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Low Risk, High Reward Trading Experiment

  • #1,681
  • Nov 10, 2006 3:20am Nov 10, 2006 3:20am
Thursday November 9 4:00 ET

Trade Signal #226A Sell EUR/CAD at 1.4528

Stop is 1.4557

Target is 1.4175

Risk is 39 pips

Reward is 343 pips

Reward : Risk ratio is 8.8 to 1

For research purposes only.

In terms of Elliott Wave, this is estimated to be the top of a new downwards trend.

___________________________________________________

Previous comments and trade signal:

Analysis of Trade Signal #226 Sell EUR/CAD at 1.4448

We were incorrect in our wave count with Trade Signal #226 Sell EUR/CAD at 1.4448 entered on November 7, 2006. The entry price was not the top of Wave C of the corrective wave (as thought and noted at the time the trade signal was posted), only the top of Wave C-1. The trade was up 56 pips of profit at one point as the second wave descended, but then it rose again to complete waves 3, 4 and 5 of Wave C (1-2-3-4-5), eventually meeting our original stop.

The Top of Wave C is the end of Wave C-5 which appears to have been met this morning, November 9, when the price met 1.4513, 2 pips past our stop. By the time the stop was met, however, our system would have re-adjusted the stop to 1.4527 .

Note that the size of this corrective wave is unusually large, so the original mistake was very understandable. The proper time of entry into this short EUR/CAD trade was actually at the beginning of the downwards impulse wave at 1.4525, not the top of the first upwards corrective wave at 1.4448, which can be quite difficult to pin down.

Mid-trend entry trades are both less strategic in terms of Reward : Risk Ratio, and in terms of the difficulty to properly assess the correct entry price.
__________________________________________________ ______

Tuesday November 7 at 20:30 ET

Trade Signal #226 Sell EUR/CAD at 1.4448
Stop is 1.4511
Target is 1.4175
Risk is 72 pips
Reward is 263 pips
Reward : Risk ratio is 3.8 to 1

For research purposes only.

In terms of Elliott Wave, this is estimated to be the top of the "C" wave of a Wave 2 corrective wave.<!-- / message -->
<!-- / message --><!-- edit note -->
  • #1,682
  • Nov 10, 2006 3:22am Nov 10, 2006 3:22am
The gbpusd has hit 1.9169. What to expect from there?
  • #1,683
  • Nov 10, 2006 6:49am Nov 10, 2006 6:49am
itme,

Do you leave open positions during the weekend?
  • #1,684
  • Nov 10, 2006 7:12am Nov 10, 2006 7:12am
where possible point entry itme?

Quoting itme
Friday November 10 2:30 ET

I meant to post this about an hour ago, so part of my prediction of the EUR/USD movement may be history, if I am correct. According to our analytical model, I predicted that this small fourth downwards ABC corrective wave would carry the price down to about 1.2845, and then reverse to an upwards last small fifth wave with a top at about 1.2870 to 1.2880.

It has since fallen to 1.2847 and risen (so far) to 1.2864. It is engaged in what looks like a mini-wave four, and seems well poised to meet our target.
  • #1,685
  • Nov 10, 2006 7:26am Nov 10, 2006 7:26am
Quoting tomhen
The gbpusd has hit 1.9169. What to expect from there?
tomhen,

to quote itme
Quote
GBP/USD just met our conservative high probability reversal value at 1.9173 and completed a full 5 wave Elliott Wave pattern.
So now the risk is to the downside .


Hope that helps.
  • #1,686
  • Nov 10, 2006 7:49am Nov 10, 2006 7:49am
Thursday November 9 8:30 ET

EUR/USD just fell to 1.2860 and GBP/USD fell to 1.9132. These are likely reversal points for the final upwards push to a double top or a new high for these pairs.

GBP/USD will probably go to 1.9185 or even a little higher, while EUR/USD is likely to rise to 1.2920 .

By studying the Elliott Wave and other factors we hope to identify the ultimate tops of these pairs, which will be an excellent low risk / high reward trade opportunity.
  • #1,687
  • Nov 10, 2006 7:51am Nov 10, 2006 7:51am
From the point of view of our system, potentially powerful announcements and other data or events that have macro-economic impact warrant carefull analysis, as occasionally they alter the direction or scale of the price movements. However, weekends, holidays, elections, etc do not play any factor in the system at all. The forex market does slow down from time to time for various reasons, but the trends continue day and night, day after day, regardless of everything.
  • #1,688
  • Nov 10, 2006 7:54am Nov 10, 2006 7:54am
thanks itme..very useful for me.
thanks a lot happy nice weekend
thanks..
Quoting itme
Thursday November 9 8:30 ET

EUR/USD just fell to 1.2860 and GBP/USD fell to 1.9132. These are likely reversal points for the final upwards push to a double top or a new high for these pairs.

