Low Risk, High Reward Trading Experiment

Monday December 11 at 3:30 ET

Temporarily exit Re-enter Trade Experiment #271A Buy GBP/JPY at 225.74 at the exit price of 228.07 to capture 198 to 224 pips of profit (depending on entry price) and re-enter approximately 40 to 50 pips lower after small wave 4 correction.

p.s.- GBP/JPY just rose to 228.38, a very high probability reversal value, and is thus very likely to reverse and do a smaller wave 4 correction down to about 227.50 before heading up to the top of Wave 3 at about 228.75
p.p.s. - GBP/JPY just fell 65 pips and then rose to form a double top at 228.38 - wave a down and wave b up. Wave b down follows, and then Wave 5 up.
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Previous trade signals:

Re-entry opportunity Trade Experiment #271A Buy GBP/JPY at 225.74

Wednesday December 6 at 24:000 ET
Another opportunity to jump on the long GBP/JPY trade ( Trade Experiment #271 Buy GBP/JPY at 226.65 ) may offer itself at about 226.00

p.s. - GBP/JPY did descend to 226.00 to offer a good re-entry price

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Previous trade experiment:

Re-enter Trade Experiment #271A Buy GBP/JPY at 225.74


<!-- / icon and title --><!-- message -->Wednesday December 6 at 6:30 ET
Re-enter Trade Experiment #271A Buy GBP/JPY at 225.74
Stop is 225.28
Target is 230.00
Risk is 55 pips
Reward is 417 pips
Reward : Risk ratio is 7.6 to 1

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Previous trade experiment:

Tuesday December 5 at 11:00 ET

Exit Trade Experiment #271 Buy GBP/JPY at 226.65 at market price of about 226.90
After more reflection it seems probable that GBP/JPY will descend to a new low. Therefore exit at market price of about 226.90. Re-enter a long trade at the bottom of the downwards wave 5.
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Tuesday December 5 at 4:00 ET
Trade Experiment #271 Buy GBP/JPY at 226.65
Stop is 226.19
Target is 230.00
Risk is 55 pips
Reward is 326 pips
Reward : Risk ratio is 5.9 to 1
For research purposes only

The wave hypothesis of this trade experiment is that GBP/JPY has gone up on a wave 1, 2, and 3 of Wave 5 and then down in an especially large Wave C of a wave 4 of Wave 5 down to the recent low of 226.48.

The rising GBP/USD, especially if USD/JPY also reverses and heads upwards, will cause a strong rise of GBP/JPY in its wave 5 of Wave 5 up to a new high at 230.00 or higher.
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Post trade analysis - Trade Experiment #281 Sell USD/CHF at 1.1978

In this trade, like the trade entered at the same time to sell USD/JPY immediately prior to the non-farm payrolls data release last Friday, we mistakenly entered the trade on the top of the third mini-wave at 1.1978 instead of the fifth mini-wave - a little prematurely. If we had counted the waves accurately and estimated the top of the fifth wave using our targeting formula, the entry limit price would have been set conservatively at 1.1994, just 9 pips short of the high at 1.2003. So we would have aced the entry if we had counted the waves correctly and used our targetting system to predict the most likely reversal price at the top of the fifth mini-wave.

However, unlike USD/JPY our stop was high enough to avoid being stopped out in spite of our mini-wave miscount, as we more sensibly employed a 27 pip stop instead of the measely (and foolishly, under the circumstances) 18 pip stop employed on USD/JPY. We thus survived the stop - but by only 1 pip - an extremely close call indeed!

Regarding our target, the predictive T Target #1 was 1.1875. The premise of the trade was a NFP report that was deleterious to the value of the USD. The reason for this assumption was that our technical analysis indicated the greater likelihood of this occuring. The opposite occurred. However, the USD/CHF exchange rate fell nevertheless, but not quite to our original target. It fell to 1.1882 - just 7 pips short of our target - even though the data favored the USD. This demonstrates how the technical necessities still hold sway over the market in many cases, even when a strong NFP data release enters into the equation. The market will often fulfil technical necessities, and then initiate a trend according to the fundamental forces at work afterwards. This accounts for the seemingly irrational swings of the market after certain significant data releases.

If we had adjusted the target during the trade, after the entry and before the exit range was reached, according to our targeting system we would have adjusted it to a conservative target of 1.1900. This target would have been hit and surpassed by 18 pips. The price came down and surpassed our calculated most likely reversal price according to our price reversal prediction model by only 2 pips.

