Low Risk, High Reward Trading Experiment

Here is a thread where we can post resource material that helps us to understand the basics of Elliott Wave Theory:

http://www.forexfactory.com/forexforum/showthread.php?t=10323

Hi Itme,

I have tried this link looks like that this site is not responding...

Thanks

Hi Itme,


What wave is GBP in at the moment can you please explain the GBP movement...

Thanks

Hi Itme,
I asked you about the timeframe, because as I trade the opposite of you (I enter the best points, following the current trend, not waiting the reverse point), What I need to make the perfect trade and 'use' all the wave would be a method to perfect take profit exit points.

I improved now, with trailing stops, and fib levels, but I still miss to use 25-30% of waves too often.

cheers

Friday November 17 at 19:00 ET

I made an honest error in counting the waves in EUR/CAD. In the final or fifth wave the internal count was seemingly complete when I entered Trade Signal #245 Sell EUR/CAD at 1.4678. There was a five wave set up to the entry price, but then a breakout above that price indicated that the wave we counted was only the first of three impulse waves in the impulsive five wave set, not the entire wave. Now another two impulsive waves have formed, so EUR/CAD is nearing completion at the current price of about 1.4715. The only remaining question is where the top of this last wave is. My charts are down so I cannot confirm the exact details. A re-entry for a short trade will be possible now or soon, with the stop above 1.4750.

______________________________________

Previous trade signal and comments:

Friday November 17 at 10:15 ET

Trade Signal #245 Sell EUR/CAD at 1.4678
The stop is 1.4712
Target is 1.4425
Risk is 44 pips
Reward is 243 pips
Reward : Risk ratio is 5.5 to 1

For research purposes only.

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EUR/CAD commentary for Friday November 17 at 5:30 ET <hr style="color: rgb(209, 209, 225);" size="1">Friday November 17 at 5:30 ET

EUR/CAD rose just now to 1.4634. Wave analysis suggests that it will now fall about 100 pips to 1.4520 to 1.4550 and then rise to a new high at about 1.4650. This new high will be a good low risk / high reward trade opportunity to sell EUR/CAD for a long move downwards. By then it will have been range bound for about a week, and be ready for a good run.

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<hr style="color: rgb(209, 209, 225);" size="1">On November 13 , 2006 I said " According to my analysis, if EUR/CAD rises to between 1.4645 and 1.4665 from its current price of 1.4555, and finishes a small upwards five wave pattern (starting at 1.4518), then it will possibly be a good short for a Wave 4 corrective wave down to about 1.4350."

_____________________________________

As of Wednesday November 15, this is the situation:

The price subsequently rose to 1.4631, close to the target entry price, then fell to 1.4550. The price may rise again to between 1.4645 and 1.4665 after it falls to about 1.4535, and present a good low risk : high reward opportunity to short this volatile pair. The current price is 1.4605, and appears poised to fall.

Friday November 17 at 20:00 ET

When we entered a buy trade on CAD/JPY the conditions looked favorable. However, it turned out that the wave count was incorrect, since there seems to be an extended five wave set downwards connected to the big move in the market this morning. The next cluster of high probability reversal points is at 102.35 to 103.45. The recent low is 103.52, slightly short of our stop at 103.48. This means that we will need to adjust the stop to 102.19

One of the lessons that can be garnered from this experience is that if one wants to avoid losing trades, one should assume an extended wave, particularly when the market is engaged in a strong move.

