Education | Nirvana Systems Inc.

Category Archives for "Education"

Why I’ll Never Be Your Average Trader

Why   I’ll Never Be Your Average Trader Have you ever felt like you are always entering the trading game too early or too late?  I can assure you that as a trader you are not alone.  Fortunately for both of us, the market isn’t going anywhere (and is probably more important now than it’s ever been).  I should mention now that I have been an active trader for the last eight years (you likely knew this already as you wouldn’t be reading this blog if I were completely new to this).  One thing is for sure, I am looking at the market in a whole new light. My goal during this series is to help YOU do the same thing; become an effective trader. I want to show you the strategies I use daily and are the core of every trade I take online.  I am not saying these need to be the foundation of your trading.  No, but understanding the concepts shared here will make you a better trader over all. While I SWEAR by these methods, let’s be clear, these are only tools and don’t negate the need for common sense. Trading is not “your life”, it’s a tool so that you can LIVE YOUR LIFE. Before we jump into this, I want to make it crystal clear, you do NOT need a Masters of Engineering or a degree in economics to be a successful trader.  It’s important to remember with each trade, you are a cog in the wheel and not the fuel pumping the market engines.  There are a few very easy concepts that you are about to learn that will drastically change the way you view the market moving forward. At the core you will need to remember: Trading is NOT easy, and it takes a lot of work. Becoming a successful trader does NOT happen overnight. Generating a fantastic income trading IS POSSIBLE. Never trade TIME for MONEY. I don’t live, teach, or believe in get-rich-quick schemes and I am always looking at new trading ideas with a discerning eye.  And I’m going to only show time-tested and proven trading techniques that have been used by the professional elite for years.  I will also forewarn that some of the examples I show or that you see on your own are going to look “TOO GOOD TO BE TRUE” and… “THEY ARE”.  What I mean by this is that even a broken clock is right twice a day and while some of the methods I show will fit perfectly on some stocks, I just want you to also use additional confirmation when making the decision to take a trade. Alright, without any further ado let’s talk trading.  Earlier in this post, we talked about methods that have been used by the trading elite for years and making them rich along the way.  The reason this is possible is that the elite knows that for every trade, there is a good price, a bad price, and a fair price.  The professional’s trade using some important leading indicators that are derived solely from price which allows them to stay ahead of the crowd.  When the Good, Bad and Fair prices are plotted on your chart this is considered to be the money zone.  You have likely heard or seen this in the form of a “market profile” chart.  You know those right?  Those really easy to read alphabet charts… Yeah, you can feel the sarcasm I am sure. Created in the ’80’s by Peter Steidimayer for use on the CBOE charts.  This popular concept has been used by thousands and understood by hundreds…  I only kid.  Basically, these market profile charts would show where about 70% of the trading activity had taken place during the session.  Each segment of the day would be represented by a letter. A, B, C. etc.  You could see where the market found fair value and the zones that it either saw as overpriced or a bad price.  You would then be able to anticipate where the security would trade during the following session.  I don’t want to get too in-depth on this topic just yet but if you are interested in finding out more about market profiles you can check it out over on the CBOE website.  The concepts of market profiling when used correctly and made easy, will improve your trading immensely.  We will spend quite a bit more time learning not only about market profiling but the MoneyZone levels and uses a little later on.  However, we are going to take a moment to look at the second tool in the box. The weight of the market in your hands… It’s a GOOD thing. The second method I never trade without is the Volume Weighted Average Price (VWAP).  If you haven’t used or heard of this method, the name basically describes it all. The VWAP price equals the dollar value of all trading periods divided by the total trading volume.  We will dig deeper into the math behind each of these methods in their respective post.  How is this helpful?  This concept works hand in hand with the market profiling that we talked about earlier.  Market profiles give you a good estimation of the trading range for the day, VWAP allows you to identify liquidity points throughout the session.  Many of the larger institutions will use VWAP to determine the intraday trend. Basically, you look at VWAP as a median trading range.  If you enter a long position below the VWAP it would be considered a good fill because the security was bought below the current trading average. Completing the Triumvirate. So with now, you have the trading range (market profile), you have the average trading price for the session (VWAP) and lastly, we will talk about a very interesting method.  The Rhino Harmonics.  This method works closely with the first two methods but adds a very interesting dynamic to the process.  This uses a calculation based on early price movement to provide you with potential support and resistance levels.  This method utilizes the Golden Ratio in conjunction with early market personality to project areas of potential reaction throughout the session.  This specific method is one that I have created over the last nine years and as such I will spend much more time providing […]

