A coincidence of Pattern, Price and Time has come together to mark a major pivot that we have identified as the 5<SUP>th</SUP> of a 5<SUP>th</SUP> wave. The Elliott Wave pattern may not always be the one that we were expecting. When a fractal occurs it means that a wave has ended, ready or not.
The suspected high or low tick at a major pivot point is the ideal entry point. This entry has the least capital risk because it is closest to the initial stop loss point - the pivot. The trade off is that there will be a higher percentage of losses. The market does not always reverse where we want it to! The pivot point is Point Zero.
The most common Fibonacci relationships between Elliott waves of the same degree.
</TD></TR><!--WAVE ONE--><TR><TD vAlign=top width="7%"><!-- LEFT -->W.1
</TD><TD vAlign=top width="33%"><!-- MIDDLE ONE-->Will follow either a three wave A-B-C or a five wave impulse pattern. W.1 that follows an A-B-C is an impulse wave. W.1 that follows a five wave pattern is W.A of an A-B-C pattern.
Modern Elliott Wave analysis allows for five wave triangle patterns in the W.1 position of lesser degree waves. That means that W.4:1 can overlap W.1:1 without invalidating the pattern as an impulse wave. The internal structure is 3-3-3-3-3.
W.1 triangles are never allowed as lesser degree waves within a larger degree W.3.
</TD><TD vAlign=top width="33%"><!-- MIDDLE TWO-->New W.1 of the same degree should overbalance the immediately prior corrective pattern in price range but not necessarily in time.
TIME
> 50% W.1 minimum
> 62% < 162% of W.1 most likely
</TD></TR><!--WAVE THREE --><TR><TD vAlign=top width="7%"><!-- LEFT -->W.3
</TD><TD vAlign=top width="33%"><!-- MIDDLE ONE-->Usually the longest and strongest trending wave of the sequence.
W.3 cannot be the shortest wave of a five wave sequence. W.3 does not have to be longest wave but it can never be the shortest. This is one of the very few Rules of Elliott Wave analysis.
W.3 always synchronizes with an Oscillator extreme. The Oscillator extreme usually occurs before the price extreme.
</TD><TD vAlign=top width="33%"><!-- MIDDLE TWO-->W.3 confirmed when the price extreme of W.1 is exceeded. Price should not come back and trade beyond the beginning of W.2.
If suspected W.3 completes five waves of lesser degree and is less than 100% of W.1 consider that the suspected W.3 is W.C of a corrective pattern and not an impulse wave.
Once W.3 exceeds 100% of W.1 look for price to reach and probably exceed 162% of W.1
Look for termination conditons when W.3 exceeds 262% expansion of W.1 or 462% retracement of W.2
W.3 often equal in time to complete W.0 through W.2 sequence.
</TD></TR><!--WAVE FOUR--><TR><TD vAlign=top width="7%"><!-- LEFT -->W.4
</TD><TD vAlign=top width="33%"><!-- MIDDLE ONE-->If W.2 was an ABC then W.4 will probably be complex and vica versa. This is the priciple of alternation.
Look for minimum of three fractals in lower time frame and minimum price relationship of 62% to W.2
W.4 should not penetrate W.1. A W.4 close into W.1 invalidates the W.5 setup. This is a Rule.
</TD><TD vAlign=top width="33%"><!-- MIDDLE TWO-->Price extreme often occurs before the termination of the W.4 pattern. In complex waves Time factors should be the primary consideration.
If Wave 4 has exceed >50% of Wave 3, the possibility of a 5<SUP>th</SUP> wave failure is increased.
The Oscillator will cross the zero line two times during W.4. First against the direction of W.3 and then in the direction of W.3 to signal that W.4 has fulfilled minimum requirements for completion.
< 50% of W.3
W.4 38% W.3 common
W.4:W.3 < W.2:W1 on percentage basis
W.4 62% 100% 162% W.2
W.4 > 23.6% < 50% W.0 - W.3
TIME
W.4 most often related to W.3 or W.0 - W.3
Often longer in time than W.3 / W.0 - W.3
W.4 138% - 162% of Parallel Projection of ends of W.1 - W.3 measured from beginning of W.2
</TD></TR><!--WAVE FIVE--><TR><TD vAlign=top width="7%"><!-- LEFT -->W.5
</TD><TD vAlign=top width="33%"><!-- MIDDLE ONE-->Look for termination when W.5 has completed at least five fractals in lower time frame and is in a coincidence of Price and Time.
