Low Risk, High Reward Trading Experiment

Hi Itme,

I am new at forex trading.

What do you recommend to learn the wave? Is there a particular platform you use? Is the wave better at what interval chart?

I thank you for the info in the last 2 weeks.

Thank you

AJ

Hi Ajasso,

I suggest that you give yourself a strong grounding in the fundamentals, beyond that there are a variety of styles and theories, and in this I can only tell you that my approach is more freeform, and based on empirical observation of typical patterns rather than rules.

Here is some material on basic Elliott Wave Theory:

The Basics of Elliott Wave Theory

http://www.forexfactory.com/forexfor...hlight=Elliott

Study, and continue to review, observe and practise. Be patient.

The thirty year chart is very helpful, plus the one day / 10 year chart; also the 1 hour / 60 days and 2 hour / 12 months charts. For smaller waves the 15 minute and 5 minute charts are helpful. For timing entries precisely the one minute and tick charts come in handy.

hi itme

you might want to check your PMs, it is full right now.

I sent you some PMs last week.

Thanks, Clam61, no wonder things have been so quiet lately!

Note: EUR/JPY seems to be at the top of a channel now, and may correct downwards about 50 pips or so. Short term momentum traders may want to check out a short at the resistance level around 152.47 - 152.50.

EUR/CAD update for Monday November 27 at 7:15 ET
<HR style="COLOR: #d1d1e1" SIZE=1><!-- / icon and title --><!-- message -->EUR/CAD update for Monday November 27 at 7:15 ET

EUR/CAD completed a brief and spiky 93 pip downwards Wave 4 down to 1.4796 from its previous high of 1.4889, which we counted as the top of an extended Wave 3, and then rose 120 pips to a recent high of 149.08, slightly past our target for the ultimate high of 149.00.

But the wave pattern still does not yet resemble a complete 1-2-3-4-5 Wave 5 pattern. EUR/CAD is therefore likely to rise a final time to about 1.4950 after falling in an A-B-C corrective wave to about 1.4800. If it does this, then this will be a good short trade opportunity.


Itme,
On the EUR/CAD 1 Day 10 Year chart it shows the 38.2% Fibo to be in the area of around 1.5022. This would place your 1.4950 prediction close to the area you expect Wave 5 to top out.
I also agree that the 5th wave pattern has not been completed yet (This is on the Daily 1 Year Chart). The A-B-C corrective waves will not appear until we reach our high, and the top materializes without doubt finishing the 1-2-3-4-5 Wave pattern.

Monarch

Monarch, please elaborate more on this comment, and explain to us whatever the Fibo method can tell us at this time. What two points did you fibo, and why? And what inferences can you draw? Thanks.

" On the EUR/CAD 1 Day 10 Year chart it shows the 38.2% Fibo to be in the area of around 1.5022."

Itme,

This Fibo was charted off of the 1 Day 10 Year "Candle High and Low"
the 38.2 % Fibo placed the price at 1.5020/1.5022.
The Points for Fibo is as follows:
The Candle High for the 10 year period is 1.9211 on 10/08/98
The Candle Low For the 10 year period is 1.2448 on 10/26/00

I also charted a "Line Type Fibo" using the same 1 Day 10 Year Chart and it resulted with the same days for Highs and Lows for a 10 Year Period, but the Fibo dropped 89 pips lower. The 38.2 % Fibo for the "Line type" stands at 1.4933

Looking Back on the Charts - the last time the price it this high was back on 8/04/05 which closed at 1.5027 and also 8/05/05 when it opened at 1.5027 and closed at 1.5020.

As of Today - The R3 Daily Resistance stands at 1.4986, and the R2 Weekly Resistance stands at 1.5032.

I expect Wave 5 to hit around 1.5020 before turning down, 1.5009 is where I will place my Entry Short Position (which is the middle of the two resistant levels shown above) then I expect it will makes its first Corrective Wave A at the 1.4776 level, where my Exit Target is placed, I then expect it to rise in it's Wave B pattern.

