Analysis and Trading based on Envelopes, Waves, Cycles

Hi parisboy, thanks for opening this good thread. Still trying to understand them (i am a slow learner, so it will always take time on me to grab some thing). Will try to read all of your great posts again and again, but at the moment comparing your 2 pictures are interesting. I have edited one of them, adding 3 lines (we do not know the lower band will run in path A, B or C, etc ...). If we just have a channel (lets say using envelope or std dev with Right MA setting as middle line) and the last upper/lower band is shown not at current (last) candle, then i think it is useless , because we do not know current candle is inside the channel or has reached one of upper/lower band. How can you make a nice channel like the one you upload at post #9 ? (i attach that image too below) . Any way i will try to read the whole posts again ... Gracias for sharing your ideas.

Despacito7

sorry for answering you so late but I was not available.

About the "uselessness" you simply show you are (for now) unable to "milk" all the informations a chart can give you :

if we consider the AORD chart you get :

- informations on the various fluctuations of AORD Price let's say :

- short Term (32 Trading Days = 6 Weeks
- Mid-Term (128 Trading Days = 6 Months ,
- 256 Trading Days = 1 Year
- Long Term = 1536 Trading Days = 6 years

- then you have informations on the Trend direction of current price and you can can integrate it up to 3 degrees above

- you have also informations on the maximum amplitude of the 4 different Envelopes which include most of the price fluctuation

- 6 Years = 1875 points
- 1 Year = 937.5 points
- 6 Months = 467.5 points
- 6 Weeks = 234.375 points

It is your right to find all these informations "useless", it is my right to find them very useful

Very simple

using "normal" Centered Moving Averages you displaced the result of the calculation half of the period BACK

for the CMA 32 - 16 points back
for the CMA 128 - 64 points back
for the CMA 256 - 128 points back
for the CMA 1536 - 768 points back

to get the chart where all Channels are aligned I displace ALL the results of ONLY 16 bars back

that is how you get the chart

a compromise between precision and "usefulness"

comparing both charts

Long position closed + 143 points

DAX Long position closed + 14 points

Hello Parisboy
still reading your posts with big interest.
does the degree of VTL have any importance ? Can you tell more about degree?

Green pips To you
amicalement

Hello limprobable I will develop on Valid Trend Lines and "degrees"

amicalement

on going Long on DAX

after a Gap UP and an overnight position

for now + 274 points

The concept of a Valid Trend Line however is unique to Hurst's Cyclic Theory. A Valid Trend Line is a trend line which further obeys a few rules (which validate it). A VTL is drawn for a particular cycle, because the position of that cycle's peaks and troughs are used in the plotting of the VTL.
There are two types of VTL's:

1. An upward VTL connects price troughs
2. A downward VTL connects price peaks

The rules are:

1. a Valid Trend Line connects the price troughs associated with two consecutive cycle troughs, or the price peaks associated with two consecutive cycle peaks.
2. a Valid Trend Line is drawn so that it does not cut through price (between the peaks or troughs that the VTL is connecting). Instead of invalidating a VTL, this rule will cause the VTL to be moved to prevent the VTL from crossing price.
3. the third rule applies only to downward VTL's: the price peaks connected by the Valid Trend Line may not have between them a trough of a cycle which is longer than the cycle for the VTL that is being drawn.

There is one further unstated rule which we will mention here for the sake of completeness:

1. If an upward VTL is not actually pointing upwards (when viewed from left to right), then it is invalidated, and similarly if a downward VTL is not actually pointing downwards (when viewed from left to right), then it is invalidated.

Because of these rules, and particularly the last unstated rule, there are not always both upward and downward Valid Trend Lines for all cycles.
When Sentient Trader plots the VTL's for a cycle, if it does not find a valid upward or downward VTL then it will look further back, and plot the last valid VTL that it finds in the previous three waves of the cycle. The VTL's are referred to as expired VTL's because they have usually been crossed by price, and their usefulness is of purely historical value.

