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ES multiday CIT estimation
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ES multiday CIT estimation

  #41 (permalink)
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The importance of CIT estimation

The importance of CIT estimation

This morning I was thinking of CIT estimation and how I felt it is important.
That is, why bother starting this tread at all?

When trading in line with a trend it is important to get in early and to not try and continue to trade the trend direction after it has changed. If the trend has been up and we continue to trade with and upward bias after the CIT, the peak, we are now training against the trend. That is we are trading with an upward bias in a downtrend.

So if our rules for CIT are too after-the-fact then the trend is working against us and not for us.

As an example if the average trend length is 15 trading days, and our CIT rules take 5 days to form, then for 5TD we continue to trade with and upwards bias when the market is trending down. We had had 5TD of incorrect bias cutting our returns. Then on day 6 we acknowledge the CIT to down and we are now trading with the trend. days 6,7,8,9,10 we are profiting from the correct down bias for our trades and this approximately nets out the negative bias of days 1,2,3,4,5 when we continued to trade up bais until the "trend has proven itself to have changed".

Days 11,12,13,14 and 15 we benefit from a correct trend bias and then on days 16,17,18,19, 20 we suffer incorrect trend bias for the next 5 days as we trade down bias and the CIT has happened and the trend is up.

So in a 15 TD cycle we are plus 5 days of correct trend bias.
(a similar idea if our CIT rules require a percentage reversal that is too large.)

We always trade in uncertainty and so we accept embracing risk as an integral part of attempting to capture reward.

Keep your mind in the future, in the now.

Last edited by aquarian1; November 2nd, 2013 at 06:50 PM.
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  #42 (permalink)
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Only rarely will markets give a clear picture of which of many is the current dominant cycle or wave degree, hence a concept of 'in early' or 'out late' is never the simple proposition it sounds. I agree though that sometimes you have just got to swing for the fence - if the risk in in bounds.

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  #43 (permalink)
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bunt or swing?



ratfink View Post
Only rarely will markets give a clear picture of which of many is the current dominant cycle or wave degree, hence a concept of 'in early' or 'out late' is never the simple proposition it sounds. I agree though that sometimes you have just got to swing for the fence - if the risk in in bounds.

Thanks!

For sure in "early" or "late" is a hindsight call, but you need to have courage to make the call.
So I've made one in public and if wrong everyone can see it and I'm ok with that. There's is no point pointing out the obvious. If we wait til its clear then what is the point

I see my post above as risk reduction not increase.
In contrast to swing for the fences is is more a bunt.

The thing is, is that if you wait for every tom-dick-and-'arry to say we are now in a downtrrend, then instead of reducing your risk you increase it.

The trend is your friend - until the end - of the trend.
Even then itsstill your friend but he's walking on another road and you are on the path alone.

Determining the CIT can't be easy or without chance of error otherwise everyone there's on the new wave - which can't be because the retail has to be behind the curve.

Keep your mind in the future, in the now.
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  #44 (permalink)
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Open university

(These are general comments and not at or for any person in particular but but for the forum and applicable to many threads)

To be clear I was hoping several people would post clear rules for establishing a CIT as early as possible.

Let us imagine (ok I'm laughing too!) that 4 people posted rules for CIT given that we are looking at multiday trend lengths as in ~15 TD (not 15 weeks or months or several years), then we could have others on the forum add into these ideas perhaps combining them or adding or deleting a factor and forming path 5, 6 7.

Together we could combine minds to build something - perhaps beyond one mind.

It doesn't have to be yet another "I'm right and you are wrong and here is why you are a bonehead."
Much more "that's a good idea and what about if we try this...."

If we close our minds and don't open them to new fresh ideas our minds become stale.

-------------
In any case, I am a daytrader so the multiday trend may or may not play an important role. I suspect it can be useful in helping establishing an increased probability of a the day's pattern but that is something I have yet to work on.

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  #45 (permalink)
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another look

So I've look at:
cycle lengths,
speed slopes,
MA's action relative to the price bars at previous CIT
length of move (the sing in points and in percentage terms.

Here's some numbers on a weekly perspective;
(something to add-in)

ETH

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  #46 (permalink)
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I consider there to be 3 trends, up/down/sideways. Sideways should be the current condition, buy 1745-50 and sell 1760-65 for the next while. The buy/sell range may drift higher since the impulse seems to just now be waning. The expectation should be down after that; however, I will not discount a plateau with which time has to catch up to price. Because structurally this move looks like one of the prior cycles up until this point, I am in no hurry to be net short for a move down.

If my projection is wrong, then any move will be violent and most everyone will miss the boat on a 2 percent day. I would rather miss that move than have a position wander for days. If it bursts higher (~1800), that would give a great opportunity to fade.

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  #47 (permalink)
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aquarian1 View Post
For sure in "early" or "late" is a hindsight call, but you need to have courage to make the call.
So I've made one in public and if wrong everyone can see it and I'm ok with that. There's is no point pointing out the obvious. If we wait til its clear then what is the point

I understand your point. Mine is simply based on years of experience watching many very highly qualified cycles and wave guys call turns or targets only to pull their hair out when the market didn't 'behave' as expected. All our trading is based on a combination of evidence, fear, risk and balls and it will ever be thus - after all that is what makes the market.

ES has already broken the mini-short series and pulled up into the full hwb short, but after appearing to trade a long off the daily extension following the break, so doors still remain open both ways. Pretending otherwise might help me favour the short side but for now I have to remain open to both and am happy to trade both.

The real point is to be able to take these setups on both sides of the market when they present themselves at reduced risk places - that's all - the same as for any other established trading method.

Travel Well
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  #48 (permalink)
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Luger View Post
I consider there to be 3 trends, up/down/sideways. Sideways should be the current condition, buy 1745-50 and sell 1760-65 for the next while. The buy/sell range may drift higher since the impulse seems to just now be waning. The expectation should be down after that; however, I will not discount a plateau with which time has to catch up to price. Because structurally this move looks like one of the prior cycles up until this point, I am in no hurry to be net short for a move down.

If my projection is wrong, then any move will be violent and most everyone will miss the boat on a 2 percent day. I would rather miss that move than have a position wander for days. If it bursts higher (~1800), that would give a great opportunity to fade.

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"I consider there to be 3 trends, up/down/sideways. Sideways should be the current condition, buy 1745-50 and sell 1760-65 for the next while. The buy/sell range may drift higher since the impulse seems to just now be waning. "

You are absolutely correct.
I did not include sideways in the thread and I should have.
It was a little bit of a cheat on my part to just get some other ideas flowing from other people.
It is like pulling teeth just to get others to come out and set out some trading rules.
I really did not want a "I think it's up til its not" and vice versus thread and only posted thoughts about a peak because after such a strong rise the next turn is a top - or as you have no so correctly pointed out a sideways move.

A sideways move can become a high consolidation or a broadening topping.

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  #49 (permalink)
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aquarian1 View Post
A sideways move can become a high consolidation or a broadening topping.

That is why I chose not to pick up or down after my expected period of sideways. To paraphrase a quote from the Matrix, "I cannot see past the choices the market does not yet understand".

I realize my addition to this thread was not directly mechanical. Additional mechanics that I use are based on location of price and structure relative to the volatility bands that I use. There are a few basic rules that I have discovered that turn into trade setups, like the spike higher towards the upper red volatility band as price "should" be consolidating (particularly if the red volatility band has already flattened). Which is why I said fade ~1800 if it gets there in a day.

I may not be able to post mechanically along the lines you are discussing, but I thought I'd chime in with some of the work I do in appreciation of the thread.

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