AMT Model & Methodology

SPI

April-June highs still providing some form of resistance, along
with the 3-Week 50% levels supporting the market, an extended
push higher and target is 5468-87

Click to expand...

6468-87 Frankie!!

25th MAY AMT report

www.datafeeds.com.au/AMT25-1.pdf

Frank Dilernia

forex trading...

First of all start your analysis with the AMT model so you have
an idea about the trends and the cycles of the market.

I’m going to use GBP as an example. Below is the recent price
action of the GBP using the AMT model and the daily charts, and
we can see the market being defined by the 3-day cycle, with
the crossover of the 3-week 50% level in early MAY pushing
the currency lower, until recently.




A couple of things to remind yourself with, most weekly
patterns within the trading month will rotate but with
1-major trending week, and most trading days will rotate with
1-major trending day within the trading week (5-days)

If you have an expectation that market is going down at the
start of the trading week or as I expect at the start of
the trading week if price closes at the extreme of the trading
week, a 2-day reversal back into the 3-day lows/highs then you
would want to try and find levels in the market that will
provide the highest probable swing point based on Primary
ranges.

Let’s use 90 points for the GBP as its Primary Range.


When we compare the 90-point range and swing points compared to
the daily charts in the AMT model you can see where there
are major alignments and reversals as it moves with the
weekly timeframe.(5-days)

Each open of the 90 point Range bar gives you a line in the
sand that defines risk, so whilst price is moving away from
that open you have an expectation that price has to travel
90 points.




A Primary range can take 1 day or can take a number of days
too complete, which is normally based on volatility and the market
you trade. Rising weekly trends have much less volatility. In
up trending markets, you'll probably find 1 trading week
per month with increased volatility before markets settle
down once again. You'll normally find 1 trading day per week that is
normally double or more the ATR.

This is why 1 week in the trading month stands out and traders
find themselves doing much better, before markets contract and traders find
that rewards and losses increase because markets become choppier.


Now I don’t know what type of trader you are, but most forex
traders will hold for a very limited time, and using the
90 point range alone might take a while for each range to
complete, however it allows you are a trader to monitor a number
of markets and only trade or get interested in trading
once price moves to the extreme.

For example, if you want to trade the GBP you would wait until
the 90-point level completes before applying your short
term trading systems or techniques. Whilst you are waiting for
GBP to complete, EURO or JPY might come along.

Once in a trade you might not want to hold for the entire
90 points especially if it hasn’t reached the completion in
1-day, for example the recent 90 point high on GBP is now into
it’s 4th day, but whilst it’s below the open, you should be
either focusing on shorting or remaining on the sidelines.


When you introduce a secondary range of around 46 points you can
see how there is now a movement of price based on 50-.618% of
the primary range. The Secondary Ranges are normally found around
.618 of the ATR.

As a trader it makes it difficult to only trade 1 contract,
because it doesn’t allow you to make the most of robust
profit objectives, meaning it would be ideal to be able to exit
1 contract at the secondary range whilst holding the 2nd for
the completion of the primary range.

At least with the secondary range you should be getting
constant ranges completing within the course of the trading day,
whilst the primary can take 1 or a number of days.



For example you are a 2 lot trader, your focus is on trading the
46 and 90 point bars, so your initial exit will be the low of
the 46 point bar and hold the last contract into the low of the
90 point bar using the current price action.

Price action is random and has a random outcome, because if
your trading rules using Max range return using both these
ranges will be 136 points. (46+90) However the current price
action in the market has allowed you to re-enter the 2nd
contract once again at the top of the 46-point bar, so your
return so far is 46+46+46+ then maybe 90 points. This is why I
like consolidating markets after any trending day.

That is using an example of Max return, but in real return you
will need a filter, so if you are using 22 point reversals,
then your max return will be 24+68 points.

You might then find that you’ll only get 1 or maybe 2 ideal
trades per week on each market, focusing on trading the extreme
of the 90 bar range.