Furthermore, another way of reducing the risk of losing trades is to refuse to enter until the very last "probable reversal target" has been met.
___________________________________________________________

Previous comments and trade signal:

Friday November 17 at 10:00 ET

CAD/JPY seems to have completed its entire wave pattern and came to the precise most probable trend reversal price of 102.97, a reversal price which is confirmed on three time periods.
Trade Signal #228A Buy CAD/JPY at 102.97
Stop is 102.48
Target #1 is 106.10
Target #2 is 106.70
Risk is 59 pips
Reward is 303 / 363 pips
Reward : Risk ratio is 5.1 /6.1 to 1

For research purposes only.
_________________________________________________

CAD/JPY update for Thursday November 16 at 5:00 ET

As predicted earlier CAD/JPY declined further, reaching 103.07 so far, and is likely to fall further to 102.50 to 102.75 before a good low risk / high reward opportunity to buy it emerges.
________________________________________________
Comment on failed Trade Signal #228 Buy CAD/JPY at 103.85 <hr style="color: rgb(209, 209, 225);" size="1">The trade signal #228 buying CAD/JPY was based on an impossible wave count. We said at the time "In terms of Elliott Wave, this is estimated to be the third impulse wave of a large upwards fifth wave." The problem is that there had only been a 1-2-3-4-5 downwards wave at the time of the entry, which constitutes an A of an A-B-C downwards corrective wave. There was still an upwards B and a downwards C to go before we should have entered that buy trade. We identified the bottom of Wave A to the precise pip at 103.85, but didn't keep track of the Wave Pattern properly. The long trade which we entered was only the B wave which only went up 87 pips to 104.72. We should have exited the trade there and reversed.

The price has since fallen 137 pips to 103.35, and it is still possible for the price to fall a little more before the long trade entry price is reached.
__________________________________________

Tuesday November 8 at 00:45 ET
Trade Signal #228 Buy CAD/JPY at 103.85
Stop is 103.54
Target #1 is 105.70
Target #2 is 107.30
Risk is 41 pips
Reward is 175 / 335 pips
Reward : Risk ratio is 4.3 /8.4 to 1

For research purposes only.

In terms of Elliott Wave, this is estimated to be the third impulse wave of a large upwards fifth wave.

Friday November 17 at 20:00 ET

In Trade Signal #235 Sell EUR/JPY at 151.37 there is an example of an obviously false wave count. In this case, when I entered the trade signal my system told me that there would be a reversal, and I wanted it to be a trend reversal, when in fact it was a Wave 4 corrective wave reversal only, not a trend reversal. I had to ignore the blatant evidence before my eyes and really do a song and dance routine in my head to justify the hypothesis that a complete larger 5 -wave impulsive set had presented itself, when there was no real evidence that it had, and now I don't believe it did complete a wave at that point.

We got the entry price and stop right, but not the target, due to the incorrect wave count. The price fell 84 pips to 150.53 on November 14, just as I predicted it would on November 11 (see below) , forming an extremely clear A-B-C pattern, which would have been the ideal exit point from this trade, (and possible entry point for a modest upwards trade). And then, as predicted, the price turned around and started to rise in its final upwards impulse wave. It made it up 91 pips to the top of a smaller Wave 3 at 151.44 and then fell in a small Wave 4 to a recent low of 150.79. This would have the second profitable exit opportunity from the original short trade, in case the first opportunity was missed.

The upwards trend has a target of about 153.00 to 155.00, to be then followed by a large downwards corrective wave. The very top of this large uptrend will be a good low risk / high reward trade opportunity.

________________________________________

Previous comments and trade signal:

November 11 at 14:43 ET

EUR/JPY Elliott Wave analysis <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> Tom, thanks for your comment. In the following comment, which of the eight or so different scales of waves are you refering to?

"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"

I suspect that you are refering to the trend that began on November 2. We may have reached the top of that trend, but a careful study suggests that we are trading wave 4 down, and that the reversal price will be about 150.50 [in fact it was 150.53], followed by another upwards impulse wave - Wave 5 up to a new high at about 152.50 or so.

On the other hand, Wave 3 may not be finished, and this will then be a smaller retracement, which may not go down much further than we have already witnessed. The conservative trader might want to exit their position and wait for a clarification of the wave count, and another better entry opportunity higher up, or at the bottom of a large correction. We should monitor this situation carefully.

