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AMT Model & Methodology

Discussion in 'Trading Strategies/Systems' started by Frank D, Apr 21, 2007.

1. Frank DWell-Known Member

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AMT model

A generic Mathematical model applied to all stocks and
derivatives.

Core Theory: the rotation of price towards central
zones (50%) and the extension of price as Time moves forward.
Non-linear model and theory.

This model is designed to define probable ‘market paths’ and
Market Risk by simply using a ‘model of expectation’ that
whilst price is above or below the 50% there is a expectant
path that price will follow based on weekly, monthly, Quarterly
and Yearly timeframes.

Model of expectations:

Support and resistance moves with each new timeframe, what exists
in one timeframe will not exist in the next.

Support and resistance as per defined by the AMT model is
dynamic not static.

Short term:

If price falls under and closes below the 3-month 50% level based
on the lower timeframe i.e weekly the expectation is it will
follow a 2-month wave based on the AMT model.

A 2-month wave is NOT 60 days, it’s based on the higher
timeframe (monthly), the current month expected price move into
the following month based on the AMT model and market dynamics.

Apply AMT model.

Why?

I want to define most probable paths on timeframes starting from
the Primary into the daily.

When it comes to technical analysis the first plan is to
always determine the Primary Trend and then consider the
multiple higher timeframes. Without an understanding of this
most will struggle. Without the concept of ‘Direction’ and
‘Time’ you are guaranteed to fail, because Time effectively
defines the dynamics of the market and allows us to have a
better understanding of where Price is likely to go.

Next part of the plan is combining both Time and Price, because
with all trends price has a natural flow that rotates
between central zones and extends onward as Time moves forward.
This relationship forms levels in the market that hinders Price
from moving in straight lines, it moves between support
and resistance. As Time moves forward support and resistance moves
along with it. Knowing where support and resistance zones lie is
a critical cog in the wheel of trading, because it’s these
levels that become part of our trading plan. The levels
are now ‘probability patterns’ with a realistic expectation that
the same pattern will repeat.

Probability is the extent to which something is likely to
happen, or in some cases used extensively in areas such
as statistics and mathematics to draw conclusions about the
likelihood of potential events occuring.

Probability theory is the mathematical study of
phenomena characterized by randomness or uncertainty.
More precisely, probability is used for modelling patterns under
the same circumstances. Random variables or in this case
‘price patterns’ then become a mathematical function that
maps outcomes of random expectations, it does not describe
the actual outcome of the pattern, but rather describes
the possible, as-yet-undetermined outcomes in terms of
real numbers.

Apply AMT model on Weekly charts.

Looking for Primary Dynamics based on Yearly timeframe (Yellow)
Looking for Secondary Dynamics based on Quarterly timeframe (green)

50% levels are major support zones, each new Quarter
provides dynamic levels of probable paths that price can
follow.

..............................................SPI Weekly chart

Model of expectation: whilst price is trading above the
50% levels of both the Primary and the quarterly 50% levels
then the expected path is for the market to move higher and
follow the dynamic model higher.

2nd part, apply AMT model to the weekly and Monthly timeframes.

Same model of expectation exists in this timeframe.

AMT model: monthly dynamics (yellow)
Weekly dynamics (green)

Expectation Market is moving higher towards the Primary
and Secondary dynamic highs in 2007

February: Trend strong until it breaks the 3-week lows #1

Sell off occurs and sells into AMT model expected support
for February and bounces #2 & 3

Expectation market will continue lower in the preceding month
March (2-month wave)

March sells off hitting AMT model support once again #4

Break of #5 and it follows the same pattern #6 #7 and #8

As it continues with the Primary and Secondary trends much higher.

What the AMT model has done is allowed me to have an expectation
of where the market is moving within the Primary and
secondary timeframes whilst defining the market using
lower timeframes.

Just by this price action, recently the waves in Price have
followed the AMT model precisely. I don’t have to
haphazardly guess the market, when it meets certain criteria I
have an expectation that price follows market dynamics.

SPI....

SPI bounced off January 50% level and proceeded into a 2-month
wave into February and we have sold off breaking the March
50% level.

For those few days whilst price was below that 50% level then
my expectation is to move down, however it didn’t, it bounced
back above the 50% level became support and it has followed a
two month wave upwards into April, which is following the
Primary timeframe higher.

Each week (green boxes) I have probable weekly paths that is
will follow, The resistance of this weeks highs won’t be there
this week and can continue towards 6393 next week.

Above is the theory and a simple dynamic model based on TIME PRICE and MATH, that functions on probability not 100% guaranteed predictability.

AMT model is not about predictions; it’s about trading
observed patterns under certain criteria.