How the VTL is used

VTL's are used for analytical purposes and also as tools in the trading decision process. As is the case with FLD's the importance of a VTL is when price crosses the VTL:

1. When price crosses below an upward VTL from above that VTL, a peak of the cycle one longer (in the nominal model) than the cycle that the VTL is based upon is confirmed.
2. When price crosses above a downward VTL from below that VTL, a trough of the cycle one longer (in the nominal model) than the cycle that the VTL is based upon is confirmed.

Note that the price which is used for this confirmation is the Median price. (Theoretically)

limprobable let's go to the basics

what you see ont he chart is a Wave , a real Wave -

forget about what ellioticians says , it is just plain bullshit

in market as at sea you have no such waves as elliotticians use them a wave moves first up then down : 2 components

what you see is not a Cycle : a "Cycle" is made of (at least) TWO Waves

that is the repetition of TWO Waves more or less identical (Period , and Amplitude) which constitutes a Cycle

Waves guys love to count them !

they desesperately look to find the famous 12345ABC pattern in charts which exists but are rare

moreover they have complicated their task by using the "Fractal " or autosimilarity concept popularized by RN Elliott " big Waves of 12345ABC" are made of smaller Waves of the same structure 12345ABC"

Gann has shown the importance of Time and Price and of their intimate relation

Elliotticians have absolutely no idea of how long a Wave can lives and which Price Level the same Wave can reach

you can notice Elliotticians do not use any statistics, not even the basic ones, on both parameters Time and Price , they drive in the fog of the market -

Cycles guys are more precise than Wave guys because they take into account the Time parameter

Cycle guys talk at length about "how long a Cycle can last" - Period of a Cycle is their main subject, Amplitude almost never.

They have no tools to measure the Amplitude of a Cycle

They have a real problem - financial cycles do not last , never.

Financial cycles have their own life, they have a date of birth (you see them), they grow (you can count 1,2, 3, 4 cycles of the same nature) and they die - (suddenly cycles of period X disappears)

let's go back to the Valid Trend Lines (VTL) and their use

look at the chart - what show you the chart (for more clarity I have hidden the Envelope 128 Time Unit)

a) most of the Price Action is included within the Envelope 32 Time Units (here in 1 minute)

b) you can easily identify a Low A, a Top T , and a Low B

Just visually looking at the chart you can classify and hierarchize Price Action moves, Bottoms and Tops

you do not need to be Einstein to understand that the Tops noted T1 and T2 are not of the same nature, degree, order than the Top noted T

similarly the Lows noted B0, B1, B2, B3, B4, B5 are not of the same nature, degree, order than the Lows noted A and B

as a Wave includes a Top between 2 Lows you identify and classify Waves

same thing you can classify and hierarchize Cycles, Mand W patterns, Harmonic Patterns

Let's go back to the Valid Trend Line (VTL)

then you can link - draw a line between 2 points (Top or Low) of the same nature, order, degree, weight

On the chart you see that points noted A and B (in red) are 2 Lows of the same nature : they are the only Lows generated by Price Action under the Lower Limit of the Envelope 256 Time Unit (in brown)

This Valid Trend Line is an Ascending one with a moderate steepness - Angle is 17°

How to use it ?

a) as long as Price Action fluctuates above the green ascending VTL - Trend is UP

b) if you do not use Envelopes and VTL's you can not say if the Price Action noted T/B is a Downtrending correction in an UP move or the beginning of a new Downtrend

c) If and When the green Ascending Valid Trendline is broken

- you have the confirmation that the previous Uptrend is no more valid
- you have generated an Action Signal and can consider a Short position
- you have confirmation that (within the parameters) the Top T in green is the last Ascending Top - Price Action will not generate (before some time) a new Top higher than Top T (in green)

DAX Closed Short position + 21 points

DAX Closed Long position + 19 points

DAX Closed Long position + 26 points