Continue reading

3 reasons the Expectancy Will Improve Your Trading

A Lesson in Expectancy. 3 reasons the Expectancy Will Improve Your Trading Right now, you may be pondering, “Just what exactly is Expectancy and why should I care about it?  How will it help me?”  Great questions both.  Before we dive into detail on Expectancy, let’s look at the underlying theory behind it. Twenty-five years ago, Ed Downs published The Personality of Markets Theory  (which you can read here)  which  stated that “charts have personalities” and that “technical methods that have worked on a given chart are likely to continue to work in the future on the same chart.” Ed’s theory was put to the test when of our most innovative customers; Mark Holstius diligently worked to prove this theory. It works! The idea was that by using prior signals generated by a given strategy, we could create a probability of success of the next signal.   For example, if 2 out of the last 3 signals were profitable, the probability of the next signal being a winner was increased. Throughout Mark’s tests he found that this technique produced considerably more WINNERS than the any Strategy alone. “The Accuracy and Profitability of the Next Trade can be predicted by the trades that occurred ahead of it.” – M. Holstius Understanding the process and now having data to support the theory, we developed a way to automate this process.  The discovery of Expectancy came late in the OT 2017 development cycle but was such an important improvement that we decided to add it as a core feature in OT 2017 and make it available for all. Now that you know the general theory behind Expectancy, we can discuss how it will help improve all of your trading results.   Only take trades from the hottest strategy / symbol pair Through my own use, one of the most useful aspects of the new Expectancy Feature has been the ability to show only trades from the hottest strategy/symbol pairs.  This allows signals to be displayed on stock/strategy combinations that are currently favorable.  The reason this is so powerful is that the personality of the stocks WILL CHANGE and what was working yesterday, last week or last month might not be the case today.  Knowing the correct combination to use will be imperative to your success. Get the trades that have the highest potential for big profits Depending on strategies that you’re currently using, you are likely finding yourself caught in the middle of not enough signals or too many signals.  It’s hard to choose which one to trade.  The expectancy feature helps resolve both issues by allowing you to add the block to any strategy. Expectancy allows each strategy to show only signals that are currently favorable for each stock.  This allows you to have more strategies working on multiple market personalities.  Expectancy shows you fewer and more favorable signals that make it to the vote line making your life easier by knowing exactly what to trade. Improves the results of most strategies (especially RTM) The primary reason why Expectancy will help improve your trading is the fact that it improves the results of almost any strategy.  As with most people, almost every strategy is looking for different but prime setups.  Finding trades that way makes perfect sense but traders are left out of the market until that one specific setup shows itself. This is where Expectancy can step in to help fill the rest of the void.  You can apply Expectancy to a wide range of strategies looking for multitudes of different types of setups without being overwhelmed with too many signals.  Expectancy only allows signals that have passed the filter of proof of prior success on any given symbol. The New Expectancy Feature is a free addition to OmniTrader 2017, if you haven’t upgraded yet you can do so here or you can get the OT2017 Special Package here.

