Enviable Performance Under All Market Conditions
Since 2007
  • Chart of SLV.gif
    BIG PROFITS ON SILVER: Put 20% of assets in silver at $17.73 before the run up to about $50. Took profits at the very top at $48-50 just before the big drop. Short sold silver at $48-50 and predicted a 33% drop in silver .In a matter of couple of weeks, silver fell about 40%.
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    BIG PROFITS ON APPLE: The ZYX Change Method recognized early the potential of Apple ecosystem . Apple was bought at an average price of $131and partial profits have been taken at $360, $525, and $629. The system has stayed in the trade through ups and downs for big profits.
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    BIG PROFITS ON SENIOR BANK LOANS: The ZYX Change System recognized at the depth of 2008-2009 financial crisis that senior bank loans were unjustifiably beaten down to 30 cents on a dollar. A closed end fund VVR was bought at $1.86 and sold at $4.53 while earning double digit dividends.
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    BIG PROFITS ON THE PROCESSOR DESIGNER FOR APPLE: The ZYX Change Method recognized early on that ARM Holdings, designer of the processors for Apple products, was about to become the biggest licensor of designs for mobile devices. ARMH was bought at $10.00 and profits were taken at $25.70.
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    BIG PROFITS ON COPPER: The ZYX Change Method recognized early on that the government stimulus in China was about to cause a construction boom which would increase demand for copper. An ETF JJC was bought at $39.82 . The system correctly called the top in copper and profits were taken at $60.02
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    BIG PROFITS ON CBS: The ZYX Change Method recognized early on that the prevailing wisdom of demise of network advertising was wrong. CBS was bought at $5.93. CBS developed hit shows and advertising market recovered. Profits were taken at $20.09.
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    BIG PROFITS IN OPTICAL NETWORKING: The ZYX Change Method recognized early on that demand for optical networking was about to increase. Ciena, a major vendor of optical network systems, was bought at $13.75. Profits were taken at $24.30 just before the top in optical network market.
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    BIG PROFITS IN THE LARGEST GERMAN BANK: The ZYX Change Method correctly recognized extreme negative sentiment as a contrary indicator in Deutsche Bank. Deutsche Bank was bought at $30.03 for a very short term trade and profits were quickly taken at $36.20.
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    BIG PROFITS IN FORD: The ZYX Change Method correctly concluded that Ford would not go bankrupt when GM and Chrysler were in trouble. Ford was bought at $1.97. Profits were taken at $18.14 near the top in the stock as the system recognized extreme bullishness towards Ford as a contrary indicator.
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    BIG PROFITS FROM HEALTH CARE REFORM: The ZYX Change Method correctly recognized early on that hospitals would not be adversely effected by the health care reform as Wall Street thought. Our analysis was hospitals would benefit from the reform. HMA was bought at $1.26 and profits were taken at $6.01.
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    BIG PROFITS FROM DROP IN EMERGING MARKETS: We monitor indicators from 23 countries. The ZYX Change Method recognized that then prevailing wisdom of emerging markets decoupling from the American market was wrong. Inverse ETF EUM was bought at $63.36 and sold at $118.52.
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    BIG PROFITS FROM INDIA: The ZYX Change Method recognized early on that India would be a major beneficiary as the world emerged from the financial crises. ETF INP was bought at $25.92. The method correctly called the top in Indian market and sold INP at $76.46.
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    BIG PROFITS ON GRAINS: The ZYX Change Method recognized early on the impact of Russian fires on grain prices. JJG, an ETF representing grains, was bought at $41.00 . Profits were taken at $53.50 when grain prices had fully accounted for production shortfall in Russia and Ukraine.
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    BIG PROFITS ON NETFLIX: At a time when Netflix was maligned for dying DVD business, the ZYX Change Method was early to recognize that Netflix would be the first big mover in streaming movies and this would cause massive short squeeze. Netflix was bought at $101.00 and profits taken at $187.49.
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    BIG PROFITS FROM CHICKEN: Pilgrim Pride, a major chicken producer, got on the wrong side of hedging feed costs and had to declare bankruptcy. The ZYX Change Method correctly recognized that there was more value in the stock than Wall Street perceived. The stock was bought at $3.00 and sold at $8.47.
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    BIG PROFITS ON GENOMIC SEQUENCING: The ZYX Change Method recognized early on that Illumina was leap frogging the competition in genome sequencing. Illumina was purchased at $23.25 and sold at $39.98 .
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    BIG PROFITS FROM A EUROPEAN EXPORTER: The ZYX Change Method recognized early on that SAP, a big European software exporter was not as affected by the debt crises in Europe as generally perceived. SAP was bought for a short term trade at $48.56 and profits were quickly taken at $57.19.
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    BIG PROFITS ON SEMICONDUCTORS: The ZYX Change Method recognized early on bottom in semiconductor cycle. SMH was purchased at $24.33. SMH was sold about five months later at $34.09 when our method correctly concluded that majority of profits from the cyclical upturn were already in the bag.
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    BIG PROFITS ON FINANCIALS: The ZYX Change Method recognized early on during the financial crises that bank nationalization in the U.S. was off the table and financial stocks would rebound strongly. An ETF UYG was purchased at $21.18 and exited at $73.69.
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    BIG PROFITS FROM FALL OF SMALL CAPS: The ZYX Change Method recognized early on in 2009 that small capitalization stocks were about to be slaughtered. An inverse ETF TWM was purchased at $253.27 . In about two months, profits were taken at $426.16 close to the eventual top.