As an individual you would want to be developing or have
some trading rules based on entry, exit, stoploss and so on,
and that might not necessarily be based on ranges bars, you
could have a simple system using shorter timeframes, but I bet
the best trades will occur around the extreme of the range,
whereas the choppy markets and greater losses will occur around
the middle of the same ranges.


Then it's a matter on monitoring a number of Forex markets and be patient.


Frank Dilernia

(c) AMT model

Frank,

I am glad you raised FX in a AMT model as I was curious about seeing it done.

Thanks for consistently updating this thread I am reading all your posts, again i say thank you for your time and effort in explaining your methodology.

Really great stuff.

Cheers

SPI Trading….

This is a perfect example of AMT model and Primary Range
Trading on the SPI….

Using the AMT model price looks weak, it’s trading below the
3-week 50% level, yesterday stalling at the 50% level and
heading back down to the recent lows.


Using the Primary Range bar, the expectation still exists that
price needs to complete the upside move to 6319.





On Friday, traders had long positions at the lows @ 6251, trading
2 contracts, the first exit was the R44 high @ 6276 (+25),
with still 1 contract held and next exit the R87 high
@ 6319.

However the AMT model stopped price reached that zone and there
was another push lower into another R44 entry @ 6265 on Monday.

Even though the AMT model is showing signs of weakness,
traders still want to be trading with the expectation that price
is moving towards 6319.

Now that up move might happen today, or it might take 4 days
to complete, but each time is moves down it is giving traders
an opportunity or the potential to make more money than just a
R44 and R87 completion. This time is give traders and opportunity
to Make R44+R44+87 based on 1 primary range.




Of course the returns won’t be 44 points because it never
always turns on an exact point, but it gives you an idea about
the movement of price over a number of days.

2nd trade exit R44 high @ 6290

R44 is your secondary Range based on .618 of the ATR over 90 days.
A range bar of 44-49 points is ideal, the larger the more rewards if you choose 49 points.

At this stage, with the 3-day cycles and 3-week 50% levels forming
a major resistance zone using the AMT model, the R87 high might take
much longer to reach or it might not at all, but it gives traders an idea
that sometimes the best trades might only happen once or twice
a week.

Note: the R44 entry (6313) around the lows of the R87
on Thursday would have gotten you out in Sycom at the R44 highs
@ 6333 before being stopped out in sycom on 2nd contract. And
then re-entering longs on open on Friday around the R44/R87 lows.

this is a simple technique of using Ranges within markets, whether it's
the DOW, ES, or Forex, and allows trader's the ability to read and
analyse price action better within the weekly timeframes.

Frank Dilernia

(c) AMT model

good shout Frank - you got your 319

SPI Trading prt2

The swing completed the move upside using the Primary range
@ 6319, trader’s using the R44 and R87 ranges if only trading
2 contracts should now be on the sidelines.

The push upwards today can continue much higher if the US
markets continue higher also, however the R95 on the DOW in
early trading should give traders an idea about the direction
for US markets, becasue any push higher and the swing is towards the
3-day cycles or another random 87 point upswing on the SPI can occur
this week.



R44 is the lower end of the secondary range; these ranges
swing between 44 and 49 points. When I test the ranges
I find R44 a more robust range because it will trigger
more often compared to the R49 range, but traders might want
to look at the R49 and decide that it is better to trade using a slightly
larger range.

For some traders who are only trading 1-2 contracts, R49 might
help in maximising some profits, espesically when prices are moving away
from the Primary range extreme.





For example price is coming in an R44 low, however it needs to travel
another 5 points before the R49 range is complete, and the same applies
to the upside and exit, there will be a difference of 5 points on the
upside. So on 1 trade, there is a 10-point difference between entry and
exits.



49 point ranges


Let’s look at Fridays trading using the R44 entry @ 6251 entry
and first exit at 6276 (+25)

Using an R49 range Entry is the same @6251 but exit is 6281 (+31)


Monday’s entry on R44 @ 6265, on R49 it’s 6260 (+5) and exit is
also (+5).

