Tracking Markets Inward Outcome Time

Here is a nautical chart of the ES futures for the by calendar month (blue line).  Each bar is non denominated inwards fourth dimension units.  Rather, each bar is drawn afterwards 500 cost changes.  (Raw information from e-Signal).  Because at that topographic point are fewer cost changes inwards the overnight session in addition to during midday hours, at that topographic point are fewer bars drawn during those periods.  Busier early on morning time in addition to terminate of trading twenty-four hr menstruum hours line organisation human relationship for to a greater extent than bars on average.  Movement, non time, is treated every bit the marketplace clock.

The cherry line represents cost modify over a moving 50-bar window every bit a short-term overbought/oversold measure.  In general, we’ve seen negative average returns over the subsequent 50-100 bars when we’ve been inwards the most overbought quartile of returns in addition to positive average returns when we’ve been inwards the most oversold quartile.  I by in addition to large won’t execute a longer-term merchandise unless we’re oversold on the price-bar measure.  It’s a prissy agency of buying dips/selling bounces, which saves coin when trading rangy markets or choppy trends.

A psychological create goodness of denominating markets inwards units other than fourth dimension is that the charts dull downward every bit markets dull downward in addition to selection upward every bit markets selection up.  This is a helpful agency of avoiding overtrading dull markets–and it is a prissy heads upward on when markets are slowing downward in addition to when they’re picking up.  I too notice the cyclical demeanour of markets to endure clearer when cycles are measured inwards displace rather than time.

The principal takeaway is that if yous await at markets inwards conventional ways, you’ll generate conventional returns.  I consistently notice that it’s the creative ways of thinking close markets that concur the most hope for superior performance.

Further Reading:  Event Time

Leave a Reply