*Disclaimer: I, Toad, am by no means an expert on this subject but know enough to be able to use this tool to help my trading. I’m also a scalper at heart, so keep in mind, I’m trying to catch quick moves in the ups and downs of the market.* --- ## Harmonic Rotations **What are they?** - It is the natural ebb-and-flow of the price - The average distance from a swing high to a swing low ![[Screenshot 2025-02-15 at 12.23.11 PM.png]] ^ In the above chart, a rotation is blue dot to blue dot Can be calculated or averaged for any timeframe. For ex ample, the RTH and Globex harmonic rotations will most likely differ. As well as week to week with VIX variation etc. ![[Screenshot 2025-02-15 at 12.24.16 PM.png]] ^ In the above picture, this means that that average swing high/low of ES is 10.38 These rotations happen the best when in “price discovery” ### What do you do with this information? - Use it to inform your take profit/stoploss etc when trading - Use it as a baseline for whether the r/r of a certain trade is worth it - It can be used as a guide to get an entry into a trend, or be patient for a counter rotation ### How can this inform your TP/SL? - Let’s just say that the harmonic rotation of ES over the last week is 8pts. - Always remember, this is an average, so consider variation and don’t take it as an absolute - Let’s run a few scalping scenarios: - If I identify a level of interest and see a “bounce” off it, let’s say my long entry is 2pts from the bottom of the swing low. An average take profit for me would be 6pts (8-2). Now to be safe, I’d run a 5pt take profit, to account for a 1pt shorter than average rotation up. - Let’s say I chase the entry a bit and enter 4pts above swing low (FOMO chase). I then should not expect more than 4pts in my favor before a counter-rotation. So, to be safe here, you should take profit after 3pts (8 rotation – 4 from bottom - 1 for safety) - If you’re trying to catch a bigger move and swing trade, you can use the harmonic rotation to inform your stop-loss distance. So, if you suck at entries and are looking for a swing trade, you should not have a 5pt stop if the average rotation is 8pts. That would spell disaster from just noise or a counter-rotation. Give yourself a rotation or two of leeway if you want to try to swing - In summary: Don’t get greedy and try to have a take-profit wider than the average rotation. Use this as a guide for stops if you’re looking for a longer move. If you can’t take the heat of an average rotation, try sizing down or working on entries ### Defining r/r of a trade – especially for scalping rotations - Let’s go to previous example of an 8pt average rotation - If I enter 4pts after a local top/bottom, I now, on average have a 1:1 r/r before a natural counter-rotation. For most situation this may work, but is not ideal - If I enter 5pts after a local top/bottom, I now have a higher risk than reward on natural price movement. I should not take that trade and patiently wait for the next opportunity. - If you are scalping natural rotations, your entry from bottom/top factored with the average can give you an idea of the r/r you can take. If you can get great entries, try to take most of the rotation. ### Trends, and how to factor harmonic rotations into it. - In the scenario you identify a trend day, be it from 30 min OR break, sessions position or whatever, the harmonic rotations can help you play it - First of all, knowing the rotation is average, factor a bigger swing in direction of trend - In previous example of 8pt rotation, you may be able to factor 10pts in direction of trend and 6pts in opposing direction - Let this inform your wanting to catch knives or short an up day. Use the adjusted rotation to for an r/r. - If you are catching a knife on a hard trend down day, don’t ever assume you can get a full rotation and vice versa ### Trends can induce FOMO and can make you chase. How to be a little more patient - Wait for retracement. 61.8 or 75% is a good guide. - In the example of an 8pt average rotation, let’s say you miss a move and want to market in. Don’t pull the trigger on an order. Wait for some slowing of trend and counter-rotation - 61.8% of 8pts is 4.94 - 75% of 8pts is 6 - So you can try to get on the move with a 5-6pt retracement - This keeps you from trying to chase and buy highs/sell lows etc. - You’re better off waiting for a counter-rotation retrace and hold than FOMO’ing into a move ### Key Points - Always remember it’s an average, and give yourself the leeway for the variance - Make sure to give yourself a positive r/r on a trade, and use the rotations to inform that - Use the rotations to guide your SL/TP to adapt to the trading environment - Know what timeframe your rotation is using, and adapt to it - Factor your trading style into how you use the information.