Envelopes, Waves, and Cycles

Having essentially run out of thoughts about my trading system yesterday (other than applying it to turning Nadex into a virtual ATM machine) I conducted a Google search to look up the monikers of a couple of the few ET members who did not try to convince me that my ideas were a bunch of rubbish all along the way.

In the process, I ran across a member of another forum who used a trading system involving two simple envelopes, which in turn led me to another member of the same forum who was exploring an "envelopes methodology based on the work of Jim Hurst and Brian Millard."

Given that my system is now fully operational (outside of how I might [or might not] best apply it to Nadex), and that after five years, this is the very first time I've seen anybody doing anything similar to what I do, I figured I'd might as well look into these Hurst, Millard, and Parisboy guys (the other unnamed-forum member) as long as I have the time...just out of pure curiosity.

 

this is pure bs.

 

So, @expiated, your point for posting and starting yet another thread is ? Nadex and or Binary Options as an ATM machine?

 

Must be a good feeling having an unlimited money machine

 

Envelopes are good, I trade off 4 Env 10sma 0.01 and 0.04 and Env 20sma 0.02 and 0.08 ( still perfecting ) and when you know how to use and when to use and not use, actually very good results recently and improving as I use, but how to use for Binary Options ( I hate those ) is another story.

 

Apparently J.M. Hurst created an extensive, full-fledged training course on cycles consisting of ten lessons encompassing nearly 1,600 pages, including hundreds of 11 × 17 inch foldout charts and eleven audio tapes.

Two other traders named as considering Hurst’s work as important (in addition to Brian Miller and Christopher Grafton) are Jim Tillman and Peter Eliades, and there are supposedly thousands of Hurst students worldwide.

Before getting into the details, I find the superficial similarities between what I came up with and what I am now encountering interesting. For example, according to Peter Eliades, the main course of Hurst’s book is the "applications of numerical analysis as applied to the markets," and of course, I call my system "Numerical Price Prediction."

Additionally, the subtitle of Millard’s book is "Identifying Share Price Trends and Turning Points Through Cycle, Channel and Probability Analysis," and I have described my system as "conceptualizing price action as a spectrum of values forming cyclical waves of given amplitude, that cut swaths of area bounded by dynamic adaptive price range channels with directional tendency, to inform a decision-making process based entirely on mathematical odds and statistical probability, which has an uncanny ability to unveil the key levels where market makers reverse direction to enter/come out of positions with liquidity."

According to Millard, Hurst’s work was based on five main concepts:

1. Maximum profits are obtained from shorter trades
2. Some 23% of price motion is based on cyclic movements in nature
3. These cycles are additive
4. The cycles can be seen clearly if envelopes are constructed around the price movement
5. The ideal buying point is when several such cyclic components are reaching their low points

That the cycles are additive might, I’m thinking, be complementary to the notion of fractal market hypothesis, which is reflected in my system.

Also, that maximum profits are obtained from shorter trades fits with my stating that one of the intrinsic predictability limitations of Numerical Price Prediction is that of error growth with time.

The fourth concept states that "the cycles can be seen clearly if envelopes are constructed around the price movement," and when considering the fractal market hypothesis the other day, I wrote: "So then, fractal market hypothesis believes technical analysis is possible because one can see the fractals—the replicating geometric patterns—in which prices move through time. Analysis is therefore focused on the price movements of assets based on the contention and central premise that history repeats itself."

The fifth concept states that "the ideal buying point is when several such cyclic components are reaching their low points," which fits with my guidelines to "enter trades as price bounces off key statistical support/resistance levels—where the amplitude of the corresponding price wave(s) is level with the upper or lower band(s) of the riverbank and/or shoreline envelope(s)."

 

Ummmm. It's a trivial frosh bit of algebra to go from two envelopes to the much-maligned MACD.

"Just sayin'."

 

J.M. Hurst did his work and by analyzing cycles of floods from the Nile river. Cycle analysis from the physical world applied to finance is only a model or approximation. How well that approximation works is shown by your pnl curve.

So, I'm not saying Hurst analysis is wrong when applied to finance, but I doubt it's a good model either. At least the Hurst hypothesis should be testable.

 

I plowed a decade learning Hurst material and came away with there are cycles, but like any other way to trade like Gann, Fibonacci, sometimes they work and sometimes that don't. Another problem is waiting for cycles to come up, during the in between, you are missing obvious good charting pattern signals. It was interesting to learn something new, but bottom lines I prefer charting with few indicators as it is easier to program.

Have enjoyable weekend all.

 

@expiated -- you have great writing skills and apparently like to publish a lot of words. Suggest that with your skills for research and your proclivity for enjoying to post -- that you give up your quest for trading and write a great book for huge profits.