Taking your Profits – 2 October 2013 15


Last week I presented a short trade opportunity in the S&P 500 (the ES futures contract) which unfolded in an absolutely textbook fashion, demonstrating again the profit potential of the FLD Trading Strategy (we recently announced that we are bringing the FLD Trading Strategy to our popular Hurst Signals service, so make sure that you help us shape that service to your liking). Here is the chart from last week:

Before the trade

And here is what happened:

A textbook D-category interaction

The market approached to within a few ticks (3 ticks to be exact) of the target, at which point it bounced upwards with some strength. As I wrote last week: “Mostly D-category interactions provide for good profitable trading opportunities, although one has to be careful to get out quickly as the market bounces up to form the second peak of the M-shape of the 80-day cycle.”

This was a textbook D-category FLD and Price interaction. The FLD Trading Strategy works on the basis that not all FLD and Price interactions are equal but that there is a particular sequence of interactions that occur. Each interaction in the sequence has its own character. Once you understand that sequence and are able to identify them correctly you unlock the doors to making consistent profits.

Notable about this D-category interaction were:

  • The way in which price hesitated at the FLD as it crossed below it. The FLD is a very powerful line and it is common to see price reaching back up to the FLD as it did last Thursday.
  • The accuracy of the approach to the target. The D-category interaction occurs as the market moves down to the 40-day cycle trough. There is a delicate balance of cycles at this point which usually results in the target for the move being fairly accurately achieved, with only a few ticks leeway.
  • The strong bounce out of the 40-day cycle trough. One has to be nimble with D-category trades as I mentioned last week.

The next interaction will be a long E-category opportunity as price rises up to form the second peak of the M-shaped 80-day cycle.

We are very excited to be bringing the FLD Trading Strategy to our Hurst Signals service, meaning that you can trade the strategy using the simple web interface of Hurst Signals, accessible from any browser. There will also be training material to help you understand the trading strategy fully. Please let us know what you would like to see in such a service by answering these two questions.


About David Hickson

I have been trading for over 20 years, but only had any success after discovering Hurst's cyclic principles. Unable to find any software to speed up the analysis process I created Sentient Trader software, which now pretty much does all the analysis for me. I am a film maker and a TV director, but nowadays I mostly provide consultation services to professional traders and fund managers, helping them to integrate Hurst analysis into their trading. I'm South African and live with my family in Italy.


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15 thoughts on “Taking your Profits – 2 October 2013

  • Steve

    David, I have a couple of questions for you.
    1. My cross point on that same trade was at 1687.00. I use the same broker and have the same settings as you do(I believe). I am off 9pts! Do you know why that might be?
    2. I signed for the course not too long ago and started to like it. When you say that you are going “to be bringing the FLD Strategy to your Hurst Signals service”, does it mean that I am not going to be able to follow your videos ,and have to sign for a new course?
    Your feedback is highly appreciated. Thanks for shearing.

    • David Hickson Post author

      Hi Steve. The difference in your cross point was because of a small difference in the analysis. You probably have a 20-day trough on 17 September 2013, whereas the analysis I showed here has that trough on 13 September 2013. One could debate the correct placement, and we’ll only know for certain in a week or two, although with the extended move down recently the 17 September trough looks to be the better position. I presented this option in the blog post because it was an easier call, and I try to avoid long complicated discussions about alternates. But you should remember to create those alternates for yourself, and keep an eye on both of them. With regard to the upcoming change to Hurst Signals it certainly won’t mean that you will have to do another course, in fact we’ll be offering students of the FLD course some added bonuses.

      • Jonathan Santos

        Hi David, you said that due to the extended move down recently the 17 September trough looks to be the better position for the 20-day cycle. Why do you support this idea?
        I tryed to draw the cycle shape for the 40-day cycle considering the 20-day trough on the 17 september and it didn´t look good to my analysis. But If I place the 20-day trough on the 13 september, it makes more sense to me. How do see the M-shape for 40-day cycle?

        I would really appreciate if you answered my question.

        I´ve been studying FLD Trading Strategy for just a few months and what I have learned since then has helped me to see the market through another point of view which I could have never imagined before. Thanks for the course, that is my feedback to you!

        • David Hickson Post author

          Hi Jonathan. Yes indeed in terms of pure analysis the 13 September trough “looks” better, but it is one of the fascinating aspects of Hurst analysis that the better looking trough is not always the best position for the trough. A very interesting thing happens as you become more experienced with the FLD trading strategy – you will find that the trading itself (or to be specific the way in which the price and FLD interact) actually informs the analysis, and this is an example. Have you reached module 5 of the course where the advanced concept of displacing the FLD is discussed? The extended move down implies that the FLD would have been “better positioned” a few bars later … and so it suggests that the 20-day FLD should be displaced to the right, and therefore that the recent 20-day trough should be later. It is a rather tenuous thought process, and a bit complex, but I find it useful to allow the FLD and price interaction to feed back to the analysis at times like this. Sentient Trader does use the FLD and price interactions to inform the analysis which is why some default analyses (such as Steve’s) placed the 20-day trough later.
          I am very pleased to hear that you are enjoying the course!

          • Jonathan Santos

            Hi David,
            I’m very thankful for your reply. When you say that at first the13 September trough “looks” better, you confirm that the way I am looking into the analysis is taking the right course. Of course, I didn’t know that we could allow the FLD and price interaction to feed back to the analysis in this way.

            But I remember that when the dominant cycle is upwards, we expect troughs to occur early, right? Then, the most obvious cycle shape I am able to notice is the 80-day cycle which last trough is placed on 28 August 2013 which in turn makes the 40-week cycle be the dominant cycle. As the 40-week cycle is still upwards, I would expect the 20-day trough to occur early which supports the idea that it should be better placed on 13 September (16 days elapsed since the last 80-day trough against 20 days elapsed if it is positioned on 17 September). My goal is just to make sure I am thinking right. Thanks, David

  • Robert

    David,

    Could you please comment on the currencies, since you’ve been away. Is your Euro analysis still the same, or are you getting concerned about the potential 18-month trough.

    Thanks.

    • David Hickson Post author

      Hi Robert. I will post something about the Euro soon. The big question is whether the 40-week trough did occur in early April as I believed back in June, which makes the trough of 9 July 2013 a very deep 80-day cycle trough, or whether that 9 July trough should be considered to be a late 40-week cycle trough. I favor the latter analysis at the moment, but I will discuss both possibilities in a blog post.