Naked Time Part 1

There is a beauty in naked. Actually, I prefer to use the word "nude". To me, naked is

awkward like someone walking in on you bent over pulling your undies up or your

toddler running into the family room of relatives when he's feeling the freedom of being

"nakie" whereas artists draw or sculpt nudes. Just a quark. But to the back to the

point. The beauty that a chart devoid of squiggly lines can tell more about where and

when price is going than any fancy optimized, no lag, oscillator has always been an

attraction for me. My first foray into trading and chart analysis was on paper charts with
a straight edge and pencil. I guess you could say I was born into the trading world

naked.

Now that I've run the full gamut of squiggly line indicators, I've come back to the blank

chart with just a pencil and straight edge. However, I've added the compass, protractor,

and the most important tool which is the clock. All virtually of course. In this series I

will show how using simple trend lines and support/resistance as trading tools can be

greatly enhanced with using time.

For the example a daily chart of the British Pound/Yen (GBPJPY) will be used. In the

first chart, I had reason to believe that the the long run up was coming close to an end.

There was a significant lower low and price was in a consolidating pattern. The typical

play for most naked traders would be to buy or sell a breakout from consolidation. But

there are risks in buying the first breakout such as head fakes and pattern failures IE the

famous Ross Hook. Or price might continue to create more consolidation in the form of

a head and shoulders pattern. So my first play is to wait for price to break consolidation

and tip its hand on what will happen next.

The next chart shows that price did break out of consolidation making a new high and

then falling back to where a new trend line can be drawn. There are two significant

hints we can take from this breakout. 1) Price has made a significant swing high and 2)

price has closed below the consolidation trend line. Had price bounced off of that line

upward then there's a chance that the upward trend will continue. (For reasons beyond

the scope of this article, and as stated earlier, I had reason to believe the end of trend

was near.)

By using the swing high as the start of the stop watch, I then counted off the Fibonacci

sequence and marked those divisions of time. I normally start at 8 thus 8, 13, 21, 34,
55, 89, and 144. 1,2,3 and most of the time 5 are too short of a time range for my style

and for confirmation. Confirmation is price and time meeting at support resistance.

The trigger is to wait for at least 1 bar to close and sometimes 2-3 bars depending on

what can be discerned from the patterns on the chart and price action.

One of the tell tale signs between price and time is price making a nice run straight to

the time marker. With 8 being a few bars away, a move up is a good possibility. But

the plan is to trade the overall reversal in the downward direction. So a rise at 8 back

up to the original trend line around 13 bars will be the entry target. The naked only

trader might be looking for price to continue to free fall once it breaks the magenta trend

line. But experience with trading these marks of time has me comfortably waiting for

price to react at 8. Note that I said react and not reverse. Marks of time can be

reversals, but they can also be pauses and accelerations. And of course there are

those times when they mean nothing at all. Clear as mud. But the trading plan is clear

as crystal. Time + Support/Resistance or no trade.

Sure enough, price reacted at 8 and went up slightly and then into consolidation. As

mention before, the best setup is price with a clear run up or down into a time marker so

the mark at 13 is a bit dubious. Since price reached up and touched the trend line right

at time it's worth a shot. If price continues to consolidate, the trade can be closed for a

small gain/loss or held on until time point 21. If price rises into 21, it's another trigger to

short or possibly add on. If price falls into 21, an existing trade will be baby sat in case

that is a reversal point. If no trades are open, price rising into point 34 will be the next
entry for a short if there are no signs that price is going to continue with the previous

multi week upward trend. The profit target area is the two trend lines below between

226 and 230 with a keen eye on the time marker at 21.

Player hits black jack! Price dropped like a rock with spike lows below our target area

and bar closes around 228 right in the bulls eye of the price target area and of course

right on time at bar 21. This is a good spot to get out based on some other things that

will be shown in the next installment.

In hindsight, I can spot a couple of trend line breaks that weren't drawn that would have

given good entries at a higher price and probably at a time marker from a previous

swing high/low. But this trade is a good example of how adding an element of time can

provide a WHEN to go along with the WHERE of naked trading. Part 2 of this series will

show the next trade using the new low as the swing point for the marking of time. For

more examples of time, Gann, and geometric techniques, be sure to check out my blog

at http://4xcycletrader.blogspot.com/. I also keep a trading journal here at

beginnertrader.com. http://beginnertrader.com/forum2/viewtopic.php?id=938
Naked Time Pt 2.

In Naked Time Pt. 1 it was shown how using simple Fibonacci bar counts combined with

trend lines can provide optimal timing for low risk entries. In this episode, a new series

of counts will be added to try and find more entries. The plan is still to wait for time and

price to converge at support/resistence. This may mean missing some moves but lost

opportunity is preferable to lost capital.