W.5 has made new price extreme and price and the Oscillator are diverged.
</TD><TD vAlign=top width="33%"><!-- MIDDLE TWO-->When the extreme of Wave 3 is exceeded the maximum stop loss should be raised to Wave 4.
When four fractals are in place for Wave 5 trailing stops should be moved very close to the market.
If Wave 4 has exceed >50% of Wave 3, the possibility of a 5<SUP>th</SUP> wave failure is increased.
</TD></TR><!--WAVE C--><TR><TD vAlign=top width="7%"><!-- LEFT -->W.C
</TD><TD vAlign=top width="33%"><!-- MIDDLE ONE-->Classically W.C is a five wave pattern.
</TD><TD vAlign=top width="33%"><!-- MIDDLE TWO-->If W.C. exceed 162% of W.A the labelling is probably wrong. The current pattern is probably impulsive.
TIME
Use Time guidelines for complete A-B-C corrective pattern.
</TD></TR></TBODY></TABLE>
If you follow these guidlines you will become rich. You can read the book to maybe get better understanding of what you are doing but this is the K.I.S.S. to make life easier.This is like the de Vinci's code to FX if you master it you will become rich. This is honestly the secret if there is such a thing, to forex. It plays out to a tee on all pairs literally. http://www.forexfactory.com/forexfor...ons/icon12.gif
i agree with fixmetoo about ucad, i believe its in wave 3. nyum nyum....
and my analysis at gbp/usd pair saw some space to get higher and target is 1.9085 if wave 5 failure.. if not... maybe 1.92XX reached.
p/s: elliot wave is really superb... hesitation on wave 3 may give u lack of profit.
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Joined Apr 2006
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Status: Senior Member
|1,257 Posts
Read this to better understand The Theroy behind Elliot waves this explains what I mean by market sentiment and price action. Trading for most is based on emotion once people start to get profit they become scared they will loose it so they take profit early. When some discover they may be in wrong side of trade the close trade for loss these event happen to happen at fib lines. That is what makes it so easy to predict movement. So you have some like us that know this and its some who dont and continue to loose on oppurtunity to obtain more profit and others who loose profit from fear. In a nutshell that is the basis of ELLIOT WAVE THEORY. FiXmE1ToO
Elliot Wave Analysis was developed by Ralph Nelson Elliott* in the early 1930's, following what remains the most devastating market decline in U.S. history - the Crash of 1929.
<TABLE style="FONT-WEIGHT: bold; COLOR: #000080" width="100%" border=0><TBODY><TR><TD width="17%">
</TD><TD style="FONT-WEIGHT: bold" vAlign=top width="83%">An accountant by profession, Elliott had a successful career as financial consultant to numerous railroad companies, a booming sector when he began his professional life just before the turn of the 20th Century. Elliott had a passion for Latin America (his boyhood home in Texas exposed him to nearby Mexico and its culture) wrote and spoke Spanish fluently, and spent much of his professional life working for firms in Mexico, Central America and Cuba. He was considered an expert in business planning, and his services were in very high demand. Such was his reputation that Elliott caught the eye of the U.S. State Department, which sent him to Nicaragua as an economic consultant, where he helped reorganize the country's finances. It's said that one of his greatest talents in business was a shrewd eye for detail. </TD></TR></TBODY></TABLE>1929 was a terrible year for Elliott. Like many others, he suffered major losses in the market crash. To make matters worse, he had contracted a parasite during one of his trips to Latin America, infecting him with a life-threatening anemia. In 1930, he moved to California, where, to occupy his time as he recovered from his illness, he took to studying charts of the major market indices. Part of his motivation was a book on the market theory of Charles Dow (creator of the Dow Jones Industrial Average); the other part was an intense desire to understand the mechanics that led to the Crash of '29.
Training his meticulous eye on decades of market charts, he discovered a persistent and recurring pattern that operated between market tops and bottoms. He theorized that these patterns, which he called "waves," were a collective expression of investor sentiment, giving the market a distinct form and behavior. Through a use of measurements that he called "wave counting," an analyst could forecast market turns with a high degree of accuracy. After testing his theory over four years, Elliott organized his research into an essay that he titled "The Wave Principle," which was published in book form in 1935 with the assistance of Charles Collins, a respected newsletter publisher who helped popularize Elliott Wave analysis in its early years.