Apply systems and I then increase my edge of knowing what to do
on shorter timeframes, different trading strategies for
different markets. I’m a buyer and holder of stocks, and I
trade short-term derivatives.

Any time the market moves down based on LONG systems. Ie
Thursday I know that there is a high probability that the next
day will rally, Friday on the SPI is an example of this. If I
take longs on close (Thursday) I’ll hedge a small parcel of Dow
on shorts just in case the market does tank.

In conclusion: I’m working with a Dynamic model using
systems that provide expectation knowing that there is a
probable path the market follows and trade accordingly with
systems.

Frank Dilernia.

AMT model and Methodology (c) Frank Dilernia

2. Frank DWell-Known Member

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ES....

Next week i'll post something on intra-day trading.

Frank Dilernia

3. reece55Well-Known Member

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Frank

All I can say is a big thank you for generously sharing your methodology here.

Trading the index is something that I personally would like to start doing more of. Your posts are an insight into generating a profitable method to do so.

Cheers
Reece

4. >Apocalypto<20.03.2012

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Cheers Frank,

You're a true selfless teacher.

Great stuff, great stuff.

5. Frank DWell-Known Member

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Everyone who has read the book knows that I focus on 3 types
of traders, and try and make traders into those three types,
the long term investor who continually accumulates stocks and
never sells, the medium term stock trader who trades a minimum
3-6 months, and the short term derivatives trader.

I pull no punches when it comes to short term trading, it’s
the hardest and most fail, if you want to succeed in the
markets, traders should focus medium to long.

Below is NAB showing the weekly charts and the Primary
dynamic ranges.

Ideally for a long-term investor accumulating stocks around
the primary 50% levels is the best strategy using the AMT model,
or a strategy I use is buying stocks around September-October
each year regardless of price action or the AMT model.

Over 100 years, the statistical date that the market (DOW)
rises into years end has been October 27th.

So in the above chart we can see NAB is coming into an
Extended price target for 2007 using the AMT model.

When we look at the same price action on the rise (chart Below)
we can see that each rise in each quarter is following the
price action of the AMT model extremely close.

“rotation into 50% levels and extends as time moves forward”

Yellow is the primary timeframe (Yearly)
Green is the seconardy timeframe (Quarterly)

A margin trading position I use is looking for prices to test
the secondary 50% levels and hold for approx 6 months (2 period waves)
and repeat the process.

Even though I’m using the AMT model, I’m applying different
trading strategies, one based on stock accumulation and the other
based on medium term timeframes.

NAB didn't meet my BUY zone in 2007, however NAB did meet my
buying strategy on investment in 2006 (never sell), and meet
my margin trading and exit in 2006.

In my opinion, when it comes to stock trading, the ideal trading
strategy should be approx min 6-months using the quarterly 50% levels
as support zones and looking for the market dynamic highs as ideal
targets.

In my opinion, those traders who want to day trade (short term)
should focus on derivative markets and should focus more on swing
trading techniques. However, my testing suggests that traders
are short changing themselves by not being able to hold at least 1
contract overnight and exitting the next day.

Frank Dilernia

6. Frank DWell-Known Member

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SPI”¦”¦

Whenever there is a break of the 3-day cycle, there are 'two things'
can happen, the market moves with the new trend, in this case down,
or moves into a 2-day counter-trend move, as what has
happened.

When I apply systems, the ‘two things’ have favoured a rotation
upwards with higher prices on Monday based on systems expectation,
and with the next favoured down day on Monday, as per last
week’s analysis/systems expectation.

The direction of the day is un-known, the length of the day
is unknown, however between today’s close and tomorrow’s open the
market can be anywhere, a continued down move and break of the
3-week 50% level this week will be the 2nd sign of weakness in the
market using the AMT model.

#1 break of the 3-day lows
#2 continuation below the 3-week 50% level.

Tuesday: depending on price opening and systems, I’ll
trade regardless, but for the market to move back into a ‘BUY’ cycle, price
needs to break above the 3-day highs once again 6299

Frank Dilernia

7. Frank DWell-Known Member

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Trading....

A 1 contract trader would use the exit zone today and remain on sidelines until the next day (6202)

a multiple contract trader (2+) would use the same zone and exit, and move last with either a breakeven stop from entry or run stops above today's highs in sycom.

With the 'hope' that tomorrow opens lower.

Frank Dilernia.

This thread is for educational purpose, and as per Wayne L recent
request, no more \$dollars, system results, and this is not and my aim is
not to solicit.

I post occassionally on the AMT model and go through stages of posting
and then I disappear for 6 months.

Hopefully some will learn new techniques or improve an aspect of
their trading in the future, whilst there will be others who think it's a load
of crap.