GBP/USD will probably go to 1.9185 or even a little higher, while EUR/USD is likely to rise to 1.2920 .

By studying the Elliott Wave and other factors we hope to identify the ultimate tops of these pairs, which will be an excellent low risk / high reward trade opportunity.
  • #1,689
  • Nov 10, 2006 7:59am Nov 10, 2006 7:59am
<TABLE cellSpacing=0 cellPadding=0 width=575 border=0><TBODY><TR><TD class=EC_market bgColor=#f9f9f9>





</TD></TR><TR height=12><TD width=6 height=12></TD><TD height=12></TD></TR><TR><TD width=6></TD><TD vAlign=top></TD></TR><TR><TD width=6></TD><TD>



</TD></TR><TR height=12><TD width=6 height=12></TD><TD height=12></TD></TR></TBODY></TABLE><TABLE cellSpacing=0 cellPadding=0 width=575 border=0><TBODY><TR><TD width=6></TD><TD class=EC_article vAlign=top>…Fibonacci ratios are named for the famous 13th-century mathematician Leonardo Fibonacci of Pisa, the most important mathematician of the Middle Ages. Fibonacci popularized the current decimal and Hindu-Arabic numbering systems. He also discovered (actually rediscovered) the numeric sequence that bears his name, the Fibonacci sequence which begins with the number 1 and in which each subsequent number is the sum of the previous two: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 and so on. The sequence in turn gives rise to several unique ratios, including .618, .382 and 1.618 — the Golden Ratio. These ratios exist throughout nature, in everything from population growth to the physical structure within the human brain, the DNA helix, many plants and even the cosmos itself.





Many investors today know that Fibonacci ratios are used for market forecasting. But few realize that Fibonacci analysis of the markets was pioneered by R.N. Elliott. The use of Fibonacci ratios requires a valid Elliott wave interpretation as a starting point. Unfortunately, many non-Elliott analysts try to find Fibonacci proportions between market moves that are not related to each other in any way. This has made the approach appear far less valuable than it is.



Elliott had two chief insights concerning Fibonacci relationships within waves. First, corrective waves tend to retrace prior impulse waves of the same degree in Fibonacci proportion. For example, wave (2) often retraces 38% of wave (1). Other frequent wave relationships are 50% and 62%. Second, impulse waves of the same degree within a larger impulse sequence tend to be related to one another in Fibonacci proportion, as shown in Figure 3 here:



http://www.elliottwave.com/images/ez...2011-10-06.gif



Wave interpretation rules and Fibonacci relationships together are powerful tools for establishing investment strategies and reducing risk exposure. Investors use them to help decide where to get in, where to get out and at what point to give up on a strategy. Thus, the Wave Principle lets you identify the highest probability direction for the market, plus adopt an optimum position to take advantage of it all while protecting yourself against lower-probability outcomes.

___________________________________

Above is an excerpt from a classic report on the basics of using Elliott wave analysis in trading. You can read the complete report at Club EWI .



</TD></TR></TBODY></TABLE>
  • #1,690
  • Nov 10, 2006 8:22am Nov 10, 2006 8:22am
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  • #1,691
  • Nov 10, 2006 10:07am Nov 10, 2006 10:07am
thanks very much it is now very clear.
Any other important info you wish to share with me and others on the forum?
thanks again



Quoting itme
No problem. If you have a fixed stop going into a trade, and a probable target, then the Probable Reward is the difference between the entry price and the probable target, less the spread. The Probable Risk is the difference between the entry price and the fixed stop, plus the spread. The Reward divided by the Risk is the Reward : Risk Ratio.
  • #1,692
  • Nov 10, 2006 10:20am Nov 10, 2006 10:20am
Itme, great forum and I appreciate work. What is the status on EUR/CAD? I entered a short position before I saw Trade Signal #226A and at first was a bit pleased that there was an outside source that confirmed my position. However, it appears as though it may have been stopped out... is this the case? Have you moved your stop or are you still in the postion (so-to-speak)?