The Wave Pattern Elliott's main discovery was that market behavior could be identified and measured through a repeating eight wave sequence, consisting of 5 waves that he called "impulsive," followed by a 3-wave "corrective" sequence. Impulse waves are labeled numerically 1 through 5, corrective waves are labeled A, B and C, as per the following example:
The above chart also illustrates another of Elliott's key discoveries, namely that wave patterns themselves subdivide into smaller patterns that trend in the same direction as the wave of one larger size, or, as Elliott termed it, "degree." In this example, the encircled wave numbers are labeled as Primary waves. The Primary waves subdivide into a five-wave sequence of Intermediate degree waves, which, in turn, subdivide into a sequence of five Minor degree waves. A three-wave "corrective" sequence then begins from the 1929 market top and ends in July 1932, well below the start of the bull market, a loss of about 90% in the Dow's value.
Extended Impulse Waves The above chart of the Dow also illustrates the concept of "extended" waves, which holds that one of the three impulse waves in an Elliott sequence will always be "extended" or longer than the other two, regardless of degree. In Elliott's original work, he noted that 5th waves were more frequently the extended wave in a sequence. Frost and Prechter in their 1978 book "Elliott Wave Principle," revised this view to suggest that 3rd waves were more commonly extended, and their view has come to dominate wave labeling. Each of these tendencies is seen in the above chart. Both at Primary and Intermediate degree, the 5th wave extends from 1926-29, and 1928-29, respectively. At the Minor degree level (1928-29) wave 3 is clearly the extended wave. Correctly identifying the extended wave is important in forecasting the depth of the correction to follow.
Differences Between Internal Wave Structures Frost and Prechter classify internal wave structures as being one of two modes -"motive" or corrective. They use the term "motive" to describe those waves that "impel" the market. Internally, motive waves are always 5-wave structures; corrective waves are always 3-wave structures. In the impulse sequence, therefore, Waves 1, 3 and 5 are motive; Waves 2 and 4 are corrective. This should not be confused with the ABC corrective pattern (discussed below) whose internal waves may subdivide as motive or corrective, depending on the type of correction taking place.
Corrective Wave Patterns Elliott, Frost and Prechter classified 21 corrective patterns, from simple forms to more complex structures and combinations. Three of the simple patterns, and those which form the building blocks of the more complex structures, are illustrated below. These are corrective patterns following an uptrend. The patterns would be inverted following a downtrend.
Zigzag: Zigzag patterns are sharp declines (or advances in a bear rally) that substantially correct the price level of the previous impulse sequence. Often wave B (the counter-trend wave of the ABC pattern) is the shortest relative to A and C. In zigzag patterns, the sequence may double or triple up until the price correction target is achieved. Zigzags internally subdivide 5-3-5 as follows: Wave A (5-waves, motive), Wave B (3-waves, corrective), Wave C (5-waves, motive).
Flats: Flats are triangular structures that tend to move the market in a what Elliott called a "sidewise" (sideways) pattern. The ABC waves also tend to be equivalent in length. In the flat pattern, wave B will often undo the work of A and frequently tops in the area of the previous wave 5. Because of this action, wave B's tend to fake-out traders who think the correction is over. Wave C then undoes the work of wave B. There are also variations on the flat correction pattern, which include "expanded" flats (Elliott described them as "irregular") in which wave B tops well beyond the start of wave A, and wave C is substantially larger than A, generally by 1.618 or 2.618 the length. In a "running" flat, waves A & B are similar to an expanded flat, but wave C is shorter than wave A. Flats internally subdivide 3-3-5 as follows: Wave A (3-waves, corrective), Wave B (3-waves, corrective), Wave C (5-waves, motive).
Triangles: Elliott described two distinct types of triangles: Diagonal and Horizontal. Diagonal triangles are part of ending sequences in a wave pattern, and therefore can occur within a wave 5 or a wave C. According to Elliott, diagonal triangles form when market action has moved "too far, too fast" and represent exhaustion of the trend. The 5th wave of the diagonal will frequently spike sharply above the upper trendline of the triangle in what Elliott called a "throw-over." A trader should be alert to a diagonal triangle formation, as it signals an impending and sharp trend reversal. Horizontal triangles, on the other hand, are corrective structures. Also called "wedges," horizontal triangles are identified by drawing parallel trend lines along the peaks and troughs of the wave labels. D and E labels are added to fill out the sequence. In heavily corrective and choppy markets, there can be as many as 11 to 15 waves within the overall horizontal triangle structure. In all cases, the completion of a triangle pattern is normally followed by a sharp "thrust." The direction of the thrust is determined by the wave pattern in progress. One unique type of triangle, that is related to the family of "irregular flats" is the "Running Triangle," which was described by Frost and Prechter as one in which Wave B of the triangle exceeds the start of Wave (A). Since Running Triangles are cousins to both flats and horizontal triangles, they are most common to fourth waves and other corrective wave patterns.