8. tech/aNo Ordinary Duck!

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Frank.

Others could take a leaf out of your book.
Posting of charts and clear explaination leaves the reader with far more information and explaination for practical application of your ATM model.

If others did the same there would be less flack and more sharing of info.

Posting a heap of dates
or long winded rehetoric while of interest doesnt help the reader beyond one of curiousity.
Wether a method is worth persuing further cannot be evaluated.Its impossible to see how to apply most which is presented.

Your an exception

Congratulations on your time and effort and success with your method.
Youve been around a long time and have stood the test of time.

Thanks again for popping in and presenting your work.

9. >Apocalypto<20.03.2012

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Frank,

I am in awe of what I have seen in your two topics.

You're clear to the point, really enjoy your posts.

I am not commenting much due to the only action required is to read, look, absorb!

Thank you very much for the time you take to display and explain your system, it has been a real eye opener.

Cheers
Joseph

10. Frank DWell-Known Member

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First of all always look at your weekly bar chart and work
down, think of a weekly chart as 1 bar, there are 5 days within
1 bar, if the market is going to reverse down its more than
likely going to happen next week.... The only expectation in the short
term would be a reversal back into the 3-day lows. (US markets)

When you look at charts and you are looking for market reversals
or short term reversals over 2-3 days the best time is always
the start of the next trading week, especially on markets like
the DOW.

A 2-3 day reversal is part of the 3-day lows catching up,
normally on the DOW you would see a double 100 point move
towards those lows, (not 200 points), but two separate 100
point bars.

When you closely look at weekly chart (left) you begin to see
how there is a high probability pattern that prices moves away
from open, this is when you begin to factor in timing your trades
as new week's begin.

This is ideal for short-to-medium term trades 1-3 day swing traders.

Frank Dilernia

11. MagdoranWell-Known Member

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Applause.

Now that was what I was looking for.

Thank-you, and well done.

Magdoran

12. Frank DWell-Known Member

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DOW”¦.

The first two days on US markets have consolidated without
much downside movement, and even though there is an expectation
that US markets are heading towards the 3-Quarterly dynamic highs
I would still like to see those 3-day lows catch up with price.

They are still currently @12766, another days trading and those
3-day lows will catch up with price and only then would I think
the market was going to go higher.

When we look at each short-term reversal on the DOW for the start
of the next week, (left Chart) there is normally a 2 bar
100-point move that retraces back into the 3-day lows.

So at this stage, whilst price is below 13025 and the
100-point closing price I still favour the same expectation.

When I look at my weekly set-ups around these highs,
I favour rotation down or consolidation over the weekly period and into
the new week.

So at this stage I would view the DOW based on 13025, whilst
price is below that I would look for a minimum 2x 100
points rotation downwards.

For me to trade longs at these levels I would prefer to trade at the
start of the new week, which lines up with the start of the
new month of May and new monthly dynamics.

I will get a better idea by the end of the week, because if the
US markets consolidate further this week, next months 50% levels
can provide the next platform for any further rises into
the primary dynamic highs for 2007.

However the first sign of weakness will be the break of the
3-day lows as is happening in the SPI.

SPI

SPI moved lower this week after the 2-day counter-trend
rally starting from Friday. The first sign of weakness on the
SPI was last Thursday and the break of the 3-day lows, however
there was an expectation that prices would move higher into
Monday before the next down move.

2nd sign of weakness is the break of the 3-week 50% levels.

Currently the SPI is being supported at the 3-week 50% level.
(24 hour 6175, day session 6159)

I'll be back into Longs on Thursday....

However, with my expectation of US rotating down this week,
there are probably more chances there are going to be
lower openings on the SPI, and the upside follow throughs that
we have expected over the past few weeks with higher opening
prices will probably fail to eventuate.

A weekly close below 6159 this week and things begin to look differently.

Frank Dilernia

13. Frank DWell-Known Member

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US markets have continued higher after the 2-3 day stall earlier
in the week, as it makes it’s way towards the quarterly and
primary upper levels in 2007.

I personally would have like to have seen 1 more down day on the
DOW this week before heading higher, but once it took out 13025
and the 100 point high on Wednesday I knew that this week
was following another bottom-to-top trading week.

SPI...

The Australian market has been tight ever since it closed below
the 3-day lows, and those follow throughs of multiple up days
are less and less, and Friday is following the weekly down
pattern heading towards a weekly close on it's lows.

For next week Australian traders will be looking at the MAY
50% levels that should clearly define the Trend, and by looking
at the close of the weekly timeframe we are below the 3-Week
50% for next week @ 6197, using the AMT model it is now step #2
in market weakness.