After a signifcant drop it's expected that price will retrace or consolidate forming a
pendant/flag or the section 2 of a 1-2-3 pattern. Wave counting can also come into

play. I prefer not to trade inside of consolidation unless there's enough range early in

the pattern. I'm also always leary of the head fake and Ross Hook. So as was the case

in the first trade, if price breaks to the upside out of the channel, the play is to wait for a

pull back. If price doesn't fake out high and just follows low, the standard play of

catching the breakout applies. And again, how price advances to the next time line is

key. Falling into time could lead to a move up and a pull back opportunity entry. Rising

into time is the ideal setup to short immediately. It's also worthy to note how bar 34 of

the fib count picked up the turn within consolidation. That would have made for a great

intraday trade. Time is a great heads up for top down trading for intraday.
The next chart adds fib counts from the low. There is a cluster at the previous count 34

just mentioned and price rose on the current 21 and went right up to a cluster of the

previous 55 and current 34. A good short entry on the potential Ross Hook? Not

according to the plan. Time + Support/Resistance or no trade. There is no immediate

discernable resitance so no trade despite the cluster. If price drops and doesn't pull

back, the plan will pick up the move below the consolidation. So there's no need to fret

missing some of the move if it plays out that way. Plan the trade, trade the plan.
The chart below shows that the cluster ended up being one of those rare intances when

the time marks meant nothing. At the end of the article I'll show how there was a
different cycle of time that was taking precedence that picked the turn bang on and how

there was hidden resistance. None the less, the pattern ended up playing right into the

plan for a great setup. A double top type pull back right at time and right at resistence

of the 1st camel hump. As a double check, I like to bring up an oscillator to check for

divergence and sure enough there is negative divergence. If this were baseball we'd be

staring at a hanging curve ball. Swing for the fences.

Going and gone. A good trade is only as good as the exit and price moved down

straight into time for a no brainer exit. By sticking to the plan an opporunity for a better
entry than the cluster area presented itself. One of my favorite mantras is this: Trading

time is not about predicting the future. It's knowing when the future has arrived and

risking accordingly.

This is also a good time to explain the cycle mentioned above that would have picked

up that 1st camel hump. A Gann Square of 90 applied shows that price moved the full

square and our exit was the termination of the square right at time. It also shows that

the 1st camel hump peaked at 2/3's range of time and 3/8's of price falling down and
squaring perfect just shy of 3/4's of time and 3/4's of price. The 1x2 angle coming off of

the top also acted as additional resitance for our entry on the 2nd hump.

In the 3rd and final installment of the series I'll go into some Gann type bar counts that

can be added to the fibs without the need to break out a Square of 90 overlay or a

Square of Nine chart. Until then, happy trading.

Naked Time Part 3

For the third and final installment of this Naked Time series, we're going to address

some other bar count numbers to add to the arsenal. Specifically some Gann type

numbers.

Any one Gann technique can easily take a good sized book to explain and show

examples. But there is one simple method that can easily be applied to any trading

system be it naked, draped in squiggly lines and indicators, or carefully plotted out with
squares and angles. The method is simply dividing time into sections of the circle.

The circle is the measure of one cycle be it time, price, or unified time-price. Breaking

the circle into degrees yields numbers that play out in the markets time and time (price

and price?) again. By quartering the circle, the four sections are divided at 90, 180,

270, and 360. These are the cardinal points. If a square is placed within the circle, the

circle is quartered diagonally at the points of the square at 45, 135, 225, and 315.

These are the ordinal points. The distance between the cardinal and ordinal points is

45° or 1/8th sections. 45° is also the angle of the diagonal line dissecting the square.

The Gann Square of Nine is largely based on these numbers and angles and a chart

worthy of detailed study.

The circle can also be broken out into thirds. By placing an equilateral triangle within

the circle, the points touch at 120, 240, and 360. An inverted triangle would touch at 60,

180, and 300. The difference in degrees between the points of the triangles is 60°

which is also the internal angle of an equilateral triangle. The resulting shape of two

equilateral triangles is the Star of David or Merkaba. By connecting the points, the

result is a hexagon. The Gann Hexagon is another chart worthy of detailed study.
So now we have a bunch of numbers to use as bar counts. Below are three15m

GBPUSD charts showing static cycles of 45 and 30 (60/2). Starting from significant

highs or lows, there are price reactions at most of the marks. Obviously it's subjective

on where to start the counts from. But with practice and observation, it'll become

apparent on where the best starting points are. I like to make sure there are at least 2

hits on the lines to make sure that the starting point is valid. At first glance it might seem

like a lot of lines. However, YOUR system should filter out most of them. In the

previous articles it was shown how to use trend lines and support/resistance as the

filter. Indicator signals such MA crossovers, an oscillator crossing zero, or an oscillator

in overbought/oversold areas can be used to filter as well. Time cycles on higher time

frames are a great filter. Sometimes I'll go days without looking to trade because a

cycle line is coming along with some other chart pattern coming into play.
Experiment with different divisions of the circle. For example, there is one number that
hits all of the divisions of 1/3 and the divisions of 1/4. Experiment with starting a cycle

of 45 from a low and then another from the next high.

Another technique not related to the circle is to just find a cycle such as low to low or

high to high. If it's a wide cycle, then divide it by 2 or 3. It's easy to get a lot of lines on

the chart so what I like to do is have two or three charts showing different cycles and

then watch for a cycle squaring up support/resistance.

I hope this series of articles has shown how to the element of time to any trading system

or method. And remember, it's not about predicting the future. It's knowing when the

future has arrived and risking accordingly.