Analysis and Trading based on Envelopes, Waves, Cycles

a quote from Mircea Dologa

The channels or channelling is a useful tool very often neglected by the inexperienced trader.

Its quintessence is to use the past and the current market information and then project it into the future.

The construction:is very simple because it links the troughs of the trend to form the lower border and the peaks to constitute the upper border of the up-sloping channel.

When the width of the channel is too wide, with regard to the Average True Range (ATR) of
the currently used time frame chart, the trader can divide it into multiple portions using the
Fibonacci ratios.

Whatever you do, dont ever neglect to use the middle channel line (centerline) , which is of preponderant importance.

The huge advantage of channelling is that it allows the trader to better understand the market whether it is: the contextual or the local market.

Moreover, it represents a real edge to the professional trader, allowing him/her to find, in a blink of an eye, the exact location of the current market action within the trend and also to prepare for the next trading decisions.

This tool supplies the propitious entry level, and it also assists the trader in money management techniques.

Where do you dig out all this stuff from.....amazing :-)

aptx I have tons of very interesting quotes :

The Basis of The Wave Principle
October 1, 1940

Civilization rests upon change. This change is cyclical in origin and characteristics. A rhythmic series of extreme changes constitutes a cycle. When a cycle has been completed, another cycle is started. The rhythm of the new cycle will be the same as that of the previous cycle, although the extent and duration may vary. The cycle progresses in accordance with the natural law of movement.

This law of natural change is inevitable, and applies to the seasons and the movements of the tides and planets. It has truly been said that change is the only "immutable thing in life." Being a natural phenomenon, it necessarily governs all human activities, even the relatively static sciences of biology and botany. Even time and .mathematics appear to be amenable to the application of this law of rhythm, from the small unit of hours to the great intervals of decades, centuries and millenniums.

The causes of these cyclical changes seem clearly to have their origin in the immutable natural law that governs all things, including the vm-ious moods of human behavior. Causes, therefore, tend to become relatively unimportant in the long term progress of the cycle.


Measuring the behavior of cycles should therefore offer a reliable means of forecasting changes, regardless of the cause, and thus yield handsome profits. After extensive studies of changes in the stock market over a period of many years, I discovered a clue that measures and determines cyclical trends.

By 1934, I was able to resolve the various trends of changes in stock prices to a rhythmic series of component waves, which I called a "cycle."

This cyclical rhythm has occurred regularly and repeatedly not only in the available records of the various stock exchanges, but also in commodities, industrial production, temperature, music, variation in color, electric output, population movements to and from cities, etc.
In fact, it is manifest so widely, not only in human activities, but also in the workings of nature itself, that I have termed this discovery ''The Wave Principle."

The number of waves and the extent and duration of movements seem clearly to be allied with the principle of mathematics and with the passage of time, but the number of waves never varies except under certain recognizable conditions of a cyclical nature. The lengthof a wave may possibly be affected by emotional news, but the numberof waves is clearly not affected by such transient developments.

By means of this rhythmic analysis, the end of a movement is known as it approaches, and the type of the next movement is also known. It is therefore possible to predict with confidence when a bull market is terminating and a bear market is beginning, or vice versa.

On the following page are shown 3 graphs of a stockmarket cycle, including the constructive phases of a bull market, and the destructive phases of a bear market. The number of waves in a cycle is also compared with the mathematical principles laid down centuries ago by Pythagoras and Fibonacci.
HowTheWave Principle works, and its Correlation with Mathematical Laws

The graph at the top outlines the fundamental or largest waves of a complete cycle. There are 5 waves in the bull market, and 3 waves in the bear market.

In the middle graph, these same 8 fundamental waves are amplified to show their component waves, totaling 34.
Note the constancy of the"5-3" rhythm.
This graph shows the Intermediate stages of a cycle.