SPI would need a major push upwards back above the 3-week 50%
and then 3-day highs for any UP trend to continue.

Ideally I would like to see some rotation back into the May
50% levels next month step #3. (exact level confirmed on Monday close)

Wednesday Sycom Longs now stopped after partial exit on
Thursday highs with manual trailing stops below 6176.

Frank Dilernia

PS... I won't have any short set-ups unless there are higher prices early next week.

14. >Apocalypto<20.03.2012

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Greatly enjoying this Frank, thanks for your time and effort.

15. Frank DWell-Known Member

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Weekly close puts the weekly 50% level @ 6204, and looks like there
should be higher prices next week.

long only 1 overnight.

SPI.. and the bigger picture.

Each test of the 3-month 50% level is proceeded by a 2-month
rally into the next higher timeframe dynamic highs, as has
happened in April 2007.

The begining of the following month there is an expectation
that price will go and re-test those levels within the month of
MAY 2007.

A strong market will bounce off those levels and continue
with another 2-month wave upwards towards primary highs in
2007.

.............................................SPI weekly chart

A bearish pattern will see the MAY level fail to hold, and
whilst price is below the May 50% levels, then the expectation
is for price to head towards the major support levels @5654.

A bearish pattern will only occur if there is weakness in US
markets and trading below the MAY 50% levels.

Frank Dilernia

16. Frank DWell-Known Member

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SPI opens above weekly 50% level.

Adds longs on open, partial exit 6226, holding longs into close/ tomorrow open.

Resistance around 6230, but still holding with hope that market continues higher and break the 3-day highs.

Frank Dilernia

17. Frank DWell-Known Member

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DOW has followed the similar pattern at the start of the
trading week of a 2-3 day stall or rotation back into the 3-day
lows.

The DOW isn’t in the same stage#2 bearish pattern as the SPI, as
it is still trading above the 3-week 50% level, whereas the
SPI continues to follow a weaker cycle after closing below the
3-day lows, and following the previous analysis of less upside
follow through and more lower opens.

At this stage the expectation on the SPI is a continued
rotation back into the May 50% levels as it's trading below the
3-week 50% level, whilst the DOW is yet to complete stage #1.

Yesterday my last long was covered at breakeven from Fridays
entry, but I can’t and haven’t been shorting because I don’t
have any systems that suggest shorting atm, so I’m still trading
on the long side atm even though the AMT model is defining
a bearish pattern.

Frank Dilernia

18. Frank DWell-Known Member

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Spi was drifting lower this week but I was still trading on the
long side, and its good to see a follow through on the SPI today.

The first confirmed break out around above 6208 and now
continued with the break of the 3-day highs @ 6227, with my
overall exit @ 6255. (5-day dynamic highs)

Long 6162 add 6180
Partial exit on open today 6197

Partial exit hopefully 6254 today and then hold for Thursday open.

Frank Dilernia

PS. Not sure what my set-ups will be for Thursday but a higher
open could have the first ‘short’ set-up in over 2 weeks.

19. Frank DWell-Known Member

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Whenever the 3-day cycle changes (breaks) the market can do two
things, continue to rally into the end of the week without
another down day, or move into a 2-day stall/ rotation back down
to the 3-day break of 6227.

Yesterdays 5-day dynamic highs of 6256 have shifted to 6286
today (expected resistance)

Exiting last contract on open today.

Because the range bar set-up is still LONG, I would normally
exit the higher open and wait or not trade again today, however
with the market opening around expected resistance this
morning, I’m going to limit my short to 1 contract at this stage
and let the day run it’s course.

Preferably, I would like to see an 18-point rally on open and then
a reverse, I’ve seen this happen on many occasions, and if
it reverses down from that point I’d have a high expectation
(not guaranteed) that the top for the day (only) has been set.

Frank Dilernia

20. Frank DWell-Known Member

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ES-minis

ES has continued to be supported at the dynamic 3-week
50% levels, with the break above 1520.50 and the April-June
level, the next push upwards is towards the MAY 2007 highs
@1542.

SPI

April-June highs still providing some form of resistance, along
with the 3-Week 50% levels supporting the market, an extended
push higher and target is 5468-87

DOW”¦

The DOW is now in blue-sky territory, breaking above all
timeframe dynamic highs, if the price action continues then the
DOW can continue to move into the 100% levels, firstly 13715,
and then 13902.

Back in 2006, the exact same thing occurred, the breakout of
the MAY highs, hitting the 100% level before reversing back down,
so around 13715 on the DOW is something I would look to see
if there is going to be the same price action repeating
itself, however the follow throughs on most markets will
be confirmed with breaks of 3-week 50% levels and weekly closes
below them.

Frank Dilernia