Monarch

I said, " But the wave pattern still does not yet resemble a complete 1-2-3-4-5 Wave 5 pattern. EUR/CAD is therefore likely to rise a final time to about 1.4950 after falling in an A-B-C corrective wave to about 1.4800. If it does this, then this will be a good short trade opportunity."

Monarch said, "I expect Wave 5 to hit around 1.5020 before turning down, 1.5009 is where I will place my Entry Short Position (which is the middle of the two resistant levels shown above) then I expect it will makes its first Corrective Wave A at the 1.4776 level, where my Exit Target is placed, I then expect it to rise in it's Wave B pattern."

After studying the one day chart some more I can see why EUR/CAD is doing a correction off of the recent high price, and then can anticipate a further high being reached of anywhere between 1.4975 and 1.5100, with 1.5100 being a high probability reversal point. 1.5100 is the 50% retracement approximately of the downtrend since 12/27/2004

Itme,

I also looked at the 50 % Fibo on 12/27/04 retracement and it shows it at 1.5100 which is may be a reasonable point of a reversal.

At the rate the EUR/CAD has risen this past month with over 19 Bullish Candles in the past 24 candles, and the Day Candle now is showing Bullish signs, I see no quick slow down here, maybe a minor hiccup in the push upwards. I completely agree with your summarization "and then can anticipate a further high being reached of anywhere between 1.4975 and 1.5100, with 1.5100 being a high probability reversal point."

Watching the EUR/USD make it's Wave "B" upwards correction we should see the EUR/USD rise about 80 more pips up to around 1.3220/1.3230 area. EUR/USD currency pair has been the driving force behind EUR/CAD which we expected to hit Wave 5 some time last week.

We should watch both of these currency pairs, for when we see the drop off on the EUR/USD then we will finally see the completion of Wave 5 on EUR/CAD.

Monarch

Subjectively speaking, the experiments recorded here have been very fruitful at yielding valuable lessons, lessons which I am actively incorporating into a trading system that is in development, a trading system quite different from the experiments employed to develop the system, a system which probably has some of the features which you are very sensibly referring to, features designed to avoid false entries, to adjust stops to lock in a break even status, to maximise win rate, maximize reward : risk ratio, and to optimise exit prices. Very valuable are any objective tests or qualifiers which can filter out dangerous or potentially losing trades, and point to moments of special opportunity.

The trading system I am developing will be able to identify many winning trades on various currency pairs, but it will also hopefully have the capacity to choose or priorize the optimum ones from a variety of alternatives, and will thus deliberately allow many good opportunities to pass by, because by increasing the win rate to over 50%, and limiting trades to those with a reward : risk ratio of 5:1 or better, the return on capital will be enormous. By being patient and waiting for the optimum entry points, there will be fewer trades, but a much higher reward : risk ratio and a higher success rate. It has been necessary to perform hundreds of careful experiments in order to evolve a system which will perform as I have stated.

Performance cannot be mistaken by how many times one enters and exits the market daily.

One should have a system that has been tested, using their own experience and knowledge to further their abilities, even with the assistance if gaining knowlege from those who are willing to teach, as itme has.

The final product is not how many quick hits it takes to make a profit, with such, traders could find themselves with a very minimal gain, risking much of their capital.

The performance I value is performing a key entry into a position that will gain the Highest profits, and have a very low risk of loss.

Monarch

Hi Itme,
Your trading call gave good results.
Please give your opinion for eur and gbp.
Thanks

I expect GBP/USD to descend from the current price of 1.9395 to about 1.9300 to finish its current consolidation before it rises one more time to a higher high, before a more substantial correction downwards.

p.s. - GBP/USD has just risen to 1.9453, and shows signs of reversing at about 1.9463. It isn't clear whether this is an extended B wave of a downwards consolidation, or a new impulse wave. We had better wait and see. There may be a viable trade at the top of this move, whatever it is. We will have to make an assumption about the status of this wave, and perform our calculations accordingly.

