Retracement Levels

The markets are not (completely) random.

Many years of research have confirmed this for us. Our proprietary studies show that prices tend to move up and down randomly, but they do so inside precise price patterns (that we'll call RL Price Matrixes). These Price Matrixes are very specific to each security and may be considered like their own DNA: the genetic code that generates all possible market moves for a security.

Retracement Levels is the first (and only) research firm in the world that has found the way to decode the DNA/Book of Life for  any market security, to understand the way a security develops, expand and then retrace according to its own unique historical/statistical  retracement patterns.

You can think of our claim as the ability to read the footprints of all the market players that have acted on the price of a certain security over time or you can imagine it as the ability to "photograph" how a certain security has retraced up and down through history.

We think of our research as a study of what has happened in the past that enables us to show what may happen in the future, and more importantly how likely it is to happen.

Our proprietary algorithms can decode reliably in a few seconds the Daily retracements DNA of any security with at least 10 years of historical trading data (larger data sets are required for Weekly or Monthly studies). The results  of the decoding are then displayed on our online RL  Odds Calculators (see sample images below). This information shows traders where to enter trades that have the highest probability of success.

No one else in the world offers a service like this, so those using our system have an extraordinary advantage over other market participants.

If you are wondering "How do we do it", well, unfortunately we can't reveal that: the criteria used to uncover the retracements DNA of each security are strictly proprietary and not disclosed to the public.

All we can say is that we use a sophisticated algorithmical pattern-matching system to compare a security's current/ongoing retracement with all its past retracements. This allows us to identify with surgical precision the levels at which price reversals may occur and what the chances are that they will occur, enabling you to adeptly place your trades.

Let's have a look in detail at the RL Odds Calculator (To Go Long version, in this example) to see its main features. Below you  see the Frequency Distribution Table: this graph shows the frequency of reversals at certain price levels for a particular retracement down.

The Frequency Distribution Table it's a great tool to spot price areas where trend reversals are more frequent and can be used by traders to position themselves before a reversal (regardless what the reason for the reversal is) virtually frontrunning any news or market moving event.

Next is the RL Trades window, the core of the RL Trading System: here the trader can find automatically generated trades with a high chance of success. These trades are generated by our 'intelligent' algorithms mimicking human logic and virtually producing in a few seconds a trading plan identical to the plan that we could create manually for you after an hour of market analysis.

The RL Trades  window eliminates all the guess work on the side of the trader, providing precise indications: levels, odds, position sizing and stop losses. All the trader has to do is to take the RL Trades exactly as displayed  and enjoy the profits.

Finally, the Scaling Table: here is where the trader can check the % odds of reversal at each price level and establish how much to liquidate of his profitable positions (profit taking). By the time the odds are 100%, the trader will be in cash and waiting for the next trade.

The RL Odds Calculators comes with a companion, a very useful tool called the "Odds Comparator", a device designed to compare the % odds of reversal at certain retracement levels on multiple time frames -- Hourly+Daily, Daily+Weekly or Daily+Weekly+Monthly.

The Comparator can be very useful in assessing the overall market direction or in analyzing how the price is moving across different time periods: this information allows traders to position themselves correctly in relation to the next probable direction of the security they trade, and so avoid going counter-trend before a massive medium term reversal takes place.

For example, if a certain security shows high odds to reverse LONG on all time periods, such as Daily, Weekly and Monthly (see image below), this indication can save traders a lot of money by preventing them from taking further SHORT positions and alerting them to take profit before the market reversal wipes away their gains.

One important question raised by many of our followers, is the following:  do the RL  Price Matrixes displayed on the RL Odds Calculators hold up when unforeseen events occur?

We have made several tests to examine this issue and our answer is "Yes, our Price Matrixes remain valid even during so called “Black Swan” events". We present below one such a test of our RL Odds Calculators during the crash of the Dow Jones Industrial Average that followed 9/11. The test was run using historical Daily data from 1928 to 9/11/2001. In other words, we simulated our test without hindsight: the odds you see on the chart below are the odds that our RL Odds Calculators would have displayed at the time, without knowing the future, just on the analysis of the data available up till the day before 9/11.

As you can see, even during such an extraordinary and tragic event, the DJI behaved according to the Price Matrix designated by our algorithms for that retracement down: it almost reached the 100% odds level, but did not breach it. Its movements, even during 9/11, were contained inside the designated RL Price Matrix. In fact, if an investor or a trader had taken the LONG trade on the 96% odds, they would have nailed the bottom of the crash and set themselves up for the ensuing rally. Even if they  had lacked the courage to go LONG, at least they could have avoided selling their portfolios at the bottom (like unfortunately many did, fearing further downside). If you were one of those traders or investors, the RL Odds Calculators that day would probably have saved you a good part of your investments, as it would have given you good reason to stay in for the upcoming bounce that recovered almost half of the crash losses.

So, we feel confident in saying that there are no "Black Swan" events with Retracement Levels,  and that our RL Odds Calculators always frame any event inside the right Price Matrix, regardless what happens in the world, and this is another aspect that makes it such an extraordinary and unique trading tool.

You can learn how to use the RL Odds Calculators (basic and advanced techniques) in our RL Trading Course.

You can check the list of securities currently available for trading with the RL Odds Calculators on this page.