Elliot Wave and Fibo for the Newbies

Hi, I thought I wud post a strategy I have been looking at for the past couple of weeks. Just fort I wud share it in the new people section cause i doubt the experienced wud be interested. Its a very good strategy, its just being able to identify where the price is in the Elliot Wave, that is the slightly tricky part.
So first things first. Just gona go over a few basics of elliot wave.
You have two main types of waves:

1. Impulsive
2. Corrective

The impulsive wave is the biggest move, also knows as the 'trend'. Just think that price is moving on 'impulse'.
Then corrective waves, you know when you get in with the trend then this b*tch of a move takes out your stop. Thats a corrective. It happens basically because as prices move higher or lower with the impulsive wave, it looses 'power' untill it exhausts the move. Then price 'corrects' itself untill a fresh supply of power kicks in again to continue the impulsive move (or the trend).
Eventually the power will run out completely then there will be some side-ways movement and a new trend will take place. It doesnt neccessarily reverse direction, it can continue on its previous path, such as the EURGBP.
So now we understand that that impulsive wave is the one we want to be on. An impulsive wave will typically move in 5 'stages'. These are knows as wave 1, wave 2, wave 3 ,4 and 5.
Here is a picture of what I mean:

You will notice that waves 1, 3 and 5 move in the direction of the trend. Waves 2 and 4 are actually corrective waves, inside the larger impulsive wave.
Usually where you will enter and get stoped out.
A corrective wave it self is made up of 3 parts, called wave 'A', wave 'B' and wave 'C'.
They also zig zag but in opposite direction to impulsive wave.
Within these waves, there will also be sub-waves. This is when you go down to smaller time-frames and you will see the impulsive waves and corrective waves within the larger wave.
On the charts it is harder to spot these, i will post some images on good waves.
There is also a very good way to determine where abouts you are within the elliot wave pattern.
It is called fibonachi. You have this button in mt4 that looks like horizontal dotted lines with an F in the bottom corner. The main one you need is the one called retracement. I dont really bother with the extension as the retracement can be used as both.
Now try to find a wave on the chart. Click the bottom of the wave and drag to the top of the wave with the fibonachi tool. There will be yellow lines with numbers.
Right click on the fibonachi tool and and select fibo properties.
Now add these numbers to it:

1. 0.236, call it reverse.
2. 0.784 call it 'continue'
3. 1.382 call it 'wave 5 end'
4. 1.618 call it 'wave 5 end'
5. 2.00 call it 'wave 3 end'
6. and 2.618 call it 'wave 3 end'

So now shud look like this:

Ok. You see where I have drawn the fibonachi retracement on that wave. From the bottom point to the top point. This wave here is a wave '1' that i have drawn it on.
You see that price has stopped around the 'reverse' level on the fib. And then continued up to the wave '5' target, then stopped.
This stategy basically involves getting in on this move early on.
It has the highest chance of getting to that wave 5 end part , once price has cleared the 'continue' line. So as soon as a bar has closed above the 'continue' line, or the 0.784 line, place a buy order.

Your stop loss shud be around the 'reverse' line. Or if prefere put it at the line above. Now Our target is not actually 'end of wave 5' it is the next one called 'end wave 3' because we have targeted wave 1. At wave 5 end line though you might want to take some profit out.

Now once this level is reached, move the fib to wave '3'. Do the same thing again, wait for price to retrace to around the 50.0 line this time tho. Then wait for price to break above the continue line again and place a buy. This time your whole profit target is 'wave 5 end' line.

Make sure that you are looking at an impulsive 5 wave, and not a corrective 3 wave. This just takes time and a little chart reading to get used to it.
There a lot more detail I cud go into but just see who is interested before i carry on.

Here is the fibo plotted on wave '3'. As you can see once price cleared the 'continue line, it went straight for the last wave '5' end and then reversed.

Oh ignore those 'buy' lines on my chart, those are my long term trades in demo account.
Also this wave is not a fantastic example as the fibonachi goes, but it is clear enough to show what i mean by identifying waves on the chart.

OK doesnt look like to much interest in this, maybe i am not very clear with what im talkin about.
But here is a great example of some good trades that cud have been taken with GBPUSD on the hourly.
In this little consolidation area im going to show, there was first a wave 5 up. Then a wave 3 down, then a second wave 5 up which is the one shown in my pics, and finally we have just completed a second wave 5 down move.