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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

Friday November 17 at 20:00 ET

EUR/CHF performed exactly as predicted yesterday, forming a clear A-B-C downwards corrective wave down to 1.5960, meeting precisely our most likely reversal price, and then rose 49 pips to 1.6009 at 8:00 ET on November 17, 2 pips higher than our short term adjusted most likely reversal price.The price for EUR/CHF then fell 60 pips precipitously to 1.5948.

We placed a note on our chart "Sell at about 160.10", but in all the business of our morning we forgot to issue a trade signal on this pair.

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Previous comments:

EUR/CHF update for Thursday November 16 at 4:00 ET

EUR/CHF has risen to 1.5995 as predicted, and appears poised to rise once more to the top of the final fifth wave of the fifth wave at about 1.6010 or a bit higher.
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EUR/CHF update for Monday October 16 at 6:00 ET <hr style="color: rgb(209, 209, 225);" size="1">EUR/CHF rose to 1.5961 on October 13, coming within 9 pips of our predicted turnaround point. That would have been a good short opportunity. The EW pattern is somewhat strange right now, but our prediction for EUR/CHF of September 29 is seemingly still valid:

EUR/CHF prediction - finishing fifth wave <hr style="color: rgb(209, 209, 225);" size="1"> Friday September 29 at 4:30 ET

EUR/CHF is headed for 1.5970, 100 pips higher than its current price, which will complete a long uptrend that began on May 17. This would be an opportunity to short it and to hold a position trade from the very endpoint of a weekly trend.

Sunday November 19 at 22:00 ET

EUR/JPY has come up once again to the top of the 7 day channel and has completed a potential complete 5-wave upwards trend, assuming a failed fifth wave. This gives us a re-entry opportunity at about 151.42 for a low risk / high reward trade. The adjusted stop is 151.71

Re-entry opportunity on this trade:

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 199 pips
Reward:Risk ratio is 7.6 to 1

For research purposes only.

Monday November 20 at 4:00 ET

EUR/JPY broke out upwards past the five day trendline which was located at about 151.42 and appears to be headed for about 151.60 to 152.00 . It is better to exit now when it is retracing in Wave 4 here for a small loss and re-enter the sell at the top of the trend.

Exit Trade Signal #235 Sell EUR/JPY at 151.50

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Previous trade signals and comments:

Re-entry opportunity Trade Signal #235 Sell EUR/JPY at 151.37 <hr style="color: rgb(209, 209, 225);" size="1">Sunday November 19 at 22:00 ET

EUR/JPY has come up once again to the top of the 7 day channel and has completed a potential complete 5-wave upwards trend, assuming a failed fifth wave. This gives us a re-entry opportunity at about 151.42 for a low risk / high reward trade. The adjusted stop is 151.71

Re-entry opportunity on this trade:

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 199 pips
Reward:Risk ratio is 7.6 to 1

For research purposes only.

As we stated above "Now another two impulsive waves have formed, so EUR/CAD is nearing completion at the current price of about 1.4715. The only remaining question is where the top of this last wave is. My charts are down so I cannot confirm the exact details. A re-entry for a short trade will be possible now [price at the time was about 1.4705, not 1.4715 according to my charts] or soon, with the stop above 1.4750."

The price fell subsequently to 1.4680 and then rose in what may have been the final wave up to 1.4714. The Elliott Wave pattern was potentially complete, but fuzzy towards the very end, but our trend reversal prediction system gave us 1.4713 as the most probable reversal number, only 1 pip off the actual reversal value. The ultimate high has probably been met, and the trend is therefore downwards from here.
____________________________________________________

Previous trade signal and comments:

EUR/CAD - Error in Wave Count <hr style="color: rgb(209, 209, 225);" size="1"> Friday November 17 at 19:00 ET