Thanks,

Brian
  • #1,693
  • Edited 2:11pm Nov 10, 2006 1:47pm | Edited 2:11pm
Our trade signal shorting EUR/CAD was wrong. We calculated 1.4528 as the high probability reversal value. It actually rose to 1.4561 , four pips past our stop, before falling to 1.4509. I made an error in analysis when I came up with the 1.4528 entry price, and in calculating the stop value. Neither the Elliott Wave count nor the reversal analysis support this entry number. The correct high probability reversal values are 1.4540 and 1.4558, with 1.4558 being a particularly likely reversal value. The high so far is 1.4561.

I can see the error I made. I employed the wrong time frame when analysing both the Elliott Wave, and the most probable reversal point. By employing too short a time frame, we lost perspective of the bigger picture.

According to our system we should have sold at either 1.4540 or 1.4558, with a stop at 1.4571 or higher. The following trade signal is not correct. The price of EUR/CAD may yet rise again to a similar or slightly higher price, to offer a second good low risk / high reward sell opportunity.

_____________________________________________________

Previous comments and trade signal:

Thursday November 9 4:00 ET

Trade Signal #226A Sell EUR/CAD at 1.4528
Stop is 1.4557
Target is 1.4175
Risk is 39 pips
Reward is 343 pips
Reward : Risk ratio is 8.8 to 1

For research purposes only.

In terms of Elliott Wave, this is estimated to be the top of a new downwards trend.
__________________________________________________ _

Analysis of Trade Signal #226 Sell EUR/CAD at 1.4448

We were incorrect in our wave count with Trade Signal #226 Sell EUR/CAD at 1.4448 entered on November 7, 2006. The entry price was not the top of Wave C of the corrective wave (as thought and noted at the time the trade signal was posted), only the top of Wave C-1. The trade was up 56 pips of profit at one point as the second wave descended, but then it rose again to complete waves 3, 4 and 5 of Wave C (1-2-3-4-5), eventually meeting our original stop.

The Top of Wave C is the end of Wave C-5 which appears to have been met this morning, November 9, when the price met 1.4513, 2 pips past our stop. By the time the stop was met, however, our system would have re-adjusted the stop to 1.4527 .

Note that the size of this corrective wave is unusually large, so the original mistake was very understandable. The proper time of entry into this short EUR/CAD trade was actually at the beginning of the downwards impulse wave at 1.4525, not the top of the first upwards corrective wave at 1.4448, which can be quite difficult to pin down.

Mid-trend entry trades are both less strategic in terms of Reward : Risk Ratio, and in terms of the difficulty to properly assess the correct entry price.
__________________________________________________ ______

Tuesday November 7 at 20:30 ET

Trade Signal #226 Sell EUR/CAD at 1.4448
Stop is 1.4511
Target is 1.4175
Risk is 72 pips
Reward is 263 pips
Reward : Risk ratio is 3.8 to 1

For research purposes only.

In terms of Elliott Wave, this is estimated to be the top of the "C" wave of a Wave 2 corrective wave.<!-- / message -->

<!-- / message --><!-- edit note -->
  • #1,694
  • Nov 10, 2006 2:11pm Nov 10, 2006 2:11pm
Thanks for your analysis! Much appreciated. I still managed to get 20 pips off the trade, and will wait until it rises again to sell more.
  • #1,695
  • Nov 10, 2006 2:15pm Nov 10, 2006 2:15pm
Friday November 10 15:15 ET

New estimate of reversal point for EUR/USD and GBP/USD

Our latest analysis indicates that there is a significant likelihood that the above two currency pairs will bounce at this point and rise to a double top or a slightly higher price than before:

EUR/USD at 1.2844

GBP/USD at 1.9104

This may be a good time to take some interim profits off the table from the following trade signal:

Thursday November 9 4:00 ET

GBP/USD just met our conservative high probability reversal value at 1.9173 and completed a full 5 wave Elliott Wave pattern.

Trade Signal #236 Sell GBP/USD at 1.9173
Stop is 1.9205
Target is 1.8975
Risk is 35 pips
Reward is 194 pips
Reward : Risk ratio is 5.7 to 1
For research purposes only.
<!-- / message -->
____________________________________

Previous prediction:

Future EUR/USD and GBP/USD prediction

Thursday November 9 8:30 ET

EUR/USD just fell to 1.2860 and GBP/USD fell to 1.9132. These are likely reversal points for the final upwards push to a double top or a new high for these pairs.

GBP/USD will probably go to 1.9185 or even a little higher, while EUR/USD is likely to rise to 1.2920 .

