Market cycle-finding tools have been in use for years, but are subject to some problems that make them difficult to trade. In 1990, Parallax developed a new technique for accurately finding turn dates by applying the “quasi-periodic” oscillator model from non-linear dynamics to historical market turning points. Unlike other cycles tools or “standard” trend change methods such as Fibonacci and Gann, our indicator is based on the exciting new science of Chaos. Our research has shown that auction markets are chaotic instead of random, and exhibit very clear patterns with respect to the timing of market turns. It was found that significantly better turn dates could be forecast by ignoring whether a turn was a high or low. More details are available in A New Method of Forecasting Trend Change Dates, published in the September 1990 issue of Cycles Magazine.
As a market participant you are always trying to identify the start of a new trend, regardless of the time horizon of your trades. Most indicators give a signal once a new trend is well under way, increasing your risk and reducing your trading confidence. The Precision Turn™ indicator will give you the dates of the most likely turning points in the markets well in advance, allowing you to focus your expertise on detecting whether a market is at a top or a bottom.
Turns almost always occur at geometrically sensitive prices, for example, at trend lines or channel edges and prior highs and lows. Turns are effective for an average of six bars (range is 3–12 bars). The three bars preceding the turn are often consistent. Turns may also occur when there is a high compression before a price breakout.