 
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UNIQUE ZYX CHANGE METHOD
The ZYX Change Method is a unique, proven process to profit from change by trading and investing. The method  has an enviable track record of working well in both bull and bear markets.

The ZYX Change Method is the culmination of over a quarter of a century of experimentation in developing fundamental, technical, and quantitative models as well as implementing gray boxes to execute the models in a variety of market conditions. The Methodology has been equally well applied to different time frames ranging from years to hours.


The premise behind the ZYX Change Method is that the most money is made with the lowest risk by successfully predicting change before the crowd.
  

The method consists of six screens to be applied in a specific order and  trade management guidelines.

SCREEN DESCRIPTIONS SIX  RIGOROUS ANALYTICAL SCREENS DEVELOPMENT CHRONOLOGY
 
             CHANGE SCREEN

The basic premise behind the Methodology is that the opportunities to generate outsized alpha (Alpha is the return in excess of compensation for the risk.) abound when Change is occurring.


The highest alpha is generated when a trade is entered just prior to the early recognition of  a change by the market participants.  Such an entry lowers the risk because close stops can be entered and typically stops do not hit.

Of course, money can be made by correctly predicting the trend at any stage.  However, risk adjusted returns get progressively smaller as the change is recognized more and more by market participants.

The two diagrams on this page illustrate five stages of long trade based on change and five stages of short trade based on change.

The change screen can be equally well applied to macro-changes, industry changes, technology changes, company changes,  commodity supply/demand changes and sentiment changes

For trading purposes the most important change is the change in sentiment, and correct prediction of change in sentiment leads to outsized returns.


GLOBAL FUND FLOW ANALYSIS SCREEN

The highest Alpha is mostly generated when trades are in the direction of accurately predicted fund flows for the time frame of the trade.  This is the big picture analysis where the ZYX Change Method calls for analyzing and predicting fund flows using the following global perspective:

Fund flows between asset classes

Fund flows between currencies  

Fund flows between geographical regions

Fund flows between sectors and subsectors

The trade candidates in line with the big perspective fund flows are first confirmed  based on the fund flows in the individual candidate and then passed on to  the ZYX Change Analysis Screen.

 


QUANTITATIVE ANALYSIS SCREEN

Quantitative analysis is the next screen for the candidates that pass Theory ZYX Change Analysis.  Quantitative analysis is merely data driven analysis to determine the price targets.  The Methodology compares the anticipated fundamental data from the future state with actual historical data from the same security as well as other comparable securities.  For exit signal targets, the analysis first builds models of overshoot and then mean reversion.

