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GOLD Risk Structure APR 2017

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Risk Structure outlines the context of the current risk environment based on the markets position within the PriceMap MARKET STRUCTURE framework. Click here to learn more about using risk and market structure to create a systematic approach to managing risk and fear.

The example below assumes a net long position with a RISK ON posture signaling a negative price expectation and a RISK OFF posture a positive price expectation. The current Risk Structure for Gold has the sentiment bias (R-LEVEL) equal to the CriticalRange mid-point.

Example – GOLD APRIL 2017

R-LEVEL = 1246.4 | UP (Upside Pivot) = 1290.7  |  DP (Downside Pivot) = 1208.6

The image below identifies GOLD is basically “at Risk” which is defined by the 1246.4 R-LEVEL. If the market is going to transition higher it will maintain a trade above this price point and stay in a “LOW RISK” posture in terms of a long position, up to the 1290.7 UP (Upside Pivot). At this point the market will be at a point of equilibrium in terms of committing to a new “up trend” and a RISK OFF posture or maintaining a position of LOW RISK.

Daily GOLD May17 Chart with Monthly PriceMap

Hedge Strategy Example (Net Long Position)

If GOLD is trading at the 1290.7 UP, a net long position has a profit give-back risk of around $35. This as this is the amount of profit that will be lost with a trade back down to the 1246.4 R-LEVEL which is a “normal” reaction that can be anticipated for this structure bias if the positive trend is not ready to commit. A Hedge Strategy can be implemented to reduce this risk, specifically a SELL UP FADE Hedge Strategy. IF the market price action is going to be contained within market structure THEN it will reject “in front” of the 1290.7 UP. A SELL UP FADE execution tactic can be used to protect unrealized profits with an objective of taking off the hedge at the 1246.4 R-LEVEL.

Hedge Strategy and GOLD Monthly April 2017 PriceMap

In addition to the protecting profits the Risk Structure also identifies where a hedge should be applied to protect losses. In the Hedge Strategy image above a SELL R BREAKOUT tactic can be implemented below the 1246.4. The 5.7 AD (Alert Distance) Metric can be used to confirm a “Breakout” signal (1246.4-5.7=1240.7) or a break under 1240.7, with the expectation that the market will shift into a RISK position down to the 1208.6 DP (Downside Pivot). Here again the market will be in a state of equilibrium, where it will either stabilize for a rally back up to the R-LEVEL sentiment bias or break structure and transition into a RISK ON Hedge position and potentially new Bear Trend targeting the 1126.5 DT2 (Downside Target#2).

Summary

Observing price action within Risk Structure provides clarity to the current condition and the value of an opportunity so proper risk management can be applied. Knowing where you are at risk is imperative to maintain a “fearless” focus by having the awareness of what RISK theme is currently dominating price action. The May17 Gold contract is currently trading near its 1246.7 R-LEVEL which is the sentiment bias for April 2017. Knowing this fact allows you to anticipate opportunity and implement hedge strategies.

 

Please send inquiries to info@jsservices.com.

 

Fear Factor – A Structured Approach to Risk Management

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FEAR in trading is primarily related to financial ruin. If you are undercapitalized you fear that you will blow your account out. This emotion is overwhelming and becomes self-fulfilling following potential good decisions with bad choices.

Anxiety over losses is common but should not be. Losses are part of trading. They are inevitable and can be used to improve trading and trade management. It is important to understand the difference between taking a loss and being wrong. It is easy to feel that once you have gotten stopped out of a trade that your bias was wrong and sentiment has shifted. Most of the time it is just bad stop placement which may be based on what you can or are forced to afford. This does not mean you outlook is wrong just that your stop placement is. Poor stop placement may be the result of insufficient facts but in many instances it has its roots in other emotional decisions that lead to fear factors.

