Finished my book! I think.. Easily the most interesting part of the book was the suggestion that time plays a big role in successful (swing) trading. Okay. Fair..
Naturally, when we think of this statement, we think that we should logically be trading specific periods of times during the day. Yes, past studies show that extremes are more commonly made during certain hours of the day, but I think that area of research is quickly ended. That is, I find that that logic flow doesn’t allow itself to be expanded upon and tested through more filters and additions. What is being suggested now is the repetition of time, combined with price action. Now that is a tall order for testing.
It leads itself to the question of “how do I know if my swings are correct?” To that I believe that we must simply do the best we can do. “perfect swings are different for every trader because the criteria we need varies. In the end, I think that there is a minimum threshold that a wave indicator or system must meet, rather than requiring a very specific kind (the “best”)
I decided to take a stab at repetition to see if it was worth pursuing more.
I think that this idea will eventually be dumped if I can’t find a way to drastically improve it, but it IS quite interesting to look at:
The numbers along the top, 0-23, are times (hr)
Each category below are my wave types
The first row in each category is the actual result, while the second row is the expectation of randomness
Lets take the “All” as an example (that is, all strings as they appeared in history). The probability that a swing extreme occurred at 0:00 was about 3%. The probability that a swing extreme occurred at 12:00 was 7%. Therefore, assuming randomness, if a swing extreme occurred at 0:00, the probability that the next swing extreme occurred exactly 24 hours after (0:00) should be about 3%. In reality, the probability that 2 consecutive swings occur at 0:00 is.. zero. Never. Hm. Now, it should be noted that the average time length from one swing to the next is somewhere between 15 and 16 hours. So really, maybe it’s not too crazy to see that two swings don’t occur right after each other 24 hours apart. But if that’s the case, then why does 17:00 have a whooping 7% chance of 2 swings occurring at that specific time?
Additionally, maybe there’s something to look into when we take specific swings into account. The probably that two trending waves occur at 6:00, 7:00, or 8:00 are all over 10%! If I take this 1 step further, if I had an extreme occur at 6:00, 7:00, or 8:00, the probability that the next trending swing occurs at 6:00, 7:00, or 8:00 (using a wider range now), is over 25% or any of those three hours. HMM.
Will definitely need to look into this more.
Also, i think this area is generally not talked about as much as price, and it might be fun to try a little. Maybe it will be of more interest to the readers in this way 🙂
Edit: Perfect example