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Cycle
Trading Approach
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The
HOLY GRAIL OF TRADING is: |
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With cycles you can identify the trend plus forecast and confirm trend reversals. Whether you are trading weekly, daily or intra-day time frames, it is the cycle in the longer-term time frame that sets the trend for trading the shorter time frame. Knowing the direction of the longer cycle you will know the trend for trading the shorter cycle. Almost all trading approaches and systems can be improved with the cycle timing and trading tools that Walter Bressert has developed over his 25+ years as an analyst, trader and educator. Download this report in Printer Friendly Format OUR CYCLE
TRADING APPROACH IS SIMPLE |
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The
Longer-Term Cycle Sets the Trend for the Shorter-Term Cycle |
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NOTE:
Our focus in this article is on the long side of the markets. |
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The
Bressert Double Stochastic Generates Mechanical Buy/Sell Signals to Trade
and/or Confirm Cycle Bottoms and Cycle Tops, and Trend Reversals. In the Chart 2 below, the blue oscillator is a 10DS Bressert Double Stochastic, which tends to identify the tops and bottoms of the 20-bar cycle as the oscillator tops and bottoms.
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The advantage of trading with mechanical buy and sell signals is that it takes much of the "judgement" out of your trading. With a specific entry price and a specific stop, you know your dollar risk, and you know where you will be wrong. Unlike the standard stochastic, the Bressert Double Stoc is constructed to have increased amplitude in strong trending markets, resulting in 50% more trading signals than the standard stochastic that are, on average, 10% more accurate. |
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Mechanical
Trading Signals for the Longer-Term Cycle Confirm Trend Reversals We do not trade the buy signals on the longer-term or 20-minute chart., but they confirm a larger cycle bottom and trend reversal signaling the beginning of an uptrend. At tops, they confirm the end of an uptrend and the beginning of a downtrend. The mechanical buy/sell signals generated in the 7-minute chart are used to trade the market in the direction of the cycle in the 20-minute chart. These mechanical buy signals are 70-90% accurate in cycle identification, and have low dollars risk relative to potential profits. |
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Timing
Bands Forecast the Most Probable Time Periods for Future Each set of timing bands is generated from a cycle bottom to forecast the most probable time period for a cycle to top or bottom in the future. |
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When using the timing bands and Bressert Double Stochastic buy/sell signals, watch for prices to enter the timing band, then generate a mechanical buy signal for a bottom, or sell signal for a top. In a downtrending market, setup sell signals are used to sell cycle tops. The best trades often occur when cycles bottom and top in the timing bands with the mechanical buy/sell trading signals. |
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The
EMA Trend Indicator Helps Determine Trend and Identifies High Probability
Chart 5 shows the EMA trend indicator on an S&P; Intraday chart. The EMA trend indicator moving averages help determine trend and identify high probability buy/sell signals. When the thin EMA line (red) is above the thick EMA line (blue) and expanding, the trend is up; when the distance between the two lines narrows, the market is congesting or reversing directions. When the trend is up, the mechanical buy signals have the greatest probability of being followed by a sizeable upmove. In a downtrending market, the mirror image is true. |
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Keltner
Bands Provide Support and Resistance in Trending Markets Keltner Bands, when combined with oscillators and other technicals to identify cycle tops and bottoms, are an excellent analytical trading tool to determine support and resistance levels in trending markets either in the Keltner Band itself, or the midline that runs through the middle of the chart. They are also used to identify support/resistance levels and breakouts of congestion ranges |
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The combination of the timing bands, the Bressert Double Stochastic oscillator, Keltner Bands, and the mechanical buy/sell signals make visual identification of cycle bottoms in any market, any time frame easy... and reduce much of the judgement in trading.
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Bressert Futures OnLine Mailto:[email protected] There is a risk of loss in trading futures. Copyright © 1998-2000 Walter Bressert, Inc. All Rights Reserved. |