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Market Forecasting - Fact or Fiction?
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Market Forecasting - Fact or Fiction?

By: Vinstradamus

Today, I am going to discuss a controversial area of trading. In my opinion, this controversy is caused by a lack of knowledge. Lack of knowledge often generates fear for those who do not understand the possibilities.I will also present a market forecasting technique I have found to work quite well in any time frame and market I have traded.For simplicity's sake, I will only present this method using 2 daily charts. The first will be from a bullish perspective and the second from the bearish point of view.All Charts for this Article can be found athttp://www.esignallearning.com/education/marketmaster/archive/2008/archive_index.asp?date=042508As you will notice on Figure 1, we have a March 08 corn chart. Please take a look at the lines on the chart.You will see gold, blue and violet lines. Each line has been drawn off the low of October 2, 2007. The gold line is drawn at 30 degrees off the low, the blue at 45 degrees off the low and the violet at 60 degrees off the low.Figure 1: March 08 Corn Chart, the Bullish Perspective Why did I choose these angles, you ask? Well, the short answer is that the earth's equator is at zero degrees latitude. Each successive line north or south of the equator increases by 15 degrees. Therefore, you would have angles of 0, 15, 30, 45, 60 and 90 degrees, respectively.One day, while looking at this phenomenon, I decided to see if I could apply it to trading, and, presto, there it was -- a way to do exactly that!As you continue to view Figure 1, you will notice black horizontal lines that intersect the lines by angles of 30, 45 and 60 degrees. Notice that, where the black horizontal lines intersect at points 1 through 6, the market reverses.I simply took the swing highs designated by the letter S on the chart and drew a horizontal line off the top of each one until it intersected each line by an angle in the future. As you can see, the market reversed at points 1 - 6.I want to caution everyone at this point. This method is not perfect nor does it work 100 percent of the time. Plus, the fact that it is a mechanical method (because you have to draw lines on your chart) can also cause some error.All I did was place a 99 cent protractor (while a daily chart was open on my flat screen monitor) up against the screen and used the Trend Line feature in my eSignal application. I then drew lines at specific angles of 30, 45 and 60 degrees off the low of October 8, 2007.Figure 2 is the same concept from a bearish perspective. This time, I drew trend lines off the top of June 18, 2007 at angles of 75, 60 and 45 degrees. In this example, I used swing lows to draw the back horizontal lines that intersect future lines by angles. Once again, at points of intersection 1 - 8, you will find market reversals.Figure 2: March 08 Corn Chart, the Bearish Perspective Life is about possibilities, and, the more you have to choose from, the better off you will be, especially in the trading arena. Paper trade this simple technique, and you will discover just how practical it really is.-----------------------------------------------------------------------------Q & AQ: what do you do when your y scale changes throughout the day based on price action?-----------------------------------------------------------------------------A: Very Good Question.In order to apply the technique properly you first must adjust your charts side to side so that the Price Bars no longer get longer or shorter but stay the same length, then draw your angled lines. If that doesn't work then continue to adjust your charts until you get consistent results.I use Esignal and there is a way to dock the charts there however im not sure about other Data Providers.But it is a very good question as time goes by price bars and formations change size on one's charts but once you get the reference point correct then just look for the future turning points at the original lines of intersection reference point between the Swing Highs and Lows and the angled lines and take note of them.So for example, lets say you find the correct point of reference and draw your angles on an hourly chart, you then immediately look for the hours in the near future they point to and jot the times down so that when the price data expands or contracts you will already have the times to look for in the future.How will you know the correct point of reference?#1 The Chart Formation and Price Bars will no longer expand or contract while moving your chart side to side and#2 the results will be consistent; meaning I tried the technique 10 times and 8 or 9 times it accurately pointed to a future point that resulted in a market reversal, as an example. It's simple enough to test in real time and I encourage you to practice testing it and drawing lines and paper trading it. If you have a Line by Angle Feature in your Trading Charts, that makes it even easier.Never take anything for granted, Test it, let it prove itself to you and then and only when you have confidence that it works, then you can decide if you want to use it while trading with real money or not.Predicting the Future is Easy, Trading in the Moment and Being able to execute and respond proactively (Notice I didn't say Reactively) is what seperates those who succeed and those who don't.

Article Source: http://articlenexus.com

*Reprinted (and modified) with permission from Vincent Troncone. www.pennies-from-heaven.us. info@pennies-from-heaven.us. Futures and options trading involve high risk, and you can lose a lot of money.

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