The problem with traditional quants is that too many of them do the same trades at the same time.  The result is crowded trades that are difficult to exit profitably.  The ZYX Change Method successfully sidesteps this issue because the input of candidates to this screen is not quantitatively derived like traditional quantitative methods

 

 
 
inductivity zyx method change management
FIVE STAGES OF LONG TRADE
FIVE STAGES OF SHORT BASED ON CHANGE

THE BOOK


Those interested in  digging deep may consider taking a look at this book by Nigam Arora on widely acclaimed patented Theory ZYX of Change

The Book at Amazon.com
The Book  at Barnes and Noble

This is a not an investment book, but a management book that is popular among CEOs.

For more resources, please visit
www.Change-Management-Center.com


                 ZYX CHANGE ANALYSIS  SCREEN         

Imaging being able to fast forward to the future, look back to the present, know what will happen in the future, and then transport yourself to the present.  If you could actually do what you just imagined, without question, you would be the best trader on the planet.  Well, there is a tool that comes close to the future time machine.  The tool is the conventional the ZYX Change Analysis Screen. This is a vigorous tool that successfully predicts if a CHANGE will meet objectives or meet failure.

In the ZYX Change Method, we use this screen to predict if change will be successful and to what degree.  If the market expectations are of lesser success, we have a buy trade.  On the other hand, if the market expectations are of more success and the ZYX Change Screen predicts a failure, we have a short trade.

Inductivity is one of the  elements of this screen  The screen relies heavily on inductivity of the market participants.  Inductivity is defined as the characteristic of market participants to extend their thinking and actions on small steps that are contiguous to the present state.

The vast majority of market participants are highly inductive.  This results in them being slow to picture the eventual result of the change.  Their slowness presents an opportunity that ZYX Change Analysis captures to get ahead of the crowd in both entries and exits.

                     TRIGGER EVENT SCREEN
The market’s early recognition of change typically starts with some event that triggers early buying or selling.  To maximize annualized return, the Methodology focuses on predicting trigger events and entering just prior to the trigger event.  Predicting trigger events is easier said than done.  Therefore, the second preference is to be a fast draw upon the occurrence of a trigger event.

The obvious question is why not forget about the first four screens and just focus on the trigger event?  Decades of experience have shown that such an ad hoc approach does not work for two reasons.  First, markets are perverse, and it is difficult to determine the direction on an ad hoc basis.  A security may go down on a positive event or go up on a negative event.  Or worse, there may be a head fake, i.e. a security may go up first and then go down and vice versa – examples abound.  It is only  with the foundation of the first four screens that an accurate determination of the future direction can consistently be made.

Second, the key to building large positions quickly before most market participants catch on is to have the conviction  to execute fast, which is typically not possible without the first four screens.

             TECHNICAL ANALYSIS SCREEN

After the trigger event, the Methodology uses technical analysis to determine entry zones and stop zones.  Further technical analysis is used to supplement quantitative analysis to determine exit zones.

The research and recent testing at "The Arora Report" show that the traditional technical analysis no longer reliably works as described in the classical literature and as practiced by most technicians.  The reason appears to be that the traditional technical patterns, support/resistance, indicators, and sentiment analysis are now well known, giving advanced indications to the smarter players as to what the market participants following traditional technical analysis would do.  The smarter players take advantage of this information, sometimes acting ahead of the traditional technical signals in the direction of the predicted signals and then exiting in the order flow generated by the technical signal.  This is the reason that as the years go by, more and more break outs fail and the success rate of technical patterns diminish.

The ZYX Change Method takes advantage of the above described battles between traditional technical analysis players and smarter players to achieve better entries and better exits.

                        TRADE MANAGEMENT

Trade management is crucial to making money, especially for the smaller time frame trades.  The following are the basic tenets of trade management as called for by The ZYX Change Method.

