There is so much technical information available today and some of it is confusing. I am going to attempt to walk you through the process I have taken over the last six years. The completed product is a software application that uses a neural network and genetic algorhythm to predict the next day’s price action. As we go through this article I will outline what information went into the neural net in order to forecast the next day’s price action. Skipping how I started in neural nets would save you reading volumes that would rival War and Peace.
Begin looking at a price chart like the square it is! Airline pilots typically make good traders because they are familiar with these charts when filing flight plans. They are also above average intelligence and have considerable time to study market action.
The Tomahawk neural net has these geometric patterns imbedded in its training cell. It will search thirty days of two minute charts to arrive at the next day’s pattern. Included in the cell structure are the proportions of importance. These are the sacred ratios of one through five. They are not sacred in the religious sense, but are sacred in the study of geometry.
Study the next section of this article because it takes you from “chaos” to order in the markets with the use of the Fibonacci Summation series.
Order from chaos in the Fibonacci Summation series?
I found it helpful over the years to view any market as a vibration from some
energy point. What happened leaves clues to the future of price movements. The Fibonacci
Summation Series is related to chaos theory. Within the chaos of market action are
identifiable patterns that repeat with great frequency. One of the unusual properties of
the Fibonacci series can be illustrated by the following example: take any two numbers
from one to infinity. Any two numbers will work, but I will start with 124 and 963. Notice
what happens when you do the following: add the sum of 124 +963 1. 1087 +963 2. 2050 +1087
3. 3137 +2050 4. 5187 +3137 5. 8324 +5187 6. 13,511 +8324 7. 21,835 +13,511 8. 35,346 When
you divide the seventh harmonic vibration by the eighth harmonic vibration you get the
number =.618 21,835 =.618 35,346
Once the eighth harmonic is reached there will be virtually no change in the ration of the numbers as you approach infinity. This is a good example of how two random numbers can be related in the future. Price and time patterns show the same characteristics when they repeat.
Now the Tomahawk neural net is reading to process the data from the past thirty
days of two–minute bar charts. It is focusing on pattern recognition. We have
imbedded geometric patterns in the training cells and the ratios of proportions from the
study of sacred geometry. The neural net uses thirty epochs (or hidden layers) to find the
patterns for the next day. This work is completed on a workstation. The Tomahawk is
different than most neural nets in three ways:
If you could watch the neural net work, you could see the Tomahawk neural net take the geometric ratios and the geometric patterns to forecast tomorrow’s price with the use of the Golden Mean “Phi.” Before you get too excited, remember one important thing. The Tomahawk is a trading tool, not a system. And it is certainly not the “Holy Graile.” It does, however, give the trader a decided edge to determine trend and range of the day. The day I picked was August 31, 1998 (figure 4), the biggest down day in U.S. Stock Market history (at least so far).
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