Tuesday November 28 at 2:45 ET

Exit Trade Signal #252 Buy GBP/JPY at Market Price of 225.47

Successful trade.

Profit is 288 pips

Risk was 64 pips

Reward : Risk Ratio is 4.5 to 1

This may not be the ultimate high of this pair, but there is a significant likelihood of a strong retracement about here, so we will exit, capture gains, and be open to re-enter this position at a later time following a large A-B-C correction.

p.s. - the price has risen to 226.17 and formed a triple top. It is probably now due for a large Wave 4 retracement.
______________________________________________________________
______________________________________________________________

Previous predictions and analysis:

Thursday November 23 at 8:00 ET

Trade Signal #252 Buy GBP/JPY at 222.50
Stop is 221.95
Target is 225.00 to 226.00
Risk is 64 pips
Reward is minimum 241 pips
Reward : risk ratio is 3.8 to 1

For research purposes only,

This is a fifth wave up to the ultimate top, where a short trade is likely to be possible.

p.s. - the lowest price reached was 222.36, and the recent high is 223.92 as of November 24 at 4:15 ET
__________________________________________________ _________
__________________________________________________ _________

Analysis of GBP/JPY for Tuesday November 21 at 5:45 ET <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> Tuesday November 21 at 5:45 ET

GBP/JPY reversed direction at 222.48 as we recognised at the time, and rose about 90 pips to 223.36, then corrected down to 222.75 - just 5 pips past the point where we predicted it would turn around, and which we stated would be a viable entry for a buy trade. It then rose 149 pips to a recent high of 224.27.

We now believe that it will reverse again and fall in a downwards Wave 4 A-B-C corrective wave, to about 223.50, and then reverse again and resume its climb to the ultimate high about 225.00 to 226.00.

The target of this corrective A-B-C wave is 223.50

The current price is 224.15
_________________________________________________

Analysis of GBP/JPY for Friday November 17 at 5:30 ET

GBP/JPY did indeed rise as predicted from the reversal point at 222.48 to a recent high of 223.36 and is now engaged in a downwards A-B-C corrective wave.

The current price is 223.20.

The bottom of this wave at about 222.80 could be a viable low risk : high reward long trade with a target of 225.00 to 226.00. The safest trade will be the trade down from this ultimate high point, however.
__________________________________________

Analysis of GBP/JPY for Wednesday November 15 9:30 ET <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message -->
GBP/JPY has fallen this morning to 222.48, which appears to be the low for this downwards trend which took it down 280 pips from its recent high of 225.28. It is now headed back up to about 225.00 again as GBP/USD rises strongly.

The current price is 222.68

Tuesday November 28 at 4:00 ET

Trade Signal #257 Sell GBP/JPY at 226.06

Stop is 226.51

Target is 224.00

Risk is 54 pips

Reward is minimum 197 pips

Reward : risk ratio is 3.6 to 1

For research purposes only.

This is not a system compliant trade because the R:R ratio is too small. But it is a good experiment to learn from. We are trading a Wave 4 down, following what we believe is a completed extended Third Wave.

itme you are amazing. GBPUSD hit 1.9460 on my datafeed and bounced back. i know you said GBPUSD would go back down before it flew up but im still amazed at how you got 1.9460 as a resistance point. how did you do that?

It's a combination of Elliott Wave Theory and my Q system that gives me these accurate probable reversal points, Clam61.

The difficulty is in that they are both difficult systems to more or less master, and then they are difficult to reconcile, while also accounting at the same time for so many variables, such as the fact that in this pattern the GBP/USD and EUR/USD are not retracing as much as usual, probably because they are in a strong trending mode.

Also, we can often identify a reversal point, but it is much more difficult to identify the ultimate reversal point of a trend. Thus it is much easier to be successful at winning smaller trades, as compared to larger trades, especially when employing relatively small stops, and thus it is especially difficult to consistently win at high reward : low risk trades. If, however, through this process of trial and error, analysis and adjustment, practise and refinement, we do manage to achieve success at this endeavor, then we will have achieved the holy grail of trading - the capacity to leverage a small amount of capital into a large amount in a relatively short period of time.