                                   Time Frame

The ZYX Change Method is equally profitable for very short term and very long term trades.  The research at "The Arora Report" shows that risk adjusted returns are maximized by focusing on short term trades during periods of high volatility and longer term trades during periods of low volatility.

                                Scaling In Entries

The ZYX Change Method calls for scaling in entries.  Research at The Arora Report shows that the optimum smallest increment for scaling is about 5% of the full position size.  How quickly and in how many increments a trade is scaled in is a function of conviction, volatility, and time frame.  The ZYX Change Method will typically look for buying on spikes down as  stops placed based on traditional technical analyses by weak longs are taken out and selling on spikes up when stops placed  based on traditional technical analysis by weak shorts are taken out.

                                 Scaling Out Exits

The ZYX Change Method calls for scaling out of positions similar to scaling in for entries. Research at The Arora Report has concluded   that a proper mixture of scaling out at pre-determined prices and trailing stops produces optimum returns over a long period. The method also calls for never losing more than 20% of  a large unrealized gain   

                                        Zones

Based on technical analysis and quantitative analysis, entry zones, target zones, and stop zones are predetermined before entering a trade.  The key points are to scale in or out within the zones and ahead of the crowd.

Detailed ZYX  Trade Management Guidelines to increase profits and reduce risks  are available to paying  newsletter subscribers.

Date

Progress

1981

Developed technical analysis software

1982

Back tested various technical indicators

1982

Developed gray box for trading using technical indicators

1982

Great results in actual trading

1983

Mixed performance of the gray box

1983

Developed a hybrid trading model combining fundamental analysis and technical analysis

1983

Developed a gray box for trading the new hybrid model

1983

Major losses for the gray box

1984

Refined the hybrid model and the gray box

1984-1986

Great results in actual trading

1987

The model went heavily short the US stocks in early 1987

1987

Huge losses on short positions as the market spiked up.   Inadequate risk controls.

1987

In early October 1987, the pain of losses on short positions was excruciating.  Abandoned the model and covered all short positions realizing huge losses. 

1987

In early October 1987, went from 100% short US stocks to 100% long.  US stocks without any quantifiable model, perhaps to make up for the losses in short positions.

1987

Again huge losses on October 19, 1987 as US market crashed.

1987 The most formative year as I learned the value of adequate risk controls, not acting on emotions, and the importance of not being too early.

1988-1991

Disillusioned with US stocks, focused on building quantitative models for derivatives

1991

Heavy use of Neural nets.

1992 Addition of Genetic algorithms
1993 Addition of Statistical Algorithms
1994-1996 Addition of Inter Market Analysis

2000-2003

Development of  Change Analysis tools.

2003-2006 Extensive experimentation with application of Change Analysis tools to trading and investing.

2007

Finalization of the ZYX Change Method for Trading and Investing

2007

Extensive back testing and validation of the ZYX Change Method

2007

Finalization of the ZYX Global Multi Asset Allocation Model based on the ZYX Change Method

2007

Development of Equities Long Short Allocation Model based on the ZYX Change Method

2007 Refinement of proprietary sentiment indicators
2007  Refinement of proprietary sentiment indicators for gold and silver  

2007

Started  publishing based on the ZYX Change Method and associated models.

2007 Extensive refinement of algorithms for analysis of the real time tick trading data  from across the globe and integrating them more tightly with the ZYX Change Method and the ZYX Global Multi Asset  Allocation Model
2009 Development of the Arora Very Short Term Composite Indicator or AVSTCI
2009 Development of the Short Term S&P 500 Timing Model
2009 Development of S&P 500 Intermediate Term Timing Model
2009 Significant work towards . following 3000 U.S. stocks, 1000 international stocks, all major currencies, all major commodities, and economic data from 23 countries.

2007-present

The ZYX Change Method and the ZYX Global Multi Asset Allocation Model  have produced enviable performance. Other than  minor refinements, the ZYX Change Method and the ZYX Global Multi Asset Allocation Model have remained in a steady stable state.

   
   
   
   
   
 
 



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