1. Beginning (OPEN)
2. Middle (HIGH / LOW)
3. & End (CLOSE)
This is an essential requirement of a story, just as it is for a functioning public market.
You cannot have a story or a market without all three.
This is why, when I unveiled one constituent of our in-house methodology, it got me thinking about chess, strategy, and markets.
Then, I loaded up our deep and extensive archive and listened to the podcast I did on chess:
It got me thinking about the interrelationships of the OPEN, HIGH, LOW, and CLOSE.
I cannot emphasize enough that an open, high, low, and close can be used in any time frame, as time is relative.
*Yet, it is within human nature to acclimate ourselves to time, as on a visceral level, we are aware of our biological limitations. If we were machines, we would be less sensitive to time, as machines don't need to think of their source of energy to exist.
The advantage that I shared in my book in 2012 works effectively, tick by tick, as it works on a multi-year time frame.
The advantage achieved in trading and investing, would be the equivalent of linking quantum physics to Newtonian physics.
With absolutism, it refines and falsifies market efficient hypotheses in the most effective manner.
For the first time, it is possible to openly share it and some of the latest discoveries with my notable readers, consisting of some of the biggest names on the Street. I spent a few weeks programming and enhancing the core concepts myself.
In fact, I have heard from good authority that some of the biggest funds used and created their own iteration of this, which is a joy to hear - more soon. However, since the world isn’t ready for such revolutionary concepts, a fund could hide under the guise of being a deep value investor and use my methods for trading and execution, which, in my opinion, is perfecto.
When you combine catalyst with my methodology, that is where the magic happens aka performance fees 😍😍😍.
Chess Not Checkers
I find chess great way to help explain the utility of the app shared last week.
On an elementary level, just think of the chessboard and the fact that the game of chess has an opening sequence that leads to action in the center and a closing sequence.
The Opening Sequence
An opening range in the market refers to the price range within which a financial instrument, such as a stock or a commodity, trades during the initial period after the market opens for trading. This period typically corresponds to the first moments of trading, depending on the specific market and its trading hours.
The Opening Range is akin to the initial sequence of moves in chess, which typically consists of the first several moves. This sets the trajectory game played to understand the volatility and its possibilities throughout the trading day.
What was originally written in 2012 remains valid today: the range can be determined by a probability distribution, as seen above and in the app.
Controlling the Center
Once we complete the opening range, we are in the center of the trading session, or the high and low. We can consider averages and whether the previous session's high or low has been surpassed.
If the previous session's high or low breaks (+75%), we can begin to contemplate the trend and how it will lead into the close.
Remember, the high and low must be established before the close, and rarely is the high or low identical to the close.
The Closing Sequence
The closing range refers to the final sequence of moves in chess, akin to the endgame. We can consider the probability and statistics of transitioning from the HIGH to the CLOSE and from the LOW to the CLOSE, which is similar to contemplating how the open transitions to the HIGH or LOW.
Think of it like a contraction into the point of singularity for the next trading session.
The Market Goes Zugzwang
In Chess, Zugzwang is considered when one player is put at a disadvantage because of their obligation to make a move; a player is said to be "in zugzwang" when any legal move will worsen their position. In the case of our approach, we find zugzwang in the necessity of the market to achieve an open, high, low, and close.
When a OPEN, HIGH, LOW, or CLOSE happens - it is the past.
I refer to Hernán Cortés.
In 1519, Hernán Cortés led an expedition to conquer the Aztec Empire in Mexico. To motivate his men and eliminate any possibility of retreat, Cortés ordered the burning of his ships upon arrival. This bold act communicated his unwavering commitment to success, instilling determination in his troops while removing the option of retreat.
With no means of escape, they had no choice but to focus on victory, driving them to conquer and establish dominance over the Aztec Empire despite facing overwhelming odds and formidable challenges. Cortés's decision exemplifies strategic leadership and unwavering resolve in the pursuit of conquest.
CLOSE
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