Improve Risk, Opportunity, and Strategy

Contrary Thinker started modeling volatility in 1996 with its %C (for percent contract).

With the advent of the CBOE implied Volatility data our group isolated patterns preceding S-T declines. In 2014 we found that measuring the volatility of implied volatility, was a leading index of market types. A method used previously on index futures.  Given our success to date, we have yet to find more than a hand full of hedge funds with a handle on this approach including any of the research “white papers” that crossing my desk that is beating around the margins.

The idea was sparked by a previous CTA client who had the right idea in mind. We coded it up, tested it, proved its validity and he ended up buying the code.

Almost all of our clients are professionals or mature investors/traders. There is no entry-level types and a few intermediate levels.

Contrary Thinker ‘s advisory service and publications are structured for them. We are not interested in volumes of new customers, rather the group is looking for quality professionals to work with general and provide for their particular needs when required and provide any education called for. All client’s information remains confidential. 

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Systems Trading is indifferent to a direction, its the market dynamics that matter.

Our group’s systems designers are not giving away factors that will be widely understood and used by other model and strategy developers. Since the late 1990’s I developed one of the key indicators used in the model, and to this day investors and traders rebuff the idea. It’s obvious the industry has done a good job saturating trader and developers with the belief that strategy progress ends with the robust Algo, formula, and forward test.

Which is fine with us. Our volatility measurement is “direction neutral.” Of course, when CBOE’s VIX spikes it is normally associated with a stock market decline because stocks fall faster than they advance. But that does not explain that Volatility of VIX was spiking before the peak in early 2018; and after. Also, the FOMO buying after the November 6, 2016 election. The fact remains that both hyperinflation and deflation will cause the fear index to spike, leaving the manager unsure of directional call plus an inferior risk and opportunity management situation.

The model my group and I created provides the trader and his trade plan or system a macro filter that predicts four basic market behaviors and when a trend is going to change. All the manager must do is show up and execute his trend-following or his breakout strategy or his mean reversion system or exit and stand aside. The same model tells the investor when the swing is climatic or if it is old, feeble, and due for a change.

Learn more about Ready to Trade System Plugins

Learn more about Code Lover’s Bundle of Core Trading Indicators and Strategies

Old School Technical Analyst only knows one speed, the New School puts Market Dynamics into the Equation.

The old school puts direction first. Because when it comes to picking stocks or ETFs 70%-80% of the decision process is based on the direction of the overall market and the individual stock. With that being the majority case, they may be confident the investment will go up, but without much of an idea of at what rate of performance.

They do this with some nouveau sounding quant risk model incorporating breadth, momentum & dollar flow metrics.

The problem remains, they may have a price target but have no method on the rate of change that is minute to get it there or not. They may project risk based on a horizontal line drawn on a chart, while multiple independent methods can provide a higher confidence pricing cluster. With that in mind, the old school has a limited basis for preferred strategy selection. The New School Of Technical Analysis based on price based context or preconditions will determine risk/opportunity and strategy selection before looking at direction. Because “Direction Will Take Care of Itself.”

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