I made an honest error in counting the waves in EUR/CAD. In the final or fifth wave the internal count was seemingly complete when I entered Trade Signal #245 Sell EUR/CAD at 1.4678. There was a five wave set up to the entry price, but then a breakout above that price indicated that the wave we counted was only the first of three impulse waves in the impulsive five wave set, not the entire wave. Now another two impulsive waves have formed, so EUR/CAD is nearing completion at the current price of about 1.4715. The only remaining question is where the top of this last wave is. My charts are down so I cannot confirm the exact details. A re-entry for a short trade will be possible now or soon, with the stop above 1.4750.
______________________________________

Friday November 17 at 10:15 ET
Trade Signal #245 Sell EUR/CAD at 1.4678
The stop is 1.4712
Target is 1.4425
Risk is 44 pips
Reward is 243 pips
Reward : Risk ratio is 5.5 to 1

For research purposes only.

__________________________________________________ ___
EUR/CAD commentary for Friday November 17 at 5:30 ET <hr style="color: rgb(209, 209, 225);" size="1">Friday November 17 at 5:30 ET

EUR/CAD rose just now to 1.4634. Wave analysis suggests that it will now fall about 100 pips to 1.4520 to 1.4550 and then rise to a new high at about 1.4650. This new high will be a good low risk / high reward trade opportunity to sell EUR/CAD for a long move downwards. By then it will have been range bound for about a week, and be ready for a good run.

_______________________________________________

<hr style="color: rgb(209, 209, 225);" size="1">On November 13 , 2006 I said " According to my analysis, if EUR/CAD rises to between 1.4645 and 1.4665 from its current price of 1.4555, and finishes a small upwards five wave pattern (starting at 1.4518), then it will possibly be a good short for a Wave 4 corrective wave down to about 1.4350."

_____________________________________

As of Wednesday November 15, this is the situation:

The price subsequently rose to 1.4631, close to the target entry price, then fell to 1.4550. The price may rise again to between 1.4645 and 1.4665 after it falls to about 1.4535, and present a good low risk : high reward opportunity to short this volatile pair. The current price is 1.4605, and appears poised to fall.

Monday November 20 at 15:00 ET

I was busy expostulating on my approach to Elliott Wave theory on the Elliott Wave thread ( http://www.forexfactory.com/forexfor...ket#post143001 ), but meant to share this advise here a little while ago. My wave analysis indicates that there is likely to be a substantial retracement of AUD/USD at .7702. So the more active trader could exit their long AUD/USD trade at that price in order to get a chance of increasing their profits on their trade. Re-enter after the market has descended the proper amount and formed an A-B-C pattern.

After more careful study it looks like the price will descend to only about .7690 to .7695 before reversing and continuing upwards towards a probable high of .7715 to .7745 , which would be the top of the first part of the Fifth Wave. Re-enter a buy trade at the bottom of the small retracement, or better yet, wait for the top of the first of the fifth wave at about .7745 to sell for the downwards A-B-C wave which will have a target of about .7670. This downwards trade, being a corrective wave, is not an ideal trade either, as the reward / risk ratio will be quite low.

Trading upwards from the bottom of the second wave of the fifth wave is the next good trade opportunity, with an entry at about .7670 and a target of about .7800 . The third wave is usually the largest and fastest wave.

The best and ideal trade will be entering a sell trade at the top of the fifth wave at about .7800 to .7850, with a target at about .7550.
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Previous trade signal:

Friday November 17 at 8:15 ET

Trade Signal #244 Buy AUD/USD at .7644

We recently sold AUD/USD twice, obtaining 60 and 44 pips of profit. Since we last exited AUD/USD fell to .7614, thirty pips lower than we expected, and the price has subsequently risen in two impulse waves and fallen in two corrective waves. We believe that it has just finished its fourth wave down which means that we can buy it at the current market price of .7644 and hold for a target of about .7800.

The stop is .7628
Target is .7800
Risk is 18 pips
Reward is 162 pips
Reward : Risk ratio is 9.0 to 1

Monday November 20 at 17:00 ET

Trade Signal #242A Sell USD/CAD at 1.1450 / 1.1472 was a sell at the top of an upwards Wave 3, and not the top of an upwards Wave 5 which it should have been to qualify as a low risk : high reward trade. Not being the top of Wave 5, it was not the top of a trend. This was actually very obvious.