Continue reading

Personality of Markets Theory

Personality of Markets Theory. The Personality of Markets Theory basically states that individual securities exhibit individual personalities. If you can pinpoint a security’s personality, and apply the right trading system for that personality, you can more accurately predict its next move and make more money. The easiest way to see how the Personality of Markets theory works is by looking at the futures market. Futures personalities are much more consistent because they are often based on supply and demand. If you look at a chart for live hogs, you will see that there is a lot of volatility, with wild swings between high and low points. That’s the nature of the hog market — its personality. At the other extreme is the currency market. Here, you see long, steady trends. There aren’t a lot of surprises in this market. Its personality is stable, even boring. The two most common types of market personalities are trending personalities, as seen in the currency market, and trading range personalities, as seen in the live hog market. Gapping personalities are also found in volatile stocks. So, what causes these different personalities to develop? Price moves occur because of what people do. And, human nature says that people tend to be rather predictable. Furthermore, the same people make up a large portion of the market. So, the traders who liked a stock last week and are selling it this week, will probably like it again next week. Again, human nature says that once you’ve traded a security and either made a good move, or missed a move, you will look for another opportunity to try again. Also, different types of people are attracted to different types of securities. Technical analysis is the art of measuring these repeating patterns of human behavior in order to predict future behavior and the resulting price action. By looking at the past behavior of the market, traders have observed certain patterns and created trading systems based on those patterns. You can use these systems to predict what will happen next in the market or in a particular security. The problem is that there have been hundreds of trading systems developed; all of which work well as long as the market is exhibiting the personality for which the system was designed. So, what’s a trader to do? Ten years ago, when I founded Nirvana Systems, Inc. that was the question that challenged me. I answered it with OmniTrader. Nirvana Systems released the first version of OmniTrader in 1994 and we released Version 3.1 in September 1997. OmniTrader, the only completely automated technical analysis software program, isolates the personalities of individual securities, then generates buy and sell signals based on that information. There are 120 proven trading systems built-in to OmniTrader. OmniTrader isolates personality by testing every system against the securities you select, over a back test period (typically one year). Let’s say five of those systems proved profitable over the test period. The likelihood of one of those systems producing a profitable signal tomorrow is very high. That doesn’t mean that you’ll only use those five systems from now on, however. The key to OmniTrader is that you’re looking at a relatively short trading period. Because OmniTrader works so fast, you can easily retest the security or securities on a daily or weekly basis for new buy and sell signals. The next step for the profitable trader is to look at the security’s chart to see if the personality of the backtest period is similar to what is being exhibited today. This is very easy to recognize. If a security has been in a trading range personality for months, the buy or sell signal is based on that personality. If the security has recently taken off on an upward trend, it is now exhibiting a different personality. The stock is obviously violating its backtest period and you should not trust the signal. It’s important to note that OmniTrader is not a new “trading system.” It’s best to think of it as a completely automated “opportunity generator.” You don’t need to tweak it or tune it. Just select the securities you want to test, let OmniTrader run, then look at the resulting signals on the Focus List. Verify the personalities of the most promising securities by looking at the charts. The whole process takes just minutes a day. When traders combine OmniTrader capabilities with their own strategies and skill, the results can be very impressive. Our users typically report that over 70% of their trades are accurate using OmniTrader. Many report even greater results.  

