Here's how it works...
Firstly, we use EW to break down and label corrective moves.
Once we have more than one simple set (abc), we know it will become complex. We need to identify the X wave and then enter the trade towards the end of the b wave (when the b wave is deep). Going down to micro timescale to study the b wave helps to determine this.
Let's give a scenario where the distance between the X wave to a fresh low (min requirement for wave c) is 20 pips. If we enter approx halfway, we have a risk of 10 pips and target of 10 thus 1:1 R:R. Ok so to be successful, we must get every set-up and label correct, now....
Lets do that again by only trading deep b waves where we reduce the risk to (eg) 4 pips and target becomes 16, that is some 4 times our risk. We should ignore everything else, even if the direction looks right. By finding 3 of these a day we can look to 8/9/10 bag our initial risk. Even if we take 3 losing trades too, we still end up +6/7 times our initial risk... and that's daily... Even if that is an optimistic outlook, there is masses of room to win big.
Most investors can only dream that one of their holdings will 2 or 3 bag in a year and even then, they do not have much more than fundamentals to go on... and the problem with fundamentals, is that they are usually already priced in... TA leads in every aspect.
Here's Cables little gift this morning;
Look how to label the downmove. It can not be abcde, but it could be a complete double and back to trend at that stage. However, we get a nice deep pullback for a likely X wave. This is confirmed by the new low. We still do not have a trade yet, as the final requirement is as i've outlined above - a deep pullback for wave b. We drop down to micro timescale and find that we can reduce our risk to a mere 4 pips including spread. The trade is taken, (it actually went to within 2 pips of the start of wave a).
Position closed out 15 minutes later for +17 making 4 times risk, (there was +25 available in the end).
Now perhaps you can see why it is so important to wait for the deep pullbacks. These set-ups are everywhere, all day long...
Firstly, we use EW to break down and label corrective moves.
Once we have more than one simple set (abc), we know it will become complex. We need to identify the X wave and then enter the trade towards the end of the b wave (when the b wave is deep). Going down to micro timescale to study the b wave helps to determine this.
Let's give a scenario where the distance between the X wave to a fresh low (min requirement for wave c) is 20 pips. If we enter approx halfway, we have a risk of 10 pips and target of 10 thus 1:1 R:R. Ok so to be successful, we must get every set-up and label correct, now....
Lets do that again by only trading deep b waves where we reduce the risk to (eg) 4 pips and target becomes 16, that is some 4 times our risk. We should ignore everything else, even if the direction looks right. By finding 3 of these a day we can look to 8/9/10 bag our initial risk. Even if we take 3 losing trades too, we still end up +6/7 times our initial risk... and that's daily... Even if that is an optimistic outlook, there is masses of room to win big.
Most investors can only dream that one of their holdings will 2 or 3 bag in a year and even then, they do not have much more than fundamentals to go on... and the problem with fundamentals, is that they are usually already priced in... TA leads in every aspect.
Here's Cables little gift this morning;
Look how to label the downmove. It can not be abcde, but it could be a complete double and back to trend at that stage. However, we get a nice deep pullback for a likely X wave. This is confirmed by the new low. We still do not have a trade yet, as the final requirement is as i've outlined above - a deep pullback for wave b. We drop down to micro timescale and find that we can reduce our risk to a mere 4 pips including spread. The trade is taken, (it actually went to within 2 pips of the start of wave a).
Position closed out 15 minutes later for +17 making 4 times risk, (there was +25 available in the end).
Now perhaps you can see why it is so important to wait for the deep pullbacks. These set-ups are everywhere, all day long...
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