Cyclone System

System Design and Principles of Operation



The Cyclone System operates as a longer term daytrading system by calculating proprietary support and resistance

points using data inputs from the last several trading sessions.

The primary focus of the system are two pivot lines, one of which is drawn above yesterday's close, the other being drawn below the close of

yesterday.These are pivotal areas for the market for the day in question. When the market reaches these points they can often be a turning

point for the trend for that day.

Entry Signals

No trades are entered during the first 45 minutes of the day or during the last 45 minutes of the day.

Let's first consider a day in which the market trades higher from the open and then encounters the upper green pivot line.

From this point, two trades are possible for the system, a breakout trade and a counter trend trade.

If the market continues trading higher, a breakout trade will be entered at the upper yellow line. If the market respects the calculated resistance at the green line and turn lower, a counter trending short position will be entered at the red line below the upper green line.

In this fashion the system will take advantage of the trend which develops after the market encounters significant resistance. If the market is indeed a stong one for the day the system will get on board the uptrend with a buy stop at the upper yellow line. If the market respects the resistance the system will enter a short position with anticipation that the market has made its high for the dayand will trend lower for the remainder of the day.

The chart below illustrates a high breakout trade. The automatic trailing stop programmed into the system is responsible for the exit of this trade.

The chart below shows a countertrend day. The trade is enabled by the market challenging resistance at the green high pivot line, failing to move higher, and then trending lower for the rest of the day. The trade is exited at the end of the day.
 

The same conditions will set up a breakout trade on the lower side of the market. The chart below illustrates such a trade.
The trade is entered when the market breaks the lower breakout line. We exit the trade appriximately 24 points lower at the end of the trading day.

The next chart illustrates the countertrend trade that develops when the market finds support at the lower pivot line and trends higher for the rest of the day.