Trading Lessons: Most Precise Way to Find Bounce & Termination Points
09/11/2017 8:48 am EST
The Kairos method of squaring price and time can be used for stocks, commodities, futures, and forex. It works for intraday, swing or long term, asserts Jeff Greenblatt, director of Lucas Wave International and editor of The Fibonacci Forecaster. Our every Friday Trading Lessons.
Kairos is defined as the supreme moment. Many traders don’t realize it but markets are a zero-sum game which means for every winner there is a loser.
To get paid, the money must slip from another trader’s account into yours. Most don’t think about it this way because they know there is a broker which is a gigantic institution and it's very impersonal.
However, for any trader to succeed, that person must have an edge to identify when the pattern is likely to turn in their favor with the best possible risk-reward ratio.
To understand your edge, you need to know what may be coming against you, avoid it and instead get into a flow state with it. The question becomes, how do you do that? Approximately one hundred years ago, W. D. Gann taught when price and time squared, the pattern changed direction.
In the same era, a man named Bernard Baruch famously said he wasn’t interested in the first or last 10% of a move but he was very interested in that middle 80%. Baruch was the Warren Buffett of his times. You can imagine how important he viewed the trend and how it was his friend. It’s vitally important to be able to recognize the termination points of bounces in bear phases and pullbacks in bull phases.
There are many ways to play pullbacks and bounces. My fellow trading instructors have traditional as well as non-traditional methods. I teach a method called triangulation which helps the trader identify the most precise way to identify the Kairos moment when it comes to the continuation of the main trend. Since this is an introduction, here is one example.
Price and time square when there a match when both vibrate at the same point. In this case, we have the US dollar/Canadian dollar (USD/CAD) on a 15-minute chart. A bounce in a downtrend terminates in a triangle (not to be confused with an Elliott Wave or what you learned in Edwards and Magee) of three points.
The termination point here is a high price of 1.3633 at 32 bars high to high. In many cases, the price and number of bars match perfectly but a margin of error of plus or minus one is acceptable. Here the vibration is 32 bars with an ending price of 33. The trader waits until the formation completes and gets a candlestick reversal formation. After the price action reverses on the “33” it leaves a small tail and puts in a bearish engulfing pattern on the red bar. Once that materializes, the signal is complete.
The Kairos method of squaring price and time can be used for stocks, commodities, futures, and forex. It works for intraday, swing or long term. It is helpful to options players concerned about the evaporating time value of the instrument.
Using this chart as an example which was early phase bear for the overall pattern, those who might have bought the low hoping for a bottom would observe the bearish engulfing formation and get out of the way without a major loss.
The calculation shows not all pivots are created equal. Those looking for the price action to drop, thinking it might be the continuation of a new pattern, understanding how price and time vibrate, well, they may see this as an opportunity and get in the flow with the market.
Depending on the time frame, Kairos can be utilized for scalping. But, by adding some strategy if you look for important support or resistance areas the better moves can be identified at favorable risk-reward points before it becomes obvious to the crowd.