Hi.
Go to daily, look at your chart history, be enlightened
History repeats itself

Had 1.9450 myself, not 1.9460 as I found that more conservative and likely. I don't use EW however.

Hope this isn't interrupting.

Best regards,

SeekingLight

o ok. hehe i thought it was some form of fibonnaci planetary alignment voodoo

EUR/JPY Update for Tuesday November 28 at 4:30 ET

EUR/JPY retraced as predicted on the fourth smaller wave within the extended Third Wave by 37 pips down to 152.10 from 152.47, and then continued up to 152.81, which we take to be the top of the extended Third Wave. If we had been monitoring the situation we would have re-entered at the bottom of the A-B-C correction and captured about 60 to 70 more pips of profit in this EUR/JPY long trade.

One more rise to about 152.88 to 152.93 is likely, then a large Fourth Wave correction is due.

p.s. - In fact one more rise did occur, up to a price of 152.95. Then a retracement to 152.75 and another rise to 153.00

p.p.s - according to my trading system, I could not enter a short position on EUR/JPY below the price of 153.38. The current high is 153.42, which may be the turning point of this upwards trend.

The upwards wave three just completed (presumably) was somewhat larger than expected, because USD/JPY rose in tandem with the strong rise in EUR/USD, instead of falling as is the usual behavior of USD/JPY while EUR/USD rises.

We expect next on EUR/JPY a large Wave 4 A-B-C downwards corrective wave followed by the final upwards impulse wave to about 155.00
__________________________________________________
__________________________________________________

Previous trade signals:


Monday November 27 at 6:15 ET

Exit Trade Signal #251 Buy EUR/JPY at 152.31

EUR/JPY retraced as predicted from its interim high of 151.70 (actual interim high was 151.72) and retraced 52 pips, forming an A-B-C wave pattern, to 151.20. This would have been a good re-entry price, at the bottom of Wave 4. The price then rose to 152.47 recently, in an extended Wave 5. The current price is 152.31. Assuming a re-entry at the correct price of 151.20, and exit at the present price of 152.31, the profit from the second portion of this trade is 108 pips.

The cumulative reward : risk ratio for this two part trade, including augmentation due to strategic Wave 4 exit / re-entry, is about 7.3 to 1.

The future will probably consist of a sizable downwards fourth wave of the extended third wave, followed by an upwards fifth wave of the Third Wave and then a larger Fourth Wave and then a final Fifth Wave carrying the price up to about 155.00. The impulse fifth wave up will be the next low risk : high reward trade opportunity.
__________________________________________________ __________
__________________________________________________ __________

Interim exit Trade Signal #251 Buy EUR/JPY at 151.70 pending Wave 4 down
<!-- / icon and title --><!-- message -->Friday November 24 at 7:00 ET

Exit the following EUR/JPY long trade at 151.70 to take 111 pips of profit and re-enter following a large A-B-C corrective wave.
__________________________________________________ _
__________________________________________________ _

Trade Signal #251 Buy EUR/JPY at 150.56

Thursday November 23 at 6:30 ET
We did a wrong wave count before on EUR/JPY, but won the trade nonetheless. EUR/JPY rose in a clear five wave set to 151.66, within the range which we expected it to reach. We had temporarily exited the short trade to wait for it to reach the top. We failed to issue a re-entry signal because we were distracted, but for those who recognised the top at 151.66 and took the short position, we believe the bottom of the trend has just been reached at 150.56, 110 pips lower.

It is now possible to enter a buy position at this price of 150.56, with a target of 151.75 or higher. The stop is at 150.19, making the risk 41 pips, and the minimum reward 115 pips. That makes the reward : risk ratio only 2.8, which is not sufficient to comply with our standard for live trades. But for research purposes we will label this Trade Signal #251 Buy EUR/JPY at 150.56

p.s. the lowest price reached was 150.32, 13 pips above the stop.
The latest high is 151.47 as of November 24 at 4:00 ET