Therefore we should not have entered this trade, and failing that, we should have exited this trade at the bottom of Wave 4 at 1.1421, which was very precisely specified by our trend reversal system as well as Elliot Wave Theory. This way we would have made a profit of either 25 or 45 pips, depending on our entry price.

We could have then entered a buy trade at 1.1421, with a target between 1.1490 and 1.1515. However, this would not have been a great trade because the reward : risk ratio would be somewhat low.

The best trade is to short USD/CAD at the top of this Third Upwards Wave at about 1.1490 to 1.1515, with the target between 1.1350 and 1.1400.

If anyone is still short USD/CAD, then they should exit at about 1.1460, or wherever the current small downtrend ends.

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Friday November 17 at 4:45 ET

Especially good trade opportunity to short USD/CAD right now <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> At the current price of 1.1472, USD/CAD is an especially good short opportunity. The stop should be adjusted to 1.1491. The original entry price was too low, and the stop should have been in a more conservative location.
Trade Signal #242A Sell USD/CAD at 1.1450
Stop is 1.1474
Target is 1.1210
Risk is 28 pips
Reward is 236 pips
Reward : Risk ratio is 8.4 to 1

For research purposes only.

Monday November 20 at 17:00 ET

Trade Signal #246 Sell AUD/CAD at .8890

Stop is .8925

Target is .8660

Risk is 44 pips

Reward is 221 pips

Reward : Risk ratio is 5.0 to 1

For research purposes only.<!-- / message --><!-- controls -->

Note: the entry price should be reached in a few days, and as early as November 21.

Tuesday November 21 at 1:15 ET

A conservative re-interpretation of the wave patterns on GBP/USD causes us to change our wave count and adjust our target. The upwards trend may be finished, and a downwards trend underway, so the target for this corrective wave should be closer. As the price patterns unfold, then we may increase the target later. The recent high is 1.8994 .

Trade Signal #240 Buy GBP/USD at 1.8850

Adjust target to 1.9050
___________________________________________________________

Thursday November 16 at 4:00 ET

Re-entry opportunity Trade Signal #240 Buy GBP/USD at 1.8850

__________________________________

Previous trade signal:

Wednesday November 15 at 5:45 ET
Trade Signal #240 Buy GBP/USD at 1.8850
Stop is 1.8809
Target is 1.9150
Risk is 44 pips
Reward is 297 pips
Reward : Risk ratio is 6.8 to 1

For research purposes only.

We believe that this will be Wave B up of a downwards corrective Wave 4. Note that there is another very high probability reversal value at about 1.8820. The very conservative trader should wait in hopes that the price will descend to this level and enter there with a proportionately lower stop. Given that GBP/USD frequently travels long distances and overshoots our estimated reversal values, it is not too farfetched that it could reach this lower price. Also, the time of day is somewhat early for a reversal of the trend.

p.s. - GBP/USD subsequently fell to 1.8836, still clear of our stop, but 14 pips past our entry price. This may be the turnaround point.
<!-- / message --><!-- controls -->

Hey "ITME",

I'm a little confused as to where we are with the count onm AUD/USD, GBP/USD and EUR/JPY. Where are we getting in on these paires?

Good work as always,

AlexFX

Hi Alex,

We had two opportunities to buy GBP/USD at 1.8850, and we anticipate a rise to a target of 1.9050. If you didn't buy at 1.8850, then according to our system that is in development right now, the next low risk / high reward trade opportunity will be at the very top of this present move, which we expect to be at 1.9050

Tuesday November 21 at 3:00 ET

Re-entry opportunity for Trade Signal #245A Sell EUR/CAD at 1.4710

The recent high on November 20 at 11:00 ET was 1.4717. This may be the top of the trend, so this is a re-entry opportunity to short EUR/CAD.