Internally, all subwaves in a triangle are "threes", which tend to overlap. The only exception is a structure identified by Frost and Prechter (though not originally by Elliott) called a "leading diagonal" triangle, which occurs in the first wave position and subdivides 5-3-5-3-5 (like an impulse wave). Unlike an ending diagonal, this structure implies a continuation of the trend. They caution, however, against confusing this with a progression of first and second waves, which is far more common.
Corrective Combination Patterns In forming more complex corrections, the basic corrective patterns may, and often do, combine to extend the corrective process. Most common is a doubling of the pattern, and less frequently, a tripling. These result in the following types of combinations:
1. Double Zigzags and Triple Zigzags (self-explanatory)
2. Double-Three: The components of a double-three include...
Flats-Flat
Flat-Triangle
Zigzag-Flat
Zigzag-Triangle
3. Triple-Three: The components of a triple-three include...
Flat-Flat-Flat
Flat-Flat-Triangle
Zigzag-Flat-Triangle
Zigzag-Flat-Flat
To help clarify the labeling when these combinations occur, Frost and Prechter devised the labels W, X and Y to identify the main sections of a double combination, and W, X, Y and Z for triple combinations.
Rules of Wave Labeling Correctly labeling waves is at the heart of wave analysis. Incorrect labeling can prove very costly to a trader, and so it is important to observe the rules of labeling. Elliott established three simple rules that, if not observed, will invalidate a wave count:
Wave 3 can never be the shortest impulse wave.
Wave 2 can never exceed the start of Wave 1.
Wave 4 can never overlap Wave 1 (i.e., cross into the same price area).
In addition to these rules, there are guidelines that aid in labeling waves. They are not as inviolate as the rules, and they help in telling you what to look out for. Three of these guidelines include:
Alternation: If Wave 2 is a sharp correction, expect Wave 4 to be a sideways correction. Conversely, if Wave 2 is sideways, expect Wave 4 to be sharp. More often than not, Wave 4 is sideways, subdividing as either a flat or triangle. In corrections, if Wave A is a simple structure, expect Wave B to be more complex. Wave C may or may not be more complex relative to A.
Depth of Correction: Generally, following impulse wave sequences where Wave 3 is the extended wave (the most common scenario) the subsequent Wave A correction should terminate in the area of Wave 4.
In cases where Wave 5 is the extended wave, either Wave A alone, or the entire correction, will be sharp, and bottom in the area of a Wave 2 of lesser degree. We see an example in the Dow chart above. Note that Primary Wave A terminates right at the area of Minor Wave 2. Wave C may bottom here as well, or just as often in either the Wave 4 area from where the extension began, or it can also erase the entire impulsive rise, as also seen in the above chart of the Dow.
Wave Relationships: Two of the non-extended impulse waves (generally waves 1 & 5) will tend to be equivalent in length and time of formation, or will be related by a fib ratio (more on that in the next section). Waves 2 & 4 are also similarly related, as are Waves A & C.
There are other guidelines identified by Elliott, Frost and Prechter, and it is important to note that all rules and guidelines operate at all wave degrees, whether intraday or over longer time-spans.
Wave Labels & Degrees Since all waves subdivide into smaller waves, there is a hierarchy that is used to label wave movement that covers everything from broad expanses of time, to hourly market movement. Elliott developed a labeling method that was slightly revised by Frost and Prechter in their 1978 book. Most important are the wave degrees under study, which include, in descending order:
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Joined Apr 2006
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Status: Senior Member
|1,257 Posts
I dont know how to use pitchforks. All I use in my system is RSI, wave counts and fibs in realation to the wave we are in. I dont even use pivots. Its like when you get trained one way you just stick with that way .When you learn something a certain way, even though there maybe other ways to get to that certain point you stay with what you are familiar with and what works for you.