In that last pic it is of the first wave one. So plot the fibonachi on this, and now we look for the wave 3 end projections.
This pic shows in red lines where we expect the market to go to, which is wave 3.
As you see on the early hours of 8th dec, price broke the 'continue' line and then shot up to our target.

Here we go, here it is hitting the end of wave 3.

Now we need to look for where the final 5th wave will go.
So plot the fibonachi on this large wave 3.

In this case there was so much buying pressure that it didnt retrace past the continue line, it instead bounced off the continue line and hit wave 5.

Here is a view on this wave we have been plotting in a 4 hour chart.
So this wave cud have netted around 800 pips in a week.

Ok still no one. Well here is a live example running, we shall see what happens with it. It also shows that this method can be used on any time frame.
We will be focusing mainly on 5 min but first:
look at a 30 min chart for USDCHF. and plot a fib on this wave 1 show in image.
Put a horizontal line on the 38.2 line. This is where we expect price to turn around.

Ok now go down to 5 min chart. Now place another fib on wave 1 to get the projection of wave 3 end.
Put another horizontal line at the first wave 3 end, or target as it shows on my image.

Ok so that is where price is expected to go. Interestingly now, if you imagine that price has reached this wave 3 end level, pull your fib from the start of wave 3 to this horizontal line or where we think wave 3 will end.
Now look at where our wave 5 end projection lands near.
It has landed very close to the earlier horizontal line on our 30 min chart. This is a good target to go for.
Lets see what happens anyway.

hey, i interest with your method but still make confuse me. do you have e-book that u can share with?

Really nice Ill try to back test and post some pics.

Hey dashboard and Benjie. Dashboard sorry I dont have e-book. I am very bad at explaining things. This is just some things I have picked up in my travels across the internet.
I dont exclusivly use this method, I treat this more of a tool in my toolbox. I have to say though since removing MA's and other indicators like that my trading has improved and so has my head. That doesnt mean MAs etc are no good, they just give me a headache when looking at the screen.
Sometimes though price doesnt really behave as simple as the 5 wave and abc wave methods described here. Elliot wave theory does go a lot deeper than that.
But still it is a very effective method as your take profit and stop loss is already calculated for u with very good risk reward ratio. You just have to draw the extension correctly to get good results. Even then somtimes they dont work out, but u soon know when it isnt and can get out the market before it rapes u.
Benjie wud be good if u do some live testing maybe if we have a small collaboration we will discover what works so well and what doesnt.
As u guys seem interested ill start covering a live chart again.
I have decided to use GBPUSD on the 15min.
I want to use the 15m chart because things happen much faster. I dont want to be doing daily or even hourly for the time being. It is better to get across the ideas like this.
One little tip dont put loads of lines on your fiboncachi tool because it just gets too messy. Untill u are comfortable to do it, but I dont. I have 9 Lines on mine and they are nicly seperated so I can see them.
I got rid of the 38.2 and 61.8 inner fibs because they are around where the price bounces around and do mean anything to me.
I just have:
0.0 called - Resistance,
0.236, 0.50, 0.748,
1.0 called - Resistance,
1.382 Called Wave 5 END,
1.618 also Wave 5 END,
2.0 called - Wave 3 END,
and finally 2.618 - Wave 3 END.

Anyway on with live testing, this time ill keep posted.
Chart : GBPUSD 15m
Current Wave: Possible 1,2.
Entered: BUY at 1.4556
Looking to hit the first wave 3 extension at 1.4776.
SL set just below the Reverse or 23.6 inner fib at 1.4410.

If price approaches the Wave 5 END extensions, we could take part of our position out as price usually retraces from here. If price does reach these and then retraces back past the top Resistance line we exit all positions as the wave has become invalid.
Reason is that wave 4 shud never enter the price area of waves 1 and 2.
Lets see how she goes.

oops posted wrong chart.

Ok at the moment we wait for price to break a resistance level around 1.4570.
If price breaks this level partial profit target is at 1.4625 as there is strong resistance at this level.
If however price breaks this 1.4625 the next target is 1.4670.
It wud be worth to move the sl now to 1.4435. If price makes a clean break of 1.4460 then exit all positions.
Lets see what happens.

Ok now stop loss move to 1.4520. Always trying to reduce risk, yet still give good space so not to get stopped out.