Those two trades using a slight difference in Range has returned
an extra 15 points (+375) 1 contract

What is ideal about trading the .618 of the ATR and using Range of Price
is that you have an understanding that price travels a certain
distance within the day and it gives traders a clear exit strategy
without fearing the market or getting out too soon, even if you are just
a day trader using different trading trading techniques.

Frank Dilernia


AMT Market Dynamic Model © Frank Dilernia

DOW...

Tuesday’s trading was critical if there was going to be any
further weakness in US markets price had to continue down from
the R95 high and just continue lower for the rest of the day, but
this price action has been happening for months now, that the
start of the trading week will see a 95 point down move before
support come in pushing the market upwards, last week it took
until Thursday, this week it occurred on the first day.

This price action suggests that US markets will probably be
well supported coming into contract expiry, extremely rare to
see any major weakness prior to expiry.



ES-minis

3-week 50% level continues to support the market. This dynamic
50% level obviously moves with time and plays a valuable roll
in giving traders an idea where the support exists in each
weekly timeframe.




GBP...

The GBP on the daily chart had taken until the 6th day to
complete the .90 point bar on the downside, but all of a sudden
the move down is now looking for more bearish due to the break
of the 3-day lows along with the 3-week 50% level.

At this stage the preference is to remain on the sidelines and let
the trading week complete before trading again, and then look
for the next primary range extreme in the new week.



Frank Dilernia

Spi is currently trading between the 3-day highs and the
3-week 50% level.

With the R87 high @ 6319, traders should have an expectation
that price is moving lower over another R87 range. Once again this
can take 1 day or a number of days. Most likely any upside move
will occur if US markets move higher tonight




Yesterday’s rally and around the highs triggered shorts on the
r44-49 bars, but what traders needed to confirm was matching
R23 shorts in today’s trading. @ 6323

This occurred in the R23 upswing, and the R23 will remain short
for the rest of today.

Normal system results will mean that traders should exit
both contracts at the R44 or R49 lows today 6291-6286, but
trader’s shouldn’t be going long on the r44 lows because the
R23 remains short.

Traders trading 3 contracts hold until the R87 completes
with trailing stops around today's entry.



Frank Dilernia

SPI trading....

This is a bearish pattern on the SPI, a failure at the 3-day
highs pushing lower and completing the Primary range in 1 day
@ 6248.

Trend is down, the new month begins on Friday, and the
expectation is that price is heading towards the June 50%
levels.

There are no longs at the R87 lows today, it’s either exit @6248
or hold into close.



Frank Dilernia

SPI Trading…


US markets rallied off the 3-week 50% levels sending the SPI
higher overnight.

On open today all SPI systems will go long on a higher open, so
the swing target is based on the R87-92 upswing @ 6321-26.




On open the R23 will go long whilst the R44-49 will be
offloading contracts, that means any trade on open will be
limited to 1 contract (unless trading the daily system 3 contracts)

Normally a higher open can fade the open 23 points, but to
be trading 2-3 contracts or more it will need to move back down
from open 44-49 points before going long, or it’s 1 contract on open


But the expectation is that price is moving towards 6321-26 today in
morning trading, a break above the 3-day highs expectation that market is moving another 87 point upswing




DOW…..

DOW expectation is still to move towards the 100% of the break
at 13710, which aligns with the 3-week top after bouncing off the
3-week 50% level.

This upper level is very critical, but the week needs to complete
to get a better idea whether this is going to be a top on the
DOW if it repeats the same price action as in 2006.




Frank Dilernia

Exit is the R44 high @ 6352, but can't go short because
shorter system will remain long all day.



The market can continue higher for the rest of the day or overnight, the
next swing point will be based on an R87-92 high around 6406-6411.

But the next entry on longs can only occur if there is a down move of
44-49 points, or ideally around R87-92 lows in the new week.