Quoting jajabaik
Disliked
so fixme1too....after we know the trend...example the downtrend...where can we determine the major pivot?
example : Wave 1 is the first swing in the new trend from the pivot.
so fixme1too....after we know the trend...example the downtrend...where can we determine the major pivot?
example : Wave 1 is the first swing in the new trend from the pivot.
Can we use pitchfork to determine it?
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Jajabaik,
All of the literature on EW talks about using trend lines to help make wave counts. Recently I started using Andrew's Pitchforks (or Median Lines as some people call them) on my charts and finding them very useful. In most cases I am finding that the high of a Wave 1 and the low of a Wave 2 makes the perfect Pivot B and C locations in impulse waves. For corrections the low of Wave A and the high of Wave B also make good Pivot B and C locations.
The chart I attached I wound up using the high of Wave 3 and the low of Wave 4 for the points.
I have seven currency pairs that I plan on trading eventually using EW. However I am still struggling with making good wave counts on charts. Of the following currencies, could you rank them from easiest to most difficult, in your experience, the currencies that provide the best wave counting opportunities. I need to reduce my focus to two or three currency pairs until I get better at this.
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Joined Apr 2006
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Status: Senior Member
|1,257 Posts
here ya go Ron
chart of how things will play out next week. this is the 4 hour chart. If you guys remember we just had this same set up on the 4 hour usdcad earlier this week and on the hourly just yesterday. I have posted some charts a few post back maybe on pg 25. Showing this set up on usdcad and usdjpy. This chart will have complex b wave in order to complete wave 5 on daily. Then we will have this same kind of set up on the daily But will be in for big profit shorting this pair.
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Joined Apr 2006
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Status: Senior Member
|1,257 Posts
Jeff for my money I would trade least expensive then look at pairs that are easy to see so I would have to say
AUDUSD
USDJPY
USDCAD
EURUSD
USDCHF
GBPUSD
NZFUSD
BE VERY CAREFUL TRADING GBPUSD. This pair is like the monster of forex. You can make good profit on this pair but loose big too. This pair got me for 2000.00 usd as a newbie. This is when I didnt know anything about money management or this pair. I just knew I did good trading it on demo and was in that percent that gets fearful when watching this pair go up 30 pips then down then up then all the way down for the day. loosing big money lol glad that part of my trading days are over. The part of not having any idea where the market is going not the loosing money part. Even Warren Buffet looses money just got to know how to manage it.
Quoting jjenkin777
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Fixme1too,
I have seven currency pairs that I plan on trading eventually using EW. However I am still struggling with making good wave counts on charts. Of the following currencies, could you rank them from easiest to most difficult, in your experience, the currencies that provide the best wave counting opportunities. I need to reduce my focus to two or three currency pairs until I get better at this.
Ok Dabellator todays high on gbpusd was 1.9135 and the low was 1.9055 add these two numbers to get 3.819. Divide this number by 2 and you get 1.9095. This is an avg of the High and the Low for the day. Now, once the new day starts which was 7pm est for me depending what the open number is will determine if you go long or short. Todays open was 1.9070 this is less than the center point of 1.9095 so you should go short for today with tp of 50 pips and sl of 30. If todays open was 1.9100 then you would have went long with 50 pip tp and 30 pip sl. If you have anymore questions you can ask no problem bro. My goal is for us to all learn together. I'm still learning everyday reading different things. So hope that helps.http://www.forexfactory.com/forexfor...ons/icon12.gif
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Hi fixme1too,
Just started reading this thread yesterday and i was hooked. Im very impressed with how accurate your calls have been. I always find it refreshing when people want to help others without wanting something back in return. I find it very honorable that you are helping others who know less than you, on how to succeed in the forex market. You've actually inspired me to try to learn Elliot Waves.... again (first time i tried I just couldnt grasp it, so I quit).
I was also looking at your centerpoint system that you created. Its very interesting and from your comments, it seems that it could be very profitable in the long run. I just had a question as far as the new day starting at 7 pm est. I live on the est and I always thought the day ended at 5 pm est. That is when the high of day and low of day are calculated on FXCM.. and the beginning of the next day starts. I'm not sure if we're supposed to be looking at different tf's which would change that???? Im just a little confused and I want to make sure I follow the system to the tee. If you could shed a little light on this, I'd appreciate it.
