AMT Model & Methodology
A generic Mathematical model applied to all stocks and
derivatives.
Core Theory: the rotation of price towards central
zones (50%) and the extension of price as Time moves forward.
Non-linear model and theory.
This model is designed to define probable ‘market paths’ and
Market Risk by simply using a ‘model of expectation’ that
whilst price is above or below the 50% there is a expectant
path that price will follow based on weekly, monthly, Quarterly
and Yearly timeframes.
Model of expectations:
Support and resistance moves with each new timeframe, what exists
in one timeframe will not exist in the next.
Support and resistance as per defined by the AMT model is
dynamic not static.
Short term:
If price falls under and closes below the 3-month 50% level based
on the lower timeframe i.e weekly the expectation is it will
follow a 2-month wave based on the AMT model.
A 2-month wave is NOT 60 days, it’s based on the higher
timeframe (monthly), the current month expected price move into
the following month based on the AMT model and market dynamics.
Apply AMT model.
Why?
I want to define most probable paths on timeframes starting from
the Primary into the daily.
When it comes to technical analysis the first plan is to
always determine the Primary Trend and then consider the
multiple higher timeframes. Without an understanding of this
most will struggle. Without the concept of ‘Direction’ and
‘Time’ you are guaranteed to fail, because Time effectively
defines the dynamics of the market and allows us to have a
better understanding of where Price is likely to go.
Next part of the plan is combining both Time and Price, because
with all trends price has a natural flow that rotates
between central zones and extends onward as Time moves forward.
This relationship forms levels in the market that hinders Price
from moving in straight lines, it moves between support
and resistance. As Time moves forward support and resistance moves
along with it. Knowing where support and resistance zones lie is
a critical cog in the wheel of trading, because it’s these
levels that become part of our trading plan. The levels
are now ‘probability patterns’ with a realistic expectation that
the same pattern will repeat.
Probability is the extent to which something is likely to
happen, or in some cases used extensively in areas such
as statistics and mathematics to draw conclusions about the
likelihood of potential events occuring.
Probability theory is the mathematical study of
phenomena characterized by randomness or uncertainty.
More precisely, probability is used for modelling patterns under
the same circumstances. Random variables or in this case
‘price patterns’ then become a mathematical function that
maps outcomes of random expectations, it does not describe
the actual outcome of the pattern, but rather describes
the possible, as-yet-undetermined outcomes in terms of
real numbers.
Apply AMT model on Weekly charts.
Looking for Primary Dynamics based on Yearly timeframe (Yellow)
Looking for Secondary Dynamics based on Quarterly timeframe (green)
50% levels are major support zones, each new Quarter
provides dynamic levels of probable paths that price can
follow.
……………………………………….SPI Weekly chart
Model of expectation: whilst price is trading above the
50% levels of both the Primary and the quarterly 50% levels
then the expected path is for the market to move higher and
follow the dynamic model higher.
2nd part, apply AMT model to the weekly and Monthly timeframes.
Same model of expectation exists in this timeframe.
AMT model: monthly dynamics (yellow)
Weekly dynamics (green)
Expectation Market is moving higher towards the Primary
and Secondary dynamic highs in 2007
February: Trend strong until it breaks the 3-week lows #1
Sell off occurs and sells into AMT model expected support
for February and bounces #2 & 3
Expectation market will continue lower in the preceding month
March (2-month wave)
March sells off hitting AMT model support once again #4
Break of #5 and it follows the same pattern #6 #7 and #8
As it continues with the Primary and Secondary trends much higher.
What the AMT model has done is allowed me to have an expectation
of where the market is moving within the Primary and
secondary timeframes whilst defining the market using
lower timeframes.
Just by this price action, recently the waves in Price have
followed the AMT model precisely. I don’t have to
haphazardly guess the market, when it meets certain criteria I
have an expectation that price follows market dynamics.
SPI….
SPI bounced off January 50% level and proceeded into a 2-month
wave into February and we have sold off breaking the March
50% level.
For those few days whilst price was below that 50% level then
my expectation is to move down, however it didn’t, it bounced
back above the 50% level became support and it has followed a
two month wave upwards into April, which is following the
Primary timeframe higher.
Each week (green boxes) I have probable weekly paths that is
will follow, The resistance of this weeks highs won’t be there
this week and can continue towards 6393 next week.
Above is the theory and a simple dynamic model based on TIME PRICE and MATH, that functions on probability not 100% guaranteed predictability.
AMT model is not about predictions; it’s about trading
observed patterns under certain criteria.
Apply systems and I then increase my edge of knowing what to do
on shorter timeframes, different trading strategies for
different markets. I’m a buyer and holder of stocks, and I
trade short-term derivatives.
Any time the market moves down based on LONG systems. Ie
Thursday I know that there is a high probability that the next
day will rally, Friday on the SPI is an example of this. If I
take longs on close (Thursday) I’ll hedge a small parcel of Dow
on shorts just in case the market does tank.
In conclusion: I’m working with a Dynamic model using
systems that provide expectation knowing that there is a
probable path the market follows and trade accordingly with
systems.
Frank Dilernia.
AMT model and Methodology (c) Frank Dilernia
