Market Reactivity System

The Birth of the System

The essential concepts of this trading system, called the Market Reactivity System, were first presented in the early 1990's, in Al Gietzen's best-selling book, Real Time Futures Trading, and later in Advanced Cycle Trading. It represented the achievement of his goal to provide a trading technique superior to others that were available.  As he put it:

"Almost all of the previous technical work I found in my research was based on a very narrow measure of market behavior; price only.  I set out to develop a system of my own which used a broader measure of market behavior and had a basis in some inherent behavior characteristic of each market . . ., and it had to provide timing of trades superior to other methods"

This innovative work grew from the study of cycles in the price behavior of the markets, and from the realization that market price behavior can be approximated by a combination of simple cycles of differing periods and amplitudes acting more or less independently of one another.  This is not a new concept; it has been widely studied.  The breakthrough is the manner in which this premise is shown to apply; and, most importantly, the indicators that were developed to track and exploit the cyclical nature.

Automated Trade Signals

Armed with this new information, the logic to produce timely trade signals for a broad range of market conditions was developed. The charts below depict the key information about the market being tracked that is needed to build a position in the direction of the trend.

As an example, the PRICE chart below is for the Euro currency for a period ending 8/09/10 (Day 1 is the first trading day of the year).  It shows the computer generated trade signals, and the computed 'stop loss' points in either direction.

The second chart shows the key parameters that are used for determining the short-term trade points.  The blue and red bars show the measure of intermediate and longer trend; and the cyan line shows the parameter, used with appropriate logic and filters, to 'trigger' the trade. (In addition to the buy/sell signals shown on the PRICE chart, this chart shows signals filtered only by the intermediate term trend).

The TREND lines indicate the direction and the strength of the underlying trend - above the zero line indicates positive trends, and below the zero line indicates negative trends.  The system is quite aggressive in building a position in the direction of the trend for maximum profit.  Of course it is the traders option to take just the first few in a given direction, or to take them all.  The last add-ons in a given direction are the least profitable, or may be small losses, but of course there is no way of knowing, in advance, the strength or duration of trend, so it is generally best to take them all.

Fortunately, we don't need to be concerned with the technical complexities.  Al has done that for us.  It is all built into the software.  But aside from all this, the real importance is the performance.  Will it produce a profit?  Take a look at a straight-on presentation of results for trading a number of commodities for the past 12 months.