Continue reading

Creating the Ultimate Indicator Connors RSI

Creating the “Ultimate” Indicator. The new Connors RSI Strategy Suite is based around the concept of “blending” indicators together as published by analyst Larry Connors in his book Connors RSI 2nd Edition. In this book, Connors shows how he used the average of three different indicators, including the Relative Strength Index (RSI), in order to create a “score”. This blended indicator score has been shown to outperform the base RSI. Here’s how it works: Connors RSI Calculation The first component of the Connors RSI is the classic Relative Strength Index (RSI) itself. This indicator is also commonly referred to as Wilder’s RSI. The RSI can return a value of 0 to 100. Connors uses a default value of 3 Periods for his RSI Calculation. The Relative Strength Index (RSI) Plotted on ALLE The second component of the Connors RSI is called the “streak”. This basically determines a numerical value based on the relationship of close price values. Positive numbers indicate an upward streak, and negative numbers indicator a downward streak. Here is an example as explained by Connors: “The closing price on Day 2 is higher than on Day 1, so we have a one-day up streak. On Day 3, the price closes higher again, so we have a two-day up streak, i.e. the Streak Duration value is 2. On Day 4, the closing price falls, giving us a one-day down streak. The Streak Duration value is negative (-1) because the price movement is down, not up. The downward trend continues on Days 5 and 6, which our Streak Duration reflects with values of -2 and -3. On Day 7 the closing price is unchanged, so the Streak Duration is set to 0 indicating neither an up close nor a down close. Finally, on Day 8 the closing price rises again, bringing the Streak Duration value back to 1.” Once the streak duration values have been determined, the RSI is applied to the streak, similar to applying RSI to price values. Connors uses a 2 period RSI by default in order to evaluate the streak. The third component of the Connors RSI is to look at the size of the current day’s price change relative to previous price changes. This calculation is referred to as “Percent Rank”, or percentile. This tells us the percentage of values in the look-back period that are less than the current value. So the Percent Rank is the number of values in the look back period that are less than the current value, divided by the total number of values. Again, here is an example as explained by Conners: “For example, if the look-back period is 20 days, then we would compare today’s 2.0% return to the one-day returns from each of the previous 20 days. Let’s assume that three of those values are less than 2.0%. We would calculate Percent Rank as: Percent Rank = 3 / 20 = 0.15 = 15%” Connors uses a default look back period of 100 bars for his Percent Rank calculation. Now that we have all three components of the Connors RSI defined, the final calculation is to determine the average value of the three components. So we simply divide the sum of the value of the three components by three in order to arrive at the value of the Connors RSI indicator. The Advantage of the Connors RSI The main advantage of the Connors RSI indicator is that we are using the base RSI and two filters in order to arrive at one score. Once again, here is an explanation as provided by Larry Connors: “When we use multiple indicators to generate an entry or exit signal, we typically set a target value for each one. The signal will only be considered valid when all the indicators exceed the target value. However, by using an average of the three component indicators, ConnorsRSI produces a blending effect that allows a strong value from one indicator to compensate for a slightly weaker value from another component. A simple example will help to clarify this. Let’s assume that Trader A and Trader B have agreed that each of the following indicator values identify an oversold condition: · RSI(Close,3) < 15 · RSI(Streak,2) < 10 · PercentRank(100) < 20 Trader A decides to take trades only when all three conditions are true. Trader B decides to use ConnorsRSI to generate her entry signal, and uses a value of (15 + 10 + 20) / 3 = 15 as the limit. Now assume we have a stock that displays the following values today: · RSI(Close,3) = 10 · RSI(Streak,2) = 8 · PercentRank(100) = 21 · ConnorsRSI = (10 + 8 + 21) / 3 = 13 Trader A will not take the trade, because one of the indicators does not meet his entry criteria. However, Trader B will take this trade, because the two low RSI values make up for the slightly high PercentRank value. Since all three indicators are attempting to measure the same thing (overbought/oversold condition of the stock) by different mechanisms, it makes intuitive sense to take this “majority rules” approach.” Our research on this approach did showed the Connors RSI was much more profitable than the basic RSI. Armed with this information, we created the Connors RSI Strategy Suite, and we decided to expand the scope of the Connors RSI even further by applying the same concept to the classic stochastic indicator as well as the Williams % R indicator. You can learn more about the Connors RSI Strategy Suite here.

Continue reading

5 Pro Tips to Swing Trade the Current Market

5 Pro Tips to Swing Trade the Current Market One great thing about swing trades is that they normally only last 1-3 days.  This in itself helps limit the amount of risk you are exposed to with any given trade. Let’s take a look at a few conditional tips that will help improve YOUR odds for Swing Trading success. Before you swing trade, you really need to have an overall idea of how the market is behaving. Are you seeing fear or greed coming into the indexes? Broad market analysis is not an exact science. We just want a feel for trend and whether fear or greed is prevailing. Volatility is a Red Flag. Generally volatility is a sign of fear and bearish sentiment. You should take caution if you are entering a long position where there are signs of increased volatility.  To help protect yourself you can reduce share size or tighten up your protective stops. Trade stocks that have a short-term move against them. When you are looking at the overall trend you want to find small pullback or lower high that provides you with good short-term upside potential. USE Chart Pattern Confirmation. Even if you are not a pattern master, using some of the most basic chart patterns can help confirm your potential position. Stocks that have recently reacted to support or trend-lines generally have good potential.  Using the Fibonacci tool in your trading platform may also provide some very opportunistic entry levels. Don’t trade near earnings. Nothing can ruin a great trade like earnings. Always be mindful of when earnings are going to be released on your potential trade.  You will often see unpredictable behavior in stocks as they approach earnings. Not every swing trade is going to be “perfect”, but using the above steps will swing that trade into your favor!

