Market Update 10/09/2021, Quantifying Tops and Bottoms
Hello Traders, In today’s video we’ll going to look at Quantifying Tops and Bottoms.
In quantifying tops and bottoms, what we specifically looking at is;
1. What is the top and bottom?
2. Why is it important to quantify them?
3. How to use tops and bottoms?
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What is a top and a bottom?
Imagine now you’ve got a top to bottom move, now you see if I want to take it from here, how do I quantify a true bottom? Let’s say for this purpose of conversation, we programmed a very simple formula, now in this move, this is the lowest point isn’t it? So that is the only one that can be a potential bottom if the market keeps on going up.
Let’s say that it hasn’t done that yet and you perform a very simple formula, I will consider something as a BOTTOM if it moves from a distance of a hundred points or a hundred pips.
The level of this bar here, let’s say it’s $1.5000 and I would add a 100 pips here then it would 1.5100.
Basically on the other words what I’m saying is from the bottom here if it moves a hundred points, I would consider that as a bottom. To quantify this bottom I am using a distance parameter.
Since I’ve used a distance parameter here, until then the next bars go to that target point, the 100 points which are over here I cannot call it a bottom.
It goes up and it goes down still not 100 points yet, then finally goes up and hits it and that is the bar that confirms this bottom. And that confirms that this is the bar that fulfills the 100 points.
Some of you may say, it already traveled this far, we’re only saying in hindsight that this is a bottom, yes that is all fair enough. The real point is when you make consistent money is that after this quantification whatever you’ve done this can be 100 points, 150, can be distance plus time or any criteria that you want to do distance plus days, whatever it is whatever you quantified the bottom to be but after that bottom formula gets fulfilled, and you enter on the trade let’s say based on the signal you have to carry on.
Let’s say you buy over here it must’ve moved left. If it doesn’t move left you can’t make money consistently from it.
But before we go to that the first step is to Quantify your bottoms and tops.
We have the smart money indicator here at Master the Markets that helps us achieve our consistent trading performance.
So for example here, we have the smart money indicator on, and if I put the criteria on there we’ve got the tops and bottoms quantified.
Why is it important to define/quantify tops and bottoms?
Once you’ve quantified your tops and bottoms, this will help you towards building Sustainable, Scalable, Reproducible strategies that help you achieve consistent performance.
Another thing is once you quantify your tops and bottoms, is what we call the open equity table. We got the open equity table on the GP USD on a daily timeframe in terms on how much move left once I get a confirmation bar
So you can see here that, for example, we cash in 4.070 % open equity we use the 25pip target because 85% of the time, it will get to the 25 pip mark.
Then you’ll see if I will design any longer strategy toward hitting the higher target, I can use 70pips then it will get me into 75% of the target 75 is 68% at some time if I get to the 505 marks then that is the 150 pips.
Now you’re the first step of quantifying tops and bottoms, really helps you towards achieving consistent performance.
These are all the topics we talk about on Trader’s Basecamp Package.
How do we use all of this data?
You see it’s quite simple, once I’ve got the open equity table which I just showed you, I will know that there are 25pips left 84% of the time and that’s when I get into the market put a target and my stop loss will be towards the opposite high gets confirmed.
So just to recap on it in terms of quantifying tops and bottoms, we went through what they are, which I showed you and why they are important towards Sustainable, Scalable, Reproducible strategies and finally we looked at how we can use them towards building consistent performance.
For a more in-depth explanation of that, you can always visit the trader’s starter pack video series.
Let’s take a look at the markets for today, Swiss is on the Uptrend, going strong it took a long time to confirm its bottom.
The dollar-yen, on the other hand, is still more open equity on the Upside as well. GBP USB is in the single market compression according to the weekly and to the daily more open equity to the downside traders.
Eurodollar, more open equity to the downside if we take out this level, Aussie dollar, more open equity to the downside as well.
GBP Yen more open equity to the upside.
Bitcoin on the other hand still going strong at 45,000 more open equity to the downside.
Brent oil is more open equity still towards the downside.
Gold, as you can see it’s a more temporary downside before it starts to revert back again in line with its trend.
Footsie 100, still uptrend you can see that if it take out this level to the downside, then more open equity to the upside
Dow Jones, more open equity diminishing on the downside so I’ll be cautious on that one.
SMP, again the same thing be cautious on this one as well.
Silver, open equity diminishing to the upside.
Finally, wheat has more open equity to the downside.
So that’s that in terms of the Market Update.
In terms of our performance, in the Elite Room, as you can see, CI 4.0 100 is 0.87% down, and in terms of the Live Trading Room, CI 4.0 70% is on healthy 1.30% UP. And it just lost 0.16% OE.
So overall, 1.24% Up on the Live trading Trading room down 0.87% on the Elite Room. Overall we’re up 0.37% across both of the rooms.
As we always say, until the next time, stay disciplined, follow your trading plan and keep trading like a master.