Entry price is 1.4710

The stop is 1.4752

Target is 1.4425

Risk is 52 pips

Reward is 285 pips

Reward : Risk ratio is 5.5 to 1

For research purposes only.

Note: there is another very high likelihood reversal target at about 1.4875. The conservative trader will wait and see if EUR/CAD makes it up there, which will be a far superior trade if it materialises.

_______________________________________

Previous trade signal and comments:

EUR/CAD update for Monday November 20 at 6:00 ET <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> As we stated above "Now another two impulsive waves have formed, so EUR/CAD is nearing completion at the current price of about 1.4715. The only remaining question is where the top of this last wave is. My charts are down so I cannot confirm the exact details. A re-entry for a short trade will be possible now [price at the time was about 1.4705, not 1.4715 according to my charts] or soon, with the stop above 1.4750."

The price fell subsequently to 1.4680 and then rose in what may have been the final wave up to 1.4714. The Elliott Wave pattern was potentially complete, but fuzzy towards the very end, but our trend reversal prediction system gave us 1.4713 as the most probable reversal number, only 1 pip off the actual reversal value. The ultimate high has probably been met, and the trend is therefore downwards from here.
__________________________________________________ __
EUR/CAD - Error in Wave Count <hr style="color: rgb(209, 209, 225);" size="1"> Friday November 17 at 19:00 ET

I made an honest error in counting the waves in EUR/CAD. In the final or fifth wave the internal count was seemingly complete when I entered Trade Signal #245 Sell EUR/CAD at 1.4678. There was a five wave set up to the entry price, but then a breakout above that price indicated that the wave we counted was only the first of three impulse waves in the impulsive five wave set, not the entire wave. Now another two impulsive waves have formed, so EUR/CAD is nearing completion at the current price of about 1.4715. The only remaining question is where the top of this last wave is. My charts are down so I cannot confirm the exact details. A re-entry for a short trade will be possible now or soon, with the stop above 1.4750.
______________________________________

Friday November 17 at 10:15 ET
Trade Signal #245 Sell EUR/CAD at 1.4678
The stop is 1.4712
Target is 1.4425
Risk is 44 pips
Reward is 243 pips
Reward : Risk ratio is 5.5 to 1

For research purposes only.

__________________________________________________ ___
EUR/CAD commentary for Friday November 17 at 5:30 ET <hr style="color: rgb(209, 209, 225);" size="1">Friday November 17 at 5:30 ET

EUR/CAD rose just now to 1.4634. Wave analysis suggests that it will now fall about 100 pips to 1.4520 to 1.4550 and then rise to a new high at about 1.4650. This new high will be a good low risk / high reward trade opportunity to sell EUR/CAD for a long move downwards. By then it will have been range bound for about a week, and be ready for a good run.

_______________________________________________

<hr style="color: rgb(209, 209, 225);" size="1">On November 13 , 2006 I said " According to my analysis, if EUR/CAD rises to between 1.4645 and 1.4665 from its current price of 1.4555, and finishes a small upwards five wave pattern (starting at 1.4518), then it will possibly be a good short for a Wave 4 corrective wave down to about 1.4350."

_____________________________________

As of Wednesday November 15, this is the situation:

The price subsequently rose to 1.4631, close to the target entry price, then fell to 1.4550. The price may rise again to between 1.4645 and 1.4665 after it falls to about 1.4535, and present a good low risk : high reward opportunity to short this volatile pair. The current price is 1.4605, and appears poised to fall.

Hey there,

Thanks for that, will look towards the 1.9050 area for a short trade.

Alex

Tuesday November 21 at 4:00 ET

Our prediction for EUR/USD is that it will fall to about 1.2790 and then rise to about 1.2876. If it does as predicted, then a short trade down from 1.2876 will be the safest and most advantageous strategy.

The current price is 1.2820

p.s. - EUR/USD fell to 1.2795 at 9:00 ET November 21, then rose abruptly