Profile

 

The Science Behind The Profile

When you analyze any major sustained trend in a stock or futures contract, you will notice a series of pullbacks against the major trend. Some of the pullbacks are easily noticeable, while others are minor. In either case, once the pullback is complete, the stock continues its original trend. This is similar to a distance runner who slows down to take a breather. Once he regains his strength, the runner continues to the finish line.

 

ROOM SIZE

From our ongoing research, we have found that these pullbacks exist in all markets traded across the globe. Our research has also identified a definite correlation during these pullbacks. While we do not know when the pullback will start, we have found that each pullback has a consistent relationship between the total price declined and the time elapsed.

This relationship between the price decline and time elapsed forms a box or Room Size with a constant correlation unique to this Room Size.

 

 


 

VARIABLE ROOM SIZES

When this theory of Room Size is applied to a stock, every pullback within a major sustained trend can be identified and contained within various Room Sizes. While the price declines and time elapsed are all different, the various Room Sizes continue to retain their unique constant correlation. In this example, after the completion of each Room Size, the prices of Apple Computer continued its original trend. Each pullback created its own unique Room Size. Regardless of the size of the Room, the correlation between the price decline and the time elapsed remained constant.


 


 

ADVANTAGE OF USING ROOM SIZES

How do you select the right time frame to analyze? Do you use a 5 minute, 60 minute, or a daily chart? When using Room Sizes, you no longer have to focus on time frames. Simply decide how long you want to be in a trade and select the corresponding Room Size.

The average length of trades generated from each Room Size is different. For example, as a Day Trader, you would select DA, DB, DC or DD from the Day Trading group. Trades generated from the DD Room Size usually last between 4 to 7 hours.

 

We have identified 11 different Room Sizes that frequently occur in major sustained trends. They are divided into three groups labeled Day Trading, Swing Trading, and Position/Options Trading. They are listed along with the average length of trades generated from such Room Sizes.

Using this table you can easily select the Room Size that fits your style of trading.

 

 


 

BULL'S EYE - THE MATHEMATICAL MODEL
TO IDENTIFY THE END OF A ROOM SIZE

We have created a mathematical model that can identify in real time the end of a Room Size by measuring the price decline and time elapsed. As explained before, regardless of the size of the Room, the correlation between the price decline and the time elapsed is constant.

By monitoring this correlation, we can identify in real time when conditions are met for the end of a Room Size.

For now, focus only on the Bull’s Eye (two circles). When the inner circle starts to fill, it indicates the end of the current Room Size. In this case the stock is trading near the end of the SD Room Size.

The Bull’s Eye indicates the end of the Room Size and sets up a potential trading opportunity.

 


 
THE PROFILE

 


 

The Profile Screen shows the Bull’s Eye and Strength Bars for all Room Sizes for a stock. This allows the trader to quickly identify where the current trading opportunity is in each stock.

 


 

THE MATRIX

Once you select a Room Size, the Matrix retrieves all potential trades in that Room Size and displays them with their star ratings. You can sort the trades by their star rating, risk, risk - reward ratio, groups, or sectors. The Matrix continuously updates the trade list. Multiple Matrix windows can be opened to generate trade lists from different Room Sizes.

 

STEPS FOR FINDING TRADES

1) Select Room Size (length of trade)
2) Select Long or Short
3) Set Min and Max stock price
4) Set minimum Risk - Reward Ratio to 1.6

CLICK SEARCH
Matrix automatically retrieves all stocks with current trade setups.

a) The most recent setups are highlighted
in yellow.
b) Trades are color coded with blue for
Longs and red for Shorts.
c) Flashing blue or red indicates
immediate action is needed.

For each trade, the Matrix automatically provides:

a) Recommended entry price, stop and
target price.
b) Risk and Risk - Reward Ratio.
c) A rating from 1 to 5 stars.

 

 


 

T.J.'s TRADE BALANCE

This is a unique study we have developed that identifies the overall market strength and the NASDAQ market strength. The study also identifies the strength in various Room Sizes. This study allows the trader to adjust the ratio of Long to Short positions in a portfolio based on market strength. In addition the trader can use the study to be aggressive or conservative based on market strength. Some examples are given below:

 

 In this example both the overall market and NASDAQ are very strong as indicated by the blue strength bars. One can aggressively initiate multiple long positions.

In this example both the overall market and NASDAQ are very weak as indicated by the red strength bars. You should be aggressively short.

In this example the overall market is very weak, while the NASDAQ is very strong. The strategy here would be to trade NASDAQ stocks on the long side.

In this example the Day Trade Room sizes all show weakness. Day traders should trade on the short side. Swing traders can cautiously continue to be long provided the weakness (red) does not slide into the Swing Room sizes.

 
 

 

Click here for Risk Disclosure