FOMO

Fear Of Missing Out is not real fear and is more related to being anxious. Real fear is gut wrenching, nauseating, emotional trauma. Anxiousness does add to anxiety by increasing risk. This is typically the result of a poor entry price from an emotional decision that disregards risks considerations in favor of satisfying the feeling of FOMO. This behavior is a typical precursor to adding leverage into the mix when the market goes against your emotional FOMO entry and you add size to dollar cost average. All too often the market continues to go against your position allowing fear to take over and cloud your subjective decision making process. Objective fact focus is replaced with “hope”. When the MKT Gods do not answer your prayers, fear overwhelms every fiber of your being. The consequence can actually produce physically effects like tightening of the throat and stomach cumulating in an emotional “I’m going to be ill, just make it stop get me out, I’m done!” response. The calculator comes out and identifies the account saving stop loss amount to cover, the order is entered, you accept your fate and then it’s over, you’re out of the market. Crushing frustration takes over, even anger that “the Algos are out to get me”, “these markets are impossible”. The price action against your bias continues for a moment as the market looks to do the same to other weak hands but with deeper pockets, which provides a sense of relief that you did not lose even more. Emotions start to settle about the same time the market momentum stabilizes and you realize that where you exited was actually near where you wanted to enter in the 1st place. At that moment the market spikes back to your original FOMO entry area. You reach for you mouse to enter again, albeit with token size, and the cycle continues. Either your stopped out again or if the market does go in your favor the gains from the small position only serve to reduce the amount of loss from being stopped out with leveraged. Your bias was correct but your account balance is diminished. The only gain is the frustration and doubt in your trading method which sets the foundation for a repeat of the same events.

NO FEAR — A Structured Approach to Risk Management

Breaking the grip of fear and anxious anxiety can be accomplished by creating a structured approach to trading;

Prerequisites

• Being properly capitalized is a prerequisite for creating a more objective standardized method.

• Understanding who you are, your core strengths, risk tolerances and how you will react in stressful situations is another requirement as a basis to developing a sustainable plan. For information on taking a Personality Profile assessment for self-identification discovery, please send inquiries to info@jsservices.com.

If you are properly capitalized and have a firm understanding of how your personality traits effect your trading, you can create a trade plan and risk management program that supports your unique path to success. The goal is to remove the emotional ups and downs of reactionary trading with a method that compliments a unique personality and is aligned with the structure of the market state. Market structure provides an outline to standardize the process by creating an execution framework to define risk and create a systematic approach.

Market Structure

Knowing the structure of the market State improves awareness by providing context to the current condition and its influence on a position or trade signal. This clarity instills confidence to overcome fear. With structure you have a benchmark to gauge what conditions provide opportunity and those that do not. Risk methods can be optimized with market structure to identify the value and risks associated with an opportunity.

JSServices PriceMap analytics define the STRUCTURE of the market with 3 price points; a price band or CriticalRange and a Sentiment bias level (R LEVEL) which can be used to identify the risk profile of a market.

R-LEVEL

The R-LEVEL is the Structure point that defines “RISK” for the trade period as it represents the sentiment bias. Above this price point sentiment is positive and the market is in a LOW RISK posture having a bias for new gains. Below the R LEVEL sentiment is negative and the market is in a RISK position with a bias for new losses. Long trades entered closer to the R LEVEL will have a higher value than that of trades entered farther away because the risk of loss is at its lowest point with the greatest potential of reward from this price level. RISK OFF is a term used to define the risk environment and does not mean that trades established in this zone are “riskless”. In contrary they are at risk down to the R LEVEL, which is why trades entered near sentiment have the most value as they have the least amount of risk.

CriticalRange

The CriticalRange  (UP-DP) sets the confirmation boundary of the RISK condition. In general above the UP (Upside Pivot) confirms the positive sentiment and RISK OFF condition with a higher price expectation and below the DP (Downside Pivot) confirms the negative sentiment RISK OFF position and lower price expectation.

Risk Structure

Market Structure can be used to identify the risk structure for a fundamental market position. Risk Structure outlines the context of the current risk environment based on the markets current position within the market structure framework.

The Risk Structure profile below assumes a NET LONG POSITION with a RISK ON posture signaling a negative price expectation and a RISK OFF posture a positive price expectation. This is an example when the sentiment bias R LEVEL is equal to the CriticalRange mid-point.

Balanced Risk Structure R=DIR

 Example – GOLD APRIL 2017

R-LEVEL = 1246.4 | UP (Upside Pivot) = 1290.7  |  DP (Downside Pivot) = 1208.6

In the example below GOLD is basically “at Risk” which is defined by the 1246.4 R-LEVEL. If the market is going to transition higher it will maintain a trade above this price point and stay in a “LOW RISK” posture in terms of a long position, up to the 1290.7 UP (Upside Pivot). At this point the market will be at a point of equilibrium in terms of committing to a new “up trend” and a RISK OFF posture or maintaining a position of LOW RISK.

