Decoding the Hidden Market Rhythm

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1 Decoding the Hidden Market Rhythm by Lars von Thienen A dynamic approach to identify and trade cycles that influence financial markets

2 Decoding the Hidden Market Rhythm (ebook pdf Version) A dynamic approach to identify and trade cycles that influence financial markets All Rights Reserved. Copyright Lars von Thienen / Version 1.1 (ebook) All materials of this book, including, without limitation, text, software, Wave59 scripts, illustrations and video are copyrighted intellectual property. Everything presented in this book is considered licensed to you for your personal, non-commercial home use only. You're not allowed to redistribute or sell the material or convert it to any other form that people can use. You may not copy, reproduce, republish, upload, post, transmit or distribute this material in any way or for any other purpose unless you get the written permission from the author first. This book is designed to help readers obtain trading education. It discusses ways to trade the markets using cycle analysis in the decision process. There are no warranties implied. This book makes no guarantee that that you will make money trading any market. The past performance of any shown trading system or methodology is not necessarily indicative of future results. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Trading involves the risk of loss. Please consider carefully which trading instruments are appropriate to your financial situation. The risk of loss in trading can be substantial. However, the ability to assess risk is vital to a trader's survival. Conversely, without risk there is no profit either. Printed in Germany.

3 This book is dedicated to the Wave59 community. A community in which new ideas can thrive. A place where friendship is more than a word and where rampant ideas can be discussed, are accepted and receive constructive feedback. I would like to personally dedicate this book to Joseph. A Wave59 member who became a dear friend of mine. An exceptionally loyal and helpful person. Joseph, without your support and continual testing, I would not have been able to stay on this path. Thank you, my friend. I am grateful to have found you. Lars von Thienen, July 2010

4 Foreword - Electronic cycles book This version of the book is published as ebook to spread the knowledge about cycle analysis - independent from the software package you may prefer. The shown concepts can be realized with the Standalone WTT Charting Module and the Wave59 Cycles Plug-In. There was no need to adjust the original introduced cycle tools; the tools worked prior to the first release for years and are still working. Therefore the text, concept and functions stay the same. Please review the additional content in the video library ( Academy ) on the WhenToTrade webpage. The WTT Academy provides further video content about the cycle tools with examples about the real usage after the initial book release in In addition, the WTT Charting Module was introduced in 2012 and made available to the WTT inside community in It is a big step forward as it enables our inside group to implement new tools on top of the cycle analysis concepts. We will move ahead with the cycle research and push the boundaries. The new Genetic Algorithm is another piece of the puzzle to open the doors for the next dimension of cyclic analysis. So the next knowledge publication is already in the making on Genetic Algorithms and Cycles. The tools are already there today within the WTT Charting Module for our community. So please make yourself familiar with our underlying basic cycles approach in this ebook. Lars von Thienen, Februar

5 Contents 1. Introduction - It s all about cycles How to detect and measure cycles in the stock market The cyclic approach put into practice The Cycle Scanner: Introduction of a new & proprietary cycle detection algorithm Example 1: Dataset with 2 cycles Example 2: Dataset with 2 cycles + trend Example 3: Dataset with 2 cycles + trend + noise Step-by-step guide: How to build a forecast based on cycle detection Example 4: Dataset with 4 cycles + trend + noise Building the forecasting model for Example 4 based on the detected cycles Example 5: Dataset with 5 cycles + noise + changing trends and forces The Cycle Scanner: Algorithm overview Final summary A new area of cyclic analysis at your fingertips The Cycle Scanner: A step-by-step guide for using the add-on with Wave The cycle plotter script for Wave The Dominant Market Vibration Definition of the dominant cycle Definition of the Dominant Market Vibration Fine-tuning technical indicators using the Dominant Market Vibration The basic idea A step-by-step guide: Trading the S&P 500 E-mini futures contract intraday Trading the S&P 500 E-mini futures contract intraday Example Summary Forecasting the next important market turn Time, direction & polarity Introducing a new forecasting method based on the Dominant Market Vibration Introduction of the Dynamic Cycle Explorer method Using the Cycle Explorer as a quality check for static cycle frameworks The Cycle Explorer as a visual confirmation tool Building a forecast based on the Dynamic Cycle Explorer... 81

6 5.6 A step-by-step guide to building a tradable forecast model / Daily S&P Index Updating the forecast after the projected turning point / Polarity forecast Updating the polarity forecast and the next ETA CIT projection Review of polarity and ETA and updating the next forecast Complete review of all forecasted CIT dates and polarity windows Combining a semi-static and purely dynamic forecasting model for trading The combined semi-static and dynamic trading approach in action on the S&P Measuring and trading dominant sentiment cycles Trading the swing of the dominant cycle Next level momentum trading Calculation of the cycle acceleration Evaluation criteria for the new Cycle Swing Indicator Super smooth with no lag The cycle s acceleration is the leading price momentum Adaptive divergence detection on any market: Repeating patterns at cycle tops and bottoms Trading the turns of the cycle swing Staying in vibration with the market Developing automated trading systems based on the Cycle Swing Indicator Cycle Swing Indicator parameter and usage in Wave The LvT Cycles Model Mental warm-up session Basic assumptions Part A: Emotions drive markets Basic assumptions Part B: Natural forces drive emotions Decoding the Hidden Master Rhythm of the Universe The Master Rhythm The Universal Harmonic Energy Lock Building the superposition wave that drives financial markets Example: How to build the superposition wave for the year Decoding future market turns eight years ahead of time Swing trading the superposition wave Swing trading the Harmonic Energy Cycles Automated trading system with Wave59 The code and scripts Adding position sizing according to market risk Swing trading system with market risk-adjusted position size Hypothetical investment comparison Robustness test

7 7.16 System analysis of the Harmonic Energy Cycles model / 30 years Summary Cycles Toolbox Years with a similar energy alignment Harmonic Energy Cycles model - Detailed annual trade reviews Manual calculation sheet for the superposition wave Bibliography

First Edition License Notes

First Edition License Notes Please be mindful of copyright 3 Steps to OrderFlow Trading Success is intellectual property that is protected by copyright law. This may not be republished or distributed,