Frank Dilernia

interesting levels Frank - fwiw I have 6,353 as a 4.236 extension of 1 / A of the move out of this low

I reckon its all controlled by some greater force!

ignore the count, work in progress

Edwood,

I’m just working with the .618 of the ATR, I know on most days the
market will move 44-49 points, with the rest of the time Sycom pushes
the market further, and occasionally there are days like yesterday that
the primary range will complete in 1 day.

There are going to be days when nothing aligns because of lack of
volatility, and there will be days when everything turns on a dime. There
will be crappy weeks, but on most occasions there will be one
outstanding week within the month that pushes up my own profits.

This is just an educational post on trading the SPI by simply using
2 contracts and using ranges bars. The below results are just 1-2 contract/s
using the R44 as an exit, when there is certain alignment,
as shown in this thread.

Strategy is always finding a point in the market and take out profit
whilst letting any other contract/s run, and imo working with .618 of
the ATR is ideal for the first exit or entry points in the market.

When I first wrote my book, that ATR was 27 points, now it’s
44 points because of the increase in size, so the ability to make more
money increases because the ATR of markets have increased, not
because my method or system is better than anyone else’s.




Even trading just 2 contracts can make traders good money, more money
by increasing position size. And by working with a number of range bars
it decreases the noise of using smaller price based indicators, but you
need to be working with much wider stops.


The rewards are always random because price action is random, for
example the long on open and target of 44 points, which was basically
1-bar straight up 44 points. Fantastic. However what happened if the
Bar moved down 23 points before reversing upwards, as happens on
many occasions, that Long potential is only 21 points until the R44 is
reached

I never know what the market is going to do, other than get in on
triggers and get out @ pre-determined zones based on Range
completion.


This is my philosophy on Ranges bars….


When we analyse markets we try and define three different cycles
or trends that are based on Primary, Secondary, and
Intermediate structures. In this case, the Yearly timeframe
followed by the Quarterly timeframe followed the monthly
timeframe. Then you move into lesser timeframes, Weekly and
Daily.

Range bars or movement of price follow a very similar pattern
based on those three components, Primary, Secondary
and Intermediate, with lesser range bars. All play their
part, whilst our part is finding a certain range that fits our
own individual style.

For example, most index markets have a primary range around
87-95 points, regardless of which market it is. It has only
been recently with the increase of the Australian market that
this larger primary range has become more robust and occurs
more often. So if you are a trader or a swing trader you want to
be starting with the Primary Range.

The Secondary levels are normally found around .618 of the ATR.

This is why I use a number of range bar to filter the best possible trades;
the primary (R87-92) the secondary R44-49, and Intermediate R23, and
then use these ranges based on 5-day patterns.

Trade Long from 5-day lows; trade shorts from 5-day highs when there
is alignment, or stay out and be patient.

Because I still believe that there is only 1 or 2 good trades per week
based on swing patterns for future markets, whereas stocks should focus
on trends and longer term.


Frank Dilernia

PS. I'm going away on holidays so this will be my last post for a while.

Hi Frank - thanks very much for taking the time to post in such detail and for giving me a closer look under the bonnet.

Have a good break away, hope you get some good R&R - let me know when you return

Ed

Would someone mind expanding on the specifics of the '50% level'?

Apologies if I missed it.

Not after anything detailed, just some clarification.

Cheers.

2nd June AMT report

DOW,GBP,ES, Er2, SPI

www.datafeeds.com.au/AMT2-6june.pdf


Frank Dilernia

_____________________________________________________________

----- Original Message -----
From: frankd@fdtradeco
To: Undisclosed-Recipient:;
Sent: Wednesday, June 06, 2007 11:35 AM
Subject: AMT report

AMT Report… 6th June 2007….


This week we were looking for US markets to reverse back down
from their Primary range extremes and back into their 3-day
lows. This was part of any expectation that occurs when
markets close on their Friday highs, and aligning with Primary
range extremes.

DOW….

The DOW sold off into the 3-week 50% level, finding support
but trading below the 3-day lows. The 3-day cycle is bearish,
but unless the market continues lower on Wednesday breaking the
3-week 50% level then I will continue to think the market
is supported.