Daily GOLD May17 Chart with Monthly PriceMap

Hedge Strategy Example (Net Long Position)

If GOLD is trading at the 1290.7 UP, a net long position has a profit give-back risk of around $35. This as this is the amount of profit that will be lost with a trade back down to the 1246.4 R-LEVEL which is a “normal” reaction that can be anticipated for this structure bias if the positive trend is not ready to commit. A Hedge Strategy can be implemented to reduce this risk, specifically a SELL UP FADE Hedge Strategy. IF the market price action is going to be contained within market structure THEN it will reject “in front” of the 1290.7 UP. A SELL UP FADE execution tactic can be used to protect unrealized profits with an objective of taking off the hedge at the 1246.4 R-LEVEL.

Hedge Strategy and GOLD Monthly April 2017 PriceMap

In addition to the protecting profits the Risk Structure also identifies where a hedge should be applied to protect losses. In the Hedge Strategy image above a SELL R BREAKOUT tactic can be implemented below the 1246.4. The 5.7 AD (Alert Distance) Metric can be used to confirm a “Breakout” signal (1246.4-5.7=1240.7) or a break under 1240.7, with the expectation that the market will shift into a RISK position down to the 1208.6 DP (Downside Pivot). Here again the market will be in a state of equilibrium, where it will either stabilize for a rally back up to the R-LEVEL sentiment bias or break structure and transition into a RISK ON Hedge position and potentially new Bear Trend targeting the 1126.5 DT2 (Downside Target#2).

Summary

Observing price action within Risk Structure provides clarity to the current condition and the value of an opportunity so proper risk management can be applied. Knowing where you are at risk is imperative to maintain a “fearless” focus by having the awareness of what RISK theme is currently dominating price action.

Standardizing your trade entry to the price levels that define the risk structure is an easy way to improve risk management of a trade as well as reducing fear by knowing what the risk position of the market is. If your risk profile won’t allow you to take a trade then you have the answer to if a trade should be taken or not. Once there is alignment with structure and your risk profile then there is no thinking about taking a trade or not but just executing it with the proper size based on the value of the opportunity.

When you know the facts and your trading tactics are in alignment, FEAR is replaced with RESOLVE. As long as the FACTS that confirm that the position remains true then all the fear inducing volatility becomes what it is, noise. Having a plan and a structured method to execute it eliminates fear with an emotionless IF/THEN equation.

 

For more information please send inquiries to info@jsservices.com

Click here to demo our analytics and enhance your trading and risk management.

 

 

Risk Structure

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RISK STRUCTURE

Volatility Indices are used to identify the underlying risk condition or STATE a market is currently in. The PriceMap sentiment bias or R LEVEL for the underlying security or futures contract defines the RISK STRUCTURE of the RISK STATE.  Observing price action of the underlying security or futures contract, within the RISK STRUCTURE, in the context of the VIX RISK STATE provides awareness to markets vulnerabilities.

Example

The image below shows the Monthly, Weekly and Daily R LEVEL sentiment bias for the SP500 E-Mini.   In general: Trading above the R LEVEL is positive and below negative. Observing the differential between the current price and the R LEVEL provides insight to its influence as either a repellent when near or attraction when far away. The influence is also determined by the time frame of the structure. The available time frames are Monthly, Weekly and Daily which outline the RISK STRUCTURE of the market.

UNDERLYING RISK STUCTURE

Daily, Weekly, Monthly R-LEVEL Risk Structure

In the example above the ES futures market price is above the Monthly, Weekly and Daily R-LEVEL, identifying RISK OFF structure. Confluence of this fact with the RISK STATE of the underlying VIX provide clarity to the real vulnerabilities of the market. The example below shows that the VIX is below its Monthly R LEVEL. The Monthly time frame being the highest value in terms of market influence. As long as the VIX is below the 12.35 DIR (DIRECTIONAL) R LEVEL, volatility is in a RISK OFF position. Combining this with the fact that the ES futures are trading above all 3 sentiment bias time frames puts the current rally in a strong position with supporting volatility expectations.