The third graph is simply a more detailed analysis of the same 8 fundamental, or 34 intermediate, waves of a cycle, including the 89 minor waves of a bull market and the 55 minor waves of a bear market. The total is 144. Again the "5-3" relationship holds true.
A corrective phase of the cycle will occasionally vary the rhythm slightly for the minor waves, and in such instances, the count will be 7 or 11, according to the type or pattern, which indicates what is happening.
Pisa. His "Summation Series of Dynamic Symmetry" agrees in every respect with the rhythmic count of the Wave Principle, and the number of waves·is the same.

Fibonacci apparently derived his Summation Series from the famous Pythagorean diagram of a pyramid, consisting of 10 units, beginning with one and ending with 4. This diagram, Pythagoras said, was the "Key to the Secret of the Universe." Not only can this diagram be applied to the seasons of the year, but also to the great inner cycles of the well known ten-year cycle.2


The similarity of The Wave Principle, the Fibonacci Summation Series and the Pythagorean diagram is shown in the tables on the next page.

It should be noted that when I discovered The Wave Principle action of market trends, I had never heard of either the Fibonacci Series or of the Pythagorean Diagram.3 It is naturally gratifying to me that these old mathematical principles that were laid down centuries ago simply substantiate the validity of a present day application of basic law to practical use.

As to the conformance of the time element, or duration of market trends, with the rhythm of The Wave Principle, many "coincidences" can be cited.
R.N.Elliott

As I have already written :

a) Hurst labels his work as "The Wave Theory of Price Action" in a Short Leaflet resuming ihis Worh published in 1975 under the Title " Cyclic Analyis. In his Course 1975 Hurst use 5000 times the Word Wave and 800 Times the Word Cycle.

b) R.N Elliott in the Wave Principle mixes Rhythm, Cycle and Wave

c) Edward Dewey in the Magazine "Cycles" mix also Rhythm, Cycle and Wave and writes that he should not label his work Cycle Analysis but Rythm Analysis.

All that to say that these concepts are fluid and ambiguous in their meaning.

Hence when somebody writes "Cycle" you have to ask yourself with which meaning ?

The situation is even more complex if you take into account other similar concepts as Periodicity (period) and Regularity.

And for those of you fans of Spectral Analysis : Frequency.

By applying all the rules and considering all indications you will be able to get a more accurate forecast.

Everything moves to a gravity center or to a point half-way between some bottom and top or some other important resistance point.

Anything that comes out on multiples of 3 is very important, because it is the first odd number that we can square, as the square of 1 is 1.

45: This is the master of all numbers because it contains all the digits from 1 to 9.

90 is one of the strongest points of all because it equals a vertical angle and represents ¼ of the circle.

There are 3 important factors to consider, Price, Tme and Space movements.

W.D. Gann

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Envelopes

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Focal Points

Price Range is very narrow

BABSON CHART

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Do you see the Trend ?

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Focal Points

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Resistance Linei- Dashed red
Support Line - Dashed green

Centerline - Dotted Black

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Opened Long Position

Transition Double Bottom

CMA 16 (red) and 32 (blue) are UP

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The Parallel Centerline in red acts as a Resistance

The Down Trend Slope was relatively Steep (-24°)

Stop Loss Under the Double Bottom

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Resisrance Parallel Centerline(in red) signfiicantly broken on the Upside

why are we optimistic.
courtesy of Terry Pascoe script.

a) the Black dot is preumed by me as the CMA's inflection point.

Since this point all 5 CMA's will be trending Up

My guess a 50 % retracement : the horizontal dotted line

situation looks not very positive

BUT

thanks to Terry we see that CMA 256 and 128 have a High probability to go through the black dot making of it a FP5 - where 5 CMA's converges with Price Action

CMA 128 (ocre) has yet 16 bars (minutes) to reach this point
and CMA 256 80 bars (80 inutes)

Bad anticipation !

We reversed the position

we follow the Down Trend with a FLD 32 - price action offsetted of 1/2 period (16 bars) in the future