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Mining market data for a cyclical indicator

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As Ralph Vince looked at all the data available for a market, he developed a robust, non-redundant trading indicator to detect cyclical patterns now offered exclusively on TradeShark.

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Tim

My guest today is Ralph Vince. He's a trader and a system developer. He's got some indicators exclusively available on TradeShark. Ralph, the cycle determination indicator, what does that do? How does that look at the market?

Ralph

Well, what it does is it looks at, let's say a group of data points, let's say the last 60 data points, and tells me what kind of cycles are at work here, and how strong are they relative to each other to give me an idea where we are within the dominant cycle of that market.

Tim

All right. What kind of markets does this work on?

Ralph

I use it primarily on the broad indexes. It also works very nicely on commodities. I do a lot in the coffee market. It'll work on currency markets as well, too. It shows up very nicely there.

Tim

How did you come up with this concept?

Ralph

I really wanted to find a more robust way than the mathematically available means at the time for determining cyclical components. I thought that the other ways that I was aware of were too delicate, and I really wanted something that was robust and that didn't require a lot of back data. You know, when you have something that changes with respect to time the way market data changes, that can change as abruptly and impetuously as market data, I needed some very robust way of measuring that. I couldn't find it, so the more I thought about it, the more I realized here is a very simple, direct, robust way to measure that.

Tim

One of the things I think that differentiates you from other programmers out there, that maybe don't trade themselves and don't trade their own accounts and just use this purely as a back test method ... You've actually traded this with real money. Is that correct?

Ralph

Oh, absolutely. I do trade my own money. I've traded all these indicators with my own money. If I didn't, they wouldn't be in TradeShark and I wouldn't be talking about them.

Tim

A lot of traders love to look at volume, too, in addition to price. Does the cycle determination indicator take volume into account?

Ralph

No, it doesn't. Fortunately, it doesn't, because I have an indicator for volume we could talk about later, but I like to keep the inputs to the different indicators as non-redundant as possible.

Tim

When you say non-redundant, what does that mean?

Ralph

I don't think it does anyone a lot of good to have five different price oscillators they're looking at, five different high-pass filters that they're looking at. I think that just obfuscates the decision making process.

Tim

Do you like to have just one indicator on your charts, or do you use a couple in conjunction?

Ralph

As I've gotten older, I've had to have a little help seeing things, even given the nice TradeShark screen. The most I'll ever put on is two indicators, but because I can set up portfolios, I might have 10 different tabs for a given market within a portfolio, all with different indicators on it. With TradeShark I can just flick through them all real quickly.

Tim

All right, if I'm a new trader, and maybe even new to TradeShark ... I've heard about how great it is, and I'm on board. How do I bring up one of your indicators, and what would it tell me, where would I start?

Ralph

Let's pick the cycles indicator, for one, okay? If you have the package that includes my indicators, just by off to the right clicking on it, and you would just click to add the cycles indicator to the chart. One thing you'll want to do with the cycles indicator is to give it a certain space forward, and I usually use like 10 or 11 bars forward of the chart that I allow, so that I can see what the projection of those cycles are into the future. What day is this dominant cycle, or the composite of all cycles weighted to their relative amplitudes, what days do these peak out, and so forth? It's that simple to start using it, Tim.

Tim

So a novice trader, somebody who doesn't have 35 years experience, is this a short cut or a way to kind of jump into your experience and capitalize on that?

Ralph

I think so. As you were asking the question, I remembered with Lou, maybe about a year, year and half ago. We were talking about back in the old days when you would plot everything out on graph paper and you'd kinda tape it together and you would have this big chart and it was no longer nice and rectangular or square looking but some 12 sided ... Now days, with the ability to put this stuff into computers, that's a great step forward. This isn't just put into a computer, this is put into the easiest to use platform that I know how to use. I know if I go turn this thing on I'm going to have the latest data in it, it's going to give me the indicator it's going to be proven to be calculated correctly and I'm going to be able to see it right there in front of me. No matter how tired I might be, no matter where I am, I can call it up in seconds.

Tim

I know that is a big deal when it comes to software, because if something is for someone who is a programmer and understands these things, great, but can it also work for a brand new trader and I think that's what's key in what you are talking about here.

Ralph

Oh absolutely, the only thing they have to do is know how to interpret those indicators. Know the different nuances of them. The support team at Trade Shark will get anyone up to speed on that, I want people, if they are going to use this, to be able to use it correctly and use it for their benefit. I want it to be used by people who want to make money because that's what I made these things for.

Tim

How about the actual trading signals? Does it tell me where to buy or sell, or what kind of signals does it give me?

Ralph

Depending on the indicator. Again, the cyclical indicator tells me what kind of environment I'm in. I mean if I'm looking for, let's say on a cyclical, on cycle determination, let's say I'm looking for a high by next Wednesday, give or take a day, and as next Wednesday approaches I'm trading up into it, and I look at the cycles indicator and say that dominant cycle is still pervasive in that market, the projection calls for it to be falling off from here, now I'm going to go in and I'm going to look at the other stuff to make my entry.

Tim

How many of these things do your really need to make, do you need to look at to make a determination whether it's time to trade?

Ralph

The more non-redundant things you can look at that confirm, the better, I think. I always get a little skeptical if I see everything lining up the same way, but that skepticism is not founded in any fact, and oftentimes the best trades are the ones where everything's lined up the same way, all the non-redundant information's lined up the same way.

Tim

Talk about your background as a trader versus just a computer programmer. How does it help you put these indicators into TradeShark and make sure they work?

Ralph

The way I implement them is I try to leave myself a margin of error in implementing them. You don't have to. I prefer to do that. I'm a lot less aggressive nowadays than I might have been 20, 25 years ago, so I go in and I start building a position, and then I build taking the position off as well.

Tim

Ralph, thanks for your time today.

Ralph

Thank you, Tim.

Tim

My guest today has been Ralph Vince. We've been talking about how he trades with TradeShark.

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