The CBOE (Chicago Board of Options Exchange) and the CFE (Chicago Futures Exchange) has expanded coverage of volatility indices or VIX into grains, currencies, crude oil and interest rates along with sector ETFs and individual stocks. Knowing the fact associated with a markets RISK STATE and STRUCTURE  improves awareness and offers an indicator of confluence to standardize trading tactics into a more structured approach.

For more information Click HERE.

 

Risk State

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RISK STATE

Hedging is about managing risk which can be defined in term of volatility. Volatility Indices identify the RISK STATE or condition of the underlying security or futures market. The price points at which the RISK STATE will change are identified in the RISK STRUCTURE of a markets associated VIX. The RISK STRUCTURE alignment can be used as the foundation framework to create a hedge strategy in the underlying security or futures market position to be hedged. This is done by observing the current price position in relation to the PriceMap R LEVEL within the PriceMap framework of a markets VIX.

R LEVEL

The R LEVEL is the dynamic point of equilibrium that defines the Sentiment Bias for the trade period. It is the price level where the bias shifts from positive to negative and vice versa. Where the R LEVEL is on the PriceMap framework determines the RISK STATE. In terms of a Volatility Index like the SP500 VIX the bias shift can be looked at as RISK ON /RISK OFF flip switch for the RISK STATE.

Example

The following is a Hedge Strategy Overlay example applying JSAnalytics to the SP500 VIX. The example shows how to identify the current risk condition and the specific action qualifiers that will trigger shifts in that condition along with the recommended strategy themes and tactics to construct a hedge to protect against an increase in volatility.

RISK STATE

$VIX RISK STATE

The image above shows the Monthly structure for the cash VIX Index which is in a LOW RISK condition below the R LEVEL. A move above the R LEVEL will change the state to a RISK position.  Knowing the FACTS of the RISK condition or State provides clarity, which can be used as the basis to construct a systematic approach to managing risk and constructing a Hedge Strategy.

The CBOE (Chicago Board of Options Exchange) and the CFE (Chicago Futures Exchange) has expanded coverage of volatility indices or VIX into grains, currencies, crude oil and interest rates along with sector ETFs and individual stocks. Knowing the fact associated with a markets RISK STATE improves awareness and offers an indicator of confluence to standardize trading tactics into a more structured approach.

For more information Click HERE.

 

JSNotes Bookmap Integration

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JSAnalytics provides context for dynamic order book events which improves awareness and offer a framework to apply a more systematic trading approach.

 

BookMap xRayMap xRay delivers a configurable heat map display that visualizes both real-time order flow and live trade analysis, showing you exactly how the limit order book evolves over time. This granularity is essential to improve awareness of the micro dynamics so trading tactics can be optimized and make the execution of a macro trade strategy more effective. It is also true that micro order book trading tactics can be made more sustainable when they are aligned with macro conditions or more specifically the structure of the market state.

JSPriceMap

JSAnalytics incorporate both technical and behavioral variables, that have been developed from observations over the past 30 years, into a quantitative model, to define the structure of the market state. This structure or PriceMap Framework is integrated into the BookMap Order-Book Heat-Map display as an independent “JSNotes” column.

PriceMap Framework                                                 Heat Map – JSNotes Column

Macro Structure                                                 Micro Structure

 

The integration is strengthened by JSServices Desktop application which identifies the current market state and optimal strategy theme, along with the PriceMap market structure framework, to provide a complete picture of the macro condition.

 

STATE                                         STRUCTURE                                STRATEGY

JSDesktop

 

Clarity of real time events is achieved by observing order flow dynamics within the PriceMap Framework in the context of the market State and PlayBook Strategy themes. JSAnalytics more than anything else, is an awareness tool that provides clarity to what the current conditions are, so trading methods can be optimized by aligning tactics with these facts.

 

Practical Application – Creating a Structured Trading Approach

The following is a practical application of standardizing JSAnalytics with trading tactics that incorporate dynamic order flow events to improve their effectiveness and make them more sustainable.

STEP 1

What is the CONTEXT of the current condition?

  • Identify the market State, Structure and PlayBook Strategy themes as an underlying macro foundation.