The easiest way to define the support from Wednesday is use the
OTD level @ 13592.



These tops on US markets were the exact same dynamic tops in 2006, and
further weakness needs to continue lower otherwise trade with support.

ES-minis…

All US markets have followed the same pattern on reversals from
the top and back into the 3-week 50% levels before the market
is supported once again.

Unless Wednesday continues lower there is a good chance the
markets will continue to be supported into contract expiry.





SPI...

The SPI is following the same pattern , stalling and rotating
down after the completion of the Primary ranges on Monday’s
Spike.

The probable path on any swing down is once again 87-92
points, with any extended move into Sycom. This put's the SPI
around 6325 for the best possible swing upwards, this will line
up with approximately the 3-week 50% level.

These past 3 days is an example of things moving extremely
slowly, as 1 priamry range bar can take 1-5 days to complete.




----- Original Message -----
From: frankd@fdtradeco
Sent: Wednesday, June 06, 2007 1:20 PM
Subject: AMT report


SPI.......

The Downside move on the SPI completed to an exact low
@ 6325 and now supported at the 3-week 50% level. If this market
is going to move higher then this is the most logical place
any upswing is going to happen from

Normally when there is an R23 upmove in early trading and a
perfect top before the lows are taken out the market is
normally depressed for the rest of the trading day. I don't
expect too much up move in the day session, if it's going to
swing higher it will normally happen in Sycom.

The R87 down move completed @ 6341, there is probably a
resistance level forming there for Wednesday.

First exit R44 upside in sycom.



Frank Dilernia

DOW....

The Same price action is repeating on the DOW in 2007 once
it reached the same dynamic zone as in 2006.

This break of the 3-week 50% level is the first time in
3-months, the expectation is a rotation back into the 3-month
50% levels, a bearish pattern will see that 50% level fail to
hold in June.

Short term, treat this weekly timeframe as 1 bar, with any
upswing in the short-term use the 50% level next week as in
ideal resistance level, as occurred in 2006.

The 3-day highs should give traders an idea about swing patterns
and any strength in the market next week.




SPI……

SPI in sycom is going to be dictated by what occurs in US
markets, if US markets continue further weakness next week
the probable market path is the June 50% levels.

Failure to hold is bearish pattern below that level, with
the expectation markets are moving into July lows.

Short-term, around the same zone as 2-weeks ago using the
3-week dynamic lows could provide support for any short term
counter-trend move, but keep in mind that this is a weekly
timeframe and the 1 bar timeframe can continue lower into the
close of the trading week.




Frank Dilernia


AMT Market Dynamic Model © Frank Dilernia

DOW & ES

DOW and ES along with most markets are moving in a weekly
timeframe (1 bar) straight back into the June 50% levels.

Once 3-week 50% support levels cracked on Wednesday the
same pattern is occurring in 2007 as in 2006 after reaching the
same dynamic highs.

The expectation of a short-term upswing on Thursday failed once
the 3-week dynamic lows support zones failed and we move into
a weekly trending Bar; down.

As I mentioned previously, there is normally a market path
for Price to follow based on dynamic timeframes, as long as
traders understand support and resistance.

Rotation patterns are back towards the June 50% levels,
these levels can be major support zones, and can provide a
swing back up, if we work with a weekly timeframes then next week
is an ideal time, but that will be confirmed on this weekly close.

Because a weekly close below these levels and the expectation
is that Market can move into a 2-month bearish pattern back
into July low levels, as previoisly mentioned.




SPI….


The SPI has certain points in the market that on many
occasions become support and resistance, however overnight it
is going to be dictated by what occurs in US markets.

Yesterday provided the ideal swing point low again using the R87
lows, with good buying support, but today the market will gap
lower once again, and there is still 100 points to go before
the rotation down is complete.

Because the lower open is occurring below the low R87 @ 6240
then upside can be limited in Friday’s trading.



Frank Dilernia

AMT model (c)