Market Pattern Forecast Tutorial

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Day Trading System: Inversions

Market Pattern Forecast is created using an advanced interpretation and extrapolation of short term trading patterns, applying Gann angles and Fibonacci sequenced short term cycles in time and amplitude of movement by applying aritificial intelligence. In spite of all the research done in the application of time and cycles, there are times when the Market Pattern Forecast cycles invert. An inversion means that the market is doing exactly the opposite to what it "should do" or is "expected to do".

In reality this is not a major problem once the trader has gotten used to the Market Pattern Forecast because it is ultimately about timing highs and lows during the day. The biggest advantage to having the Market Pattern Forecast is that it alerts the trader of the expected times a high or a low will occur. If the trader suspects an inversion is taking place, then he or she simply trades against the Map.

A prime example of an inversion was on the 1st September in the Russell 2000 index.

The Russell index was expected to rally right off the open, but instead began to fall immediately. The alert trader would have suspected that the "gap" would be filled and jumped on the "short" side of the market. The cautious trader could have suspected that the Market Pattern Forecast was inverting and waited for confirmation by seeing what the market was doing once it went into the 15:00 time frame. The inversion time zones have been indicated by a red ellipse. Halfway through the day the Market Pattern Forecast reverts back to its normal structure and the turns are spot on the rest of the day.

Russel 2000 Index Inversion Pattern

Experienced users of the Market Pattern Forecast will tell you that if a time zone does turn the market, but this price level is then taken out shortly after, there is a high probability that the market will continue in that direction, and it is often a good sign that the Market Pattern Forecast has inverted or reverted back to what it should do. You can see an example of that in the green ellipses on the Russell 2K chart.

Some days you will find small inversions lasting only a short while. The chart below is the Canadian Dollar. The red ellipse shows an inversion in the early trading. While the Map is pointing lower for most of the day there is an early inversion which culminates at the green ellipse. For the next 30 minutes the two lines are staying inverted until the Market Pattern Forecast catches up with the price action of the currency.

If you look closely you will notice that the Market Pattern Forecast for the Canadian Dollar in this case is actually calling for a high too early. You can see that the next turn lower down on the Map is the same distance from the green ellipse at the top of the chart image. What the Market Pattern Forecast has indicated is lower price, which clearly manifests itself during the trading day. This is key to the understanding the Market Pattern Forecast.

Canadian Dollar Inversion Pattern

Money management is one of the absolute top priorities of successful traders. The beauty of the Market Pattern Forecast is that it assists the trader to enter the market at the most opportune time, thereby risking as little to the trader's capital as possible. It also shows the trader when he will be wrong on his trade and an optimal stop-loss can be placed.

Stop-losses are there to protect the trader, but any trader will tell you a story about how he or she put on a trade and a stop-loss. The stop-loss got triggered and then the market reversed and would have made the trader a profit. When you trade with the Market Pattern Forecast you can use fairly tight stops because you dont have to wait for very long to find out if you are right or wrong. However, it is definately recommened to use some other indicators that you are familiar with to support your trading decision.

Below are 5 snapshots taken during one trading day: Very powerful illustrations of behaviour typical of an intra-day inversions: you can see why our traders benefit from having this uncannily accurate research tool.

S&P 500 Pattern Map: 23rd JAN, 2008

Below:  Zooming in on performance: first 90 minutes actual trading on 23rd JAN, 2008

S&P 500 Zooming in: first 90 min. 23rd JAN, 2008

Below: Zooming in on the first 5 hours, the inversion becomes quite apparent

S&P 500 inversion behaviour
Below: As illutstrated, the Market Pattern Forecast is extremely helpful on a micro-level:

S&P 500 inversion behaviour

Below: Here is full snapshot of 23rd JAN, 2008.  Our traders won't trade without this tool.

S&P 500 Market Pattern Map overlaid with actual 23 Jan, 2008

Below is a chart with some comments from one of our subscribers:

inversion example

The next tutorial shows more Day Trading System examples.

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