JSDesktop displays the JSAnalytics

CONTEXT

  • FACT is the MKT is in a BULL TREND
  • FACT is that trend is engaged above the R LEVEL
  • FACT is the Optimal Strategy Theme is a BUY BREAKOUT
 STEP 2

Where is an order book event occurring within the Structure of the State?

  • Identify the order book event within the PriceMap framework. IF the order book event is occurring within the PriceMap Risk Parameter Entry Acceptance Zone THEN the it has value. IF the event is not occurring within the zone it has less value.

 Example of a Liquidity Shift event occurring at the top of the PriceMap Entry Acceptance Zone

 

STRUCTURE

  • FACT a Liquidity Shift is occurring in the order book
  • FACT the shift is occurring within the PriceMap Entry Acceptance Zone
  • FACT the Liquidity Shift is supported with price structure that is in alignment with PriceMap metrics
 STEP 3

What PlayBook Strategy theme is the order book event in alignment with?

  • Identify if the order book event is in alignment with a PlayBook Strategy theme. If so use the PriceMap risk/reward parameters to optimize trade entry/exit techniques using order flow dynamics displayed in the Heat Map.

BUY R BREAKOUT Strategy Theme is “in play”

STANDARDIZE

  • TRADE ENTRY – Entry Limit orders are standardized within the Entry Acceptance Zone using PriceMap market metrics that are aligned with of historical Resting Paper.
  • STOP EXIT – The PriceMap risk parameters provide a unified approach to standardize trade exit techniques which can be applied across all markets and optimized using historical resting paper alignment.
  • EXIT LIMIT – The PriceMap reward parameters identify the price segment movement the market is trading in or in other words the reward that the market is “paying out”. Standardizing Exit Limits to this fact using the PriceMap framework offers a systematic approach to defining exit targets which can be optimizes by incorporating dynamic order flow events.

 

Trade tactics can be optimized when executed within Entry Acceptance Zones and their effectiveness improved by using real time order book events that are in alignment PriceMap market metrics. By standardizing trading tactics with JSAnalytics trading methods become more structured and sustainable.

 

DEMO JSNotes Integration and JSDesktop

The JSNotes integration works in conjunction with the JSDesktop so you will need to download both applications.

  1. Please click here for a  JSNotes DEMO
  2. Please click here for a  JSDesktop DEMO

For more information please contact us at info@jsservices.com

 

 

 

 

PriceMap Qualifiers R LEVEL Positions

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The PriceMap is the framework of the market STATE and the R LEVEL defines the behavioral sentiment bias for the trade period. Where the R level is on the PriceMap will skew the condition of the market state. The R LEVEL is a floater number which can be in one of 9 PriceMap positions each with its own identity that is outlined below.

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R LEVEL Positions

R =DIR – The R LEVEL equal to the DIR (Directional) is in a classic pivot point position, as sentiment is balance and “on the fence”. The market is indecisive or is preparing to make a move. Any Market State with the R=DIR should respect the pivotal nature of sentiment. Typically when the R LEVEL is in this position it will either just breakout and “go” producing a linear move or a difficult rotational trade will consume the market for the trade period.

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R =UP – The R LEVEL at the top of the CriticalRange defines a “hard” resistance point at the UP (UpsidePivot). Energy is centered at this price point and a violation should be expected to produce sharp interest. A downside failure below the DP (DownsidePivot) however should be expected to NOT have the same energy and any downside breakout to be more measured.

  msb_346 msb_106 msb_266

R >UP – The R LEVL above the UP but less than the UT1 creates a RESISTANCE BAND with the UP. Trading tactics should focus on the entire zone for signal acceptance. Typically this would be on the sell side as this is a resistance band but will transition into a support band if the market violates the R LEVEL and starts to transition higher.

R =UT1 – The R LEVEL = to the UT1 (Upside Target #1) creates an even wider resistance band with the UP. Signal acceptance anywhere in the price band is acceptable however it is best to commit to opportunities closer to the UP or UT1. As the R LEVEL moves farther above the DIR the energy in the market place is skewed higher. Any lower price movement should be expected to be more measured and any positive turn from lower levels should be expected to target the R LEVEL

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Same Images for R>UP and R=UT1

R >UT1 – The R LEVEL above the UT1 identifies the high point for any price squeeze against the underlying trend if it is going to resume in the session. A market in this position has a defined underlying negative tone and any sell signal, especially at higher levels, below this price points are actionable. Sells below the DP are a lower value opportunity and the threat of a corrective squeeze up to the R LEVEL is real. Typically the market will attempt some type of corrective move when the R LEVEL is in this position.