Continue reading

How Artificial Intelligence Revolutionized Trading

  We are in an incredible time in trading history. Personal computers have become more powerful allowing advanced algorithms to process and analyze massive amounts of data. The inclusion of Artificial Intelligence (A.I.) into trading has exploded – allowing traders and trading companies to create systems and strategies that many only dreamed about just a few years ago. The availability of new computer technology provided us the ability to scan and analyze chart patterns and conditions in charts that would have been nearly impossible for traders to recognize. At Nirvana Systems we are making progress in the effort to build trading strategies that employ Artificial Intelligence.  In our 15 year journey towards the UTM (Ultimate Trading Machine) goal, we have made major strides our A.I.  The results we have achieved have surpassed what many people who have devoted their lives to in trading would have thought possible. Now we have the opportunity to help our club members use these breakthroughs to achieve their goals. Nirvana is proud to announce an all NEW release of our ARM (Adaptive Reasoning Model) technology to our Nirvana Club members.  ARM5 allows traders to tackle some of the most challenging trading problems they face. This new ARM5 technology has already been used to create some exciting new strategies showing 85% accuracy with 3% profit per trade with out-of-sample data.  This means we have seen 85% accuracy on blind data, not back test. Imagine what life would look like if you were trading any market with 85% accuracy… I am including this 30 minute video to show how we use A.I. to advance our trading strategies. After the video take a few minutes to check out what the Nirvana Club has to offer and how we can help improve your trading success. Click Here to Watch.

Continue reading
WaveTrder header

Why WaveTrader 3 is the Perfect Upgrade

Waves, Waves, and More Waves. Yes, if you are a fan of any WaveTrader or the Elliott Waves then you are in for a treat! I have personally been a big fan of the Elliott Wave theory for years and when Nirvana Systems developed WaveTrader I was giddy!  I know that sounds nerdy but I was very excited on this new addition to the Nirvana Systems product line.  The best part of this was the plugin delivered exactly what it stated. Great wave identification and powerful strategies.  A few years later I was delighted to see we had developed a new and improved WaveTrader 2 that built off the already powerful infrastructure to give enhanced performance which was more than welcomed.  It however, didn’t have the same WoW factor for me.  Don’t get me wrong.  Any improvements are HUGE, especially when it comes to your personal finances. Then yesterday the new WaveTrader 3 install was left on my desk for review… And… you guessed it… giddy again. The newest addition to the WaveTrader family is… Well… INCREDIBLE! WaveTrader 3 has now added in a new feature using Fractal Waves.  If you are not familiar with this term, a fractal wave is a “wave within a wave”.  What this means is that WT3 can now take advantage of the precision of the smaller waves while benefiting from the smooth, stabilizing, effect of the larger waves.  This is a huge advancement because the smaller repeating waves that are self-similar to the larger waves offer up highly confirmed wave candidates across the market. Now, lets take a look at what comes with the WT3 package. WT3 comes with all prior versions of the plugin which adds a great deal of value, however, the newly designed strategies that come with WaveTrader 3  are just short of amazing.  The new WT3 Long Term strategies uses Fractal Confirmation and has been generating some really great trades. Here is an example of a few trades that were found on ABBV. Here are some of the results I have seen so far when running a comparision between the WT3 Long Term Strategy with and without the Fractal Confirmation. In early test the HitRate exploded to a staggering 68.14% from an already impressive 54.58%.   Again using the Short Term strategy which looks to take profits once a trade has posted gains in the next few days. It’s no suprise that you see a great increase in Hit Rate on the WT3 ST(Short Term) versus the standard WaveTrader without the Fractal Confirmation. Although the strategies performance is great there are a few more features that really add some pow to this package. New Chart Templates New Indicators, Systems and Stops! The new set of chart templates are very helpful in that they visually identify the broad market direction compared to you current positions.  This has taken trade confirmation to a whole new level!  Along with the chart templates you will also get a new set of stops that use the fractal confirmation.  This is a big deal as it has drastically improved stop managment. So, it’s pretty clear that the updates in WaveTrader 3 have improved the overall trading experience, allowing you to fully leverage the fractal waves to improve the entire trading experience. If you have thoughts or comments let us know!

Continue reading
PHP Code Snippets Powered By :