By studying the Elliott Wave and other factors we hope to identify the ultimate tops of these pairs, which will be an excellent low risk / high reward trade opportunity.
<!-- / message -->
  • #1,696
  • Nov 10, 2006 3:48pm Nov 10, 2006 3:48pm
Friday November 10 16:45 ET

We believe that USD/CHF is due to fall quite strongly about now (current high about 1.2417), bringing down GBP/CHF. Therefore we advise temporary exit of GBP/CHF long trade at 1.3724 to capture 80 pips of profit.

Re-enter long position following completion of A-B-C corrective downwards wave.

__________________________________________________

Friday November 10 2:00 ET

Trade Signal #233A Buy GBP/CHF at 2.3630

Stop is 2.3597

Target #1 is 2.3865
Risk is 48 pips
Reward is 220 pips
Reward : Risk ratio is 4.6 to 1

For research purposes only.
_____________________________________

Previous trade signal:

Comment on Trade Signal #233 Buy GBP/CHF at 2.3666

The trade concept Trade Signal #233 Buy GBP/CHF at 2.3666 was predicated on a failed fifth wave down. This turned out not to be the case, as a fifth wave materialised, carrying the price down to 2.3643 - precisely our stop . The problem is that I didn't calculate the most probable reversal values, and it turns out that 2.3643 is the most probable reversal value exactly . So, in a conservative strategy, we would not enter a trade before the most probable reversal value is reached, and furthermore, we would never place a stop precisely on a most probable reversal value, but 10 to 15 pips on the far side of it .
__________________________________________________ ___

Thursday November 9 12:00 ET

Trade Signal #233 Buy GBP/CHF at 2.3666
Stop is 2.3634
Target #1 is 2.3840
Risk is 47 pips
Reward is 160 pips
Reward : Risk ratio is 3.4 to 1

For research purposes only.
  • #1,697
  • Nov 10, 2006 4:48pm Nov 10, 2006 4:48pm
Quoting itme
Friday November 10 15:15 ET

New estimate of reversal point for EUR/USD and GBP/USD

Our latest analysis indicates that there is a significant likelihood that the above two currency pairs will bounce at this point and rise to a double top or a slightly higher price than before:

EUR/USD at 1.2844

GBP/USD at 1.9104

This may be a good time to take some interim profits off the table from the following trade signal:

Thursday November 9 4:00 ET

GBP/USD just met our conservative high probability reversal value at 1.9173 and completed a full 5 wave Elliott Wave pattern.

Trade Signal #236 Sell GBP/USD at 1.9173
Stop is 1.9205
Target is 1.8975
Risk is 35 pips
Reward is 194 pips
Reward : Risk ratio is 5.7 to 1
For research purposes only.
<!-- / message -->
____________________________________

Previous prediction:

Future EUR/USD and GBP/USD prediction

Thursday November 9 8:30 ET

EUR/USD just fell to 1.2860 and GBP/USD fell to 1.9132. These are likely reversal points for the final upwards push to a double top or a new high for these pairs.

GBP/USD will probably go to 1.9185 or even a little higher, while EUR/USD is likely to rise to 1.2920 .

By studying the Elliott Wave and other factors we hope to identify the ultimate tops of these pairs, which will be an excellent low risk / high reward trade opportunity.
<!-- / message -->
in my view for euro on daily chart, it might go down as low as 1.2800 wave A then 1.2880 wave B and fall hard for wave C 1.2680
{Link Removed}]
  • #1,698
  • Nov 11, 2006 1:52am Nov 11, 2006 1:52am
Whats everbodys take on the GbpUsd and EurUsd. With the strong reversal of the Euro it looks like it could be continuing down? (For at least a day?) Not sure of how it and the Gbp set in the wave pattern.

Thanks Tom
Attached File(s)
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  • #1,699
  • Nov 11, 2006 9:45am Nov 11, 2006 9:45am
Quoting itme
Thursday November 9 12:30 ET

Trade Signal #235 Sell EUR/JPY at 151.37

Stop is 151.61

Target is 149.40

Risk is 26 pips

Reward is 175 pips

Reward : Risk ratio is 6.7 to 1

For research purposes only.
<!-- / message -->
Itme,

could you comment about current situation this trade?

Thank you.
  • #1,700
  • Nov 11, 2006 10:11am Nov 11, 2006 10:11am
Itme

New to the Elliot Wave theory but am wondering is the Eur/Jpy beginning wave 4 down then wave 5 up. Or is it just a small retracement on wave 3.

Thanks

Tom
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