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R =DP – The R LEVEL at the bottom of the CriticalRange defines a “hard” support level at the DP (DownsidePivot). Energy is centered at this price level and a failure should be expected to produce aggressive offers. An upside breakout above the UP (UpsidePivot) however should be expected to NOT have the same energy and any upside breakout to be more measured.

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R < DP – The R LEVEL below the DP but greater than the DT1 creates a SUPPORT BAND with the DP. Trading tactics should focus on the entire zone for signal acceptance. Typically this would be on the buy side as this is a support band but will transition into a resistance band if the market violates the R LEVEL and starts to transition lower.

R =DT1 – The R LEVEL = to the DT1 (Downside Target #1) creates an even wider support band with the DP. Signal acceptance anywhere in the price band is acceptable however it is best to commit to opportunities closer to the DP or DT1. As the R LEVEL moves farther below the DIR the energy in the market place is skewed lower. Any higher price movement should be expected to be move measure and any negative turn from higher levels should be expected to target the R LEVEL.

  msb_342 msb_102 msb_262

Same Images for R<DP and R=DT1

R < DT1 – The R LEVEL below the DT1 identifies the low point for any price squeeze against the underlying trend if it is going to resume in the session. A market in this position has a defined underlying positive tone and any buy signal, especially at lower levels, above this price points are actionable. Buys above the UP are a lower value opportunity and the threat of a corrective squeeze down to the R LEVEL is real. Typically the market will attempt some type of corrective move when the R LEVEL is in this position.

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PRACTICAL APPLICATION

* The R Level position itself can be a condition on its own to align trading tactics. For example any time, in any market state that the R=DIR it is a sign that the market is in a “pivotal” position, as sentiment is balanced. Trading tactics that perform well in pivotal market states can search out all markets that have an R=DIR.

* The R Level significantly above R>UT1 and R=UT1 or significantly below R is a “tell” that a corrective trade may develop targeting the R LEVEL. Identifying a break in PriceMap STRUCTURE is typically the 1st signal that a corrective move is in play.

* Always note the differential between the last traded price an the R Level as this is the price point that defines the rik for any trade.

PriceMap QUICK START

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PRACTICAL APPLICATION

The PriceMap provides traders with the ability to anticipate opportunity at key structure points and create risk defined strategies with improved trade vision of expected price movement. The method is scalable as a unified approach across all markets and asset classes.

 

pricemapleveldefinitionsfull_v13

SIGNAL ACCEPTANCE – Focus trading and signal acceptance at PriceMap level structure points. Avoid trading “in the middle”.

SIZE MANAGEMENT – Value trade opportunities and position sizing based on the PriceMap qualifier weighting. As a rule of thumb the R LEVEL should carry the greatest value or position size followed by the CRITICAL RANGE extremes (UP and DP). The DIR “Directional” (+++ +++) and *** 3 star PriceMap level target next followed by the ** 2 and * 1 star PriceMap levels. The +c and -c are major “target” levels but should be integrated as a directional pivot for insight to market momentum in the next session.

TRADE OPPORTUNITIES – Use the PriceMap as a “ladder” for trade management. Think in terms of price segment trade vision with opportunities defined as 1/2, full and X2 APMD (Average Price Map Distance) profit targets.

POSITION MANAGEMENT – Use the PriceMap as a “ladder” for position management. Markets make trend moves by holding positive or negative structure. Use price action within the PriceMap as a position management tool, adjusting stops as the market breaches a PriceMap level anticipating that it will go to the next level by holding above/below the breached level. If the breached level cannot sustained the violation it is a “tell” that the market may be set to REVERSE for a test of the opposing level on the PriceMap.

PriceMap Definitions

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JSServices PriceMap Analytics use quantitative methods to objectively define the price STRUCTURE of the market STATE. The knowledge of the market STATE STRUCTURE and the awareness of current price action within it, provides clarity to the value of an opportunity and the risk and reward associated with it.

