Time Dilation Theory - PART II - Understanding Expansions & Reversals

Summary

In this video, the speaker outlines a mechanical trading strategy based on counting candle patterns and understanding price action through expansions and reversals. The core concept revolves around the sequence formula `n² - n + 1`, which helps traders identify key entry and exit points. The speaker stresses the importance of focusing on large body candles while ignoring smaller, less significant ones. Emphasis is placed on mastering the basics first, with more advanced topics such as time contraction and retracement reserved for future lessons. The approach is designed to be simple, systematic, and effective with consistent practice.

Takeaways

• 😀 Understand the basic sequence (n² - n) as the foundation of time relation theory. This is critical for grasping price movements and market behavior.
• 😀 Focus on expansions and reversals, as they are the easiest concepts to understand. Avoid getting caught up in consultations and retracements initially.
• 😀 Identify the correct candles for expansions and reversals: for a bearish expansion, use the first bearish candle that marks the start, and for a bullish expansion, use the first bullish candle.
• 😀 Avoid counting candles that are not relevant to the expansion or reversal. For example, ignore the highest high or lowest low candles if they don't kick-start the move.
• 😀 Use large-bodied candles to identify key price movements. Small-bodied candles with long wicks are typical of consolidations, which are not the focus for now.
• 😀 Time relation theory is mechanical, meaning entry and exit points can be predetermined. Use alarms to manage your trading actions more efficiently.
• 😀 Practice counting candles across various timeframes (daily, weekly) to become familiar with how sequences work in different contexts.
• 😀 Be patient with your learning process. A consistent, daily study routine (1 hour per day) is enough to master the basics over time.
• 😀 The theory is flexible and can be applied in different trading models. Study the examples provided and test different approaches.
• 😀 Understanding the convergence and divergence of numbers is key to predicting market movements. Over time, you'll start recognizing patterns as sequences meet at certain points.

Q & A

What is the basic sequence mentioned in the video, and why is it important?

The basic sequence mentioned in the video is **n² - n + 1**, and it forms the foundation of Time Relation Theory. It's important because it allows for a mechanical system of counting candles, helping to predict price movements based on the alignment of numbers.

Why is the focus on expansions and reversals rather than consultations and retracements?

The video emphasizes expansions and reversals because they are easier to understand and form the basic foundation of the system. Consultations and retracements are more complex and are reserved for later lessons to avoid confusion.

What distinguishes a valid candle for counting in the context of expansions and reversals?

In expansions and reversals, the focus is on **big body candles** with little to no wicks. This is contrasted with candles in consolidation, which typically have smaller bodies and longer wicks. These larger candles signal stronger price movements.

How do you determine which candle to count when looking at a swing low or high?

When encountering a swing low or high, you start counting from the **first valid candle** (either bullish for expansions or bearish for reversals), even if it’s not the lowest low or highest high. Ignore the other candles that don't fit the criteria.

What should you do if a bearish candle creates a low but is followed by a bullish candle?

In this case, you would **ignore the bearish candle** and start counting from the **bullish candle** because it marks the start of the expansion. This counting method applies regardless of whether the bullish candle is the lowest low.

What role do highs and lows play in the counting process?

Highs and lows determine the starting points for counting. For bullish expansions, the **lowest low** with a bullish close is picked, and for bearish expansions, the **highest high** with a bearish close is used. This guides the counting sequence.

How do you manage counting when the price action shows a combination of bullish and bearish candles?

When encountering mixed price action (bullish and bearish candles), follow the rule for **expansions and reversals**: count from the appropriate candle type. For bullish expansions, ignore bearish candles and start from the lowest low with a bullish close; for bearish expansions, ignore bullish candles and start from the highest high with a bearish close.

Why is Time Relation Theory considered a mechanical system?

Time Relation Theory is considered a mechanical system because it allows for **predetermined entry** and **exit points** based on the alignment of the candle counts. This reduces subjectivity and guesswork, making the system more reliable and easier to follow over time.

How should someone new to Time Relation Theory approach studying it effectively?

To study Time Relation Theory effectively, start by focusing on the basics of expansions and reversals. Set aside an hour a day for practice, counting candles on different time frames. Over time, as you become more familiar, the concepts will become easier to understand and apply.

What is the significance of using alarms for entry and exit timings in Time Relation Theory?

Using alarms for entry and exit timings helps automate and simplify the process. By setting alarms for when the system predicts key moments for entry or exit, traders can reduce emotional decision-making and ensure they stick to the mechanical nature of the system.