 

PriceMapLevelDefinitions_V13

OVERVIEW

Price levels in the PriceMap series followed by stars *** are minor structure and major target “support and resistance” levels. The star *** value weights are determined by their structural significance to the market state alignment. Alignment defined as the price point that will have an influence on the market maintaining structure or not. The more stars ***, the more value a level has and the greater significance to the structural integrity of the price framework of the market STATE. Prices followed by symbols (+++ +++ (DIR), UP, DP, R, +c and – c) are directional pivots or trend indicators. These levels are the actionable points of the PriceMap, as they define where potential transitional shifts in STATE will occur and are the preferred entry levels.

In a general sense trading within the CRITICAL RANGE (UP–DP) represents a neutral posture for the market and trading outside a trend posture with the DIRECTIONAL (+++ +++ the classic pivot point within this range. The ***# levels are Upside/ Downside Target (UT/DT) projections the for a CRITICAL RANGE breakout.

The R Level qualifier represents the sentiment bias for the trade period. Trading above the R signals a positive buy break bias, while trading below signifies a negative sell rally bias. A price violation or failure at the R Level would reverse this bias.

+c and – c symbols represent Continuation Momentum numbers that define the technical event extremes.

JS PRICEMAP QUALIFIER KEY

R = REVERSAL LEVEL is the SENTIMENT BIAS level for the trade period, positive bias above, negative below.

UP = UPSIDE PIVOT is a key resistance point for the trade period and the top of the CRITICAL RANGE

DP = DOWNSIDE PIVOT is a key support point for the trade period and the bottom of the CRITICAL RANGE

 

MAJOR LEVELS

 DIR (+++ +++) DIRECTIONAL is a classic pivot point that sets the bias for trading within the CRITICAL RANGE [CR]

UT1 (***1) UPSIDE TARGET #1 is the minimum target for a CR BREAKOUT

UT2 (***2) UPSIDE TARGET #2 is the expected target for a CR BREAKOUT

UT3 (***3) UPSIDE TARGET #3 is the best case objective for a CR BREAKOUT

UT4 (***4) UPSIDE TARGET #4 is an event extreme target

+c     +CONTINUATION MOMENTUM defines the technical extreme

DT1 (***1) DOWNSIDE TARGET #1 is the minimum target for a CR BREAKOUT

DT2 (***2) DOWNSIDE TARGET #2 is the expected target for a CR BREAKOUT

DT3 (***3) DOWNSIDE TARGET #3 is the best case objective for a CR BREAKOUT

DT4 (***4) DOWNSIDE TARGET #4 is an event extreme target

-c      -CONTINUATION MOMENTUM defines the technical extreme

MINOR LEVELS

 *       MINOR 1 STAR LEVEL represent a minor support or resistance level

**     MINOR 2 STAR LEVEL represent a good minor support or resistance level

CRX+ CRITICAL RANGE EXTREME + defines the CRITICAL RANGE positive extreme

CR+  CRITICAL RANGE + defines the interior +quadrant of the CRITICAL RANGE

CR-   CRITICAL RANGE – defines the interior -quadrant of the CRITICAL RANGE

CRX- CRITICAL RANGE EXTREME – defines the CRITICAL RANGE negative extreme

 

MARKET METRICS

 VAR = VARIANCE – defines the optimal area influence of a Major or Minor Level

AD = ALERT DISTANCE – defines the area of signal acceptance and structure thresholds for a Major Level

MSD = MAXIMUM STOP DISTANCE – Defines the maximum area of influence of a Major Level

 

PriceMap R LEVEL

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R LEVEL

The PriceMap defines the price structure of the market state by identifying the sentiment bias for the trade period. It is the specific price point where shifts in state occur and where increased levels of liquidity can be anticipated to offer the most consistency.

The R LEVEL represents the equilibrium level within the PriceMap structure. It is the “Over-Under” number for the day and identifies the session’s trend bias.

R-Bias

Trading above the R LEVEL signals a positive buy break bias and trading below the R LEVEL signals a negative sell rally bias. It is this inflection point where sentiment shifts from positive to negative and vice versa.

The R LEVEL is the most significant price level on the PriceMap as it defines the session bias and is the best starting point when using the service. Traders should be aware of price activity in relation to the R LEVEL and note if the current action is with or against the R LEVEL bias.

Signals with the trend should be expected to be smoother, with follow through potential, and signals against the R LEVEL bias to be more laborious.

Because the R LEVEL is so significant price action around this level can be rotational as equilibrium balances its self out.

R LEVEL Overview

The R LEVEL can be used as a criteria filter for signal acceptance as well as a size and position management tool. If a signal is accepted that is counter to the R LEVEL bias, lower size is recommended along with a more aggressive position management with the target objective for the trade being the R LEVEL itself.

R-Level-Corrective

 

Note: the R LEVEL represents the optimal risk / reward entry level for any directional opportunity.

In situations where the current Price is significantly above or below the R LEVEL, any trades initiated in the direction of the R bias are ultimately at risk to and through the R LEVEL. A position is not “wrong” until the R-LEVEL is taken out. Trading action early in the session in the direction of the R LEVEL bias but significantly away from the R LEVEL is vulnerable to a “corrective” move later in the session. The market has a lot of room to “play” as counter session trend moves will not mean much as long as the R LEVEL is not violated.

Practical Application

The FTSE MIB over the past few sessions has provided corrective, directional and rotational examples of the R LEVEL behavior.

CORRECTIVE

JULY 28 2015 – FTSE MIB

On the OPEN the MIB broke structure producing a positive “corrective” rally targeting the R LEVEL. This type of corrective action is typically and a difficult trade. The market produces a trade against the R LEVEL bias which takes all session to play out. These types of opportunities typically happen after a negative signal the session prior with the R LEVEL significantly above the market . The “tell” being a break in structure at the DIR (Directional).

MIB-7-28-2015-10-35-37-PM

 

DIRECTIONAL

JULY 29 2015 – FTSE MIB

On the 29th the MIB was in a NEUTRAL DIGESTION market state identifying NON TREND condition. In NON TREND market state conditions we have a sideways expectation for price action. On the OPEN the MIB gaps higher against the R LEVEL bias and immediately turns in the direction of the R LEVEL bias. This example is interesting as the price action could not reach the R LEVEL and exhausted in front of the top of the CRITICAL RANGE at the UP (UPSIDE PIVOT). The market does not always give us what we want but it does tell us what it wants to do.

The price action around the 23380 * (CR+ = Critical Range + Minor Level) signaled a break in the OPEN positive momentum and the alignment with the R LEVEL bias. This signal, although a lower size opportunity, forecasts a “play” for the bottom of the CRITICAL RANGE at the 23055 DP (DOWNSIDE PIVOT). NON TREND market states have a sideways expectation to “digest” and the CRITICAL RANGE identifies the digestive extremes. After a “test” of resistance at 23505 UP and a break in structure at 23380 * in agreement with the R LEVEL bias, a lower forecast should be anticipated. The opposite would be true had the R LEVEL been below the market with  a positive break in structure.

MIB-7-29-2015-3-52-21-PM-1024x768

ROTATIONAL

JULY 30 2015 – FTSE MIB

On the 30th the index remained in a NEUTRAL DIGESTION market state but the equilibrium R LEVEL was balanced in the middle of the CRITICAL RANGE.

MSB_105

The R LEVEL equal to the DIR (Directional) is in a classic pivot point position, as the sentiment bias is basically “on the fence”. The market is indecisive or is preparing to make a move. Any Market State with the R=DIR should respect the pivotal nature of sentiment. Typically when the R LEVEL is in this position it will either just breakout and “go” producing a linear move or a difficult rotational trade will consume the market for the trade period. The price action in this session is an example of the later.

MIB-7-30-2015-3-52-25-PM-1024x745

Note: When the R LEVEL = the DIRECTIONAL there is a higher probability that a rotational trade will occur, especially if there is a break in structure early in the session. This happened in the above example, after the OPEN above the DIR R LEVEL and then followed by a failure below. This “fact” and the bottoming out at the 23195 (CR- minor level) is a tell for a rise up to the 23425 (CR+ minor level). In a typical “coil” the rotational price action will be contained within the 2 minor levels (CR +/-) on either side of the DIR. In the above example the summer sideways trading condition provided a head fake to the upside but stayed true to form of the no follow through expectation of the NON TREND market state.