So a monitored trade in this case would have been successful, with the stop being narrowly missed, and a target adjusted to the quality of the data release and the updated price pattern, garnering 74 pips of profit.
If we had counted the waves correctly and entered at 1.1994 instead of 1.1978, then our profit would have been 90 pips.

This trade was not system compliant because of the substandard reward / risk ratio of only 3.2 to 1, less than our minimum of 5.0 to 1, but it was a fruitful learning experience, and verified the importance of counting the waves properly on the 1 minute chart, employing the correct entry price, not using too small a stop, and adjusting the target during the trade. It also demonstrates that we can win trades even during the volatile non-farm payroll report releases if we are very careful, cautious and diligent about our entries, stops and targets, even if the news is the opposite of what we were basing our trade upon. If we had counted the waves properly and entered at the correct price of 1.1994, and still employed a risk of 31 pips to provide security for the trade, and employed the adjusted target, the RRR would still have been only 3.0 to 1.

But if the news had been the opposite, and the NFP number had been unexpectedly small instead of unexpectedly large, then the price may not have approached so close to the stop, and the movement would have been strongly downwards instead of upwards, sailing past our Target #1, and we would have adjusted the target downwards a significant amount, in which case this trade might have been very profitable.

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Previous trade experiment:

Friday December 8 at 6:30 ET
Trade Experiment #281 Sell USD/CHF at 1.1978
Stop is 1.2005
Target #1 is 1.1875
Risk is 31 pips
Reward is 99 minimum pips
Reward : risk ratio is minimum 3.2 to 1
For research purposes only.

Subsequent to our successful short trade of CHF/JPY (Trade Signal #259 Sell CHF/JPY at 96.44) this pair set in a double bottom at exactly 95.88 and then rose 123 pips as predicted to a recent high of 97.11 (which is a high probability reversal price) and formed a completed Wave 1 - Wave 2 - Extended Wave 3 wave pattern. Our prediction at the time that the price was at the bottom was "The price should now rise to complete the long upwards trend at about 97.50." It will likely reverse now and form a corrective downwards A-B-C Wave 4 targetting the region of 96.50 before heading back up in a 1-2-3-4-5 pattern Wave 5 to an ultimate high of about 97.50.
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Previous trade signals:

Success: Exit Trade Signal #259A Sell CHF/JPY at market price, currently about 96.08 Wednesday December 6 at 7:00 ET

A fresh look at Trade Signal #259A Sell CHF/JPY at 96.97 indicates that we have probably been trading down a corrective wave, not an impulse wave, and the correct exit point would be the double bottom at 95.90, providing a profit of about 100 pips.

Exit Trade Signal #259A Sell CHF/JPY at market price, currently about 96.08

The price should now rise to complete the long upwards trend at about 97.50.
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Previous trade experiment:

Friday December 1 at 3:30 ET

Trade Signal #259A Sell CHF/JPY at 96.97
Stop is 97.31
Target is 92.50
Risk is 34 pips
Reward is 437 pips
Reward : Risk ratio is 12.8 to 1

For research purposes only.

We have a virtually perfect trade here, with a clear 5 wave set up and a high probability reversal value, plus a triple top to triangulate on the precise pivot point.
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Tuesday November 28 at 6:00 ET
Trade Signal #259 Sell CHF/JPY at 96.44
Stop is 96.77
Target is 92.50
Risk is 41 pips
Reward is 386 pips
Reward : Risk ratio is 9.4 to 1

For research purposes only.

EUR/USD update for Monday December 11 at 7:30 ET

Since the high on Friday morning after the NFP data release of 1.3364 EUR/USD has fallen 236 pips to a low of 1.3128 and then bounced up 94 pips to 1.3222. It is likely to continue with another upwards pulse of the upwards corrective wave and then finish its downwards Wave A of Wave 4.

EUR/USD is currently trading at 1.3180. This is at the bottom of mini wave b of an upwards zigzag wave 4 aiming for about 1.3245 - 1.3255. From the top of this wave 4 it should reverse and continue its descent in the fifth wave of the larger Wave A of Wave 4 targeting about 1.3080. After this should come a rise of about 270 pips in Wave B of Wave 4 to about 1.3350, followed by a fall in Wave C of Wave 4 to about 1.3150, followed by a Wave 5 rise to about 1.3500 - the top of a large upwards trend.

Sorry i am disturbing your work itme. But do you have any view on the pair EUR/AUD at the moment?

USD/CHF update for Monday December 11 at 8:00 ET
Since the low Friday morning after the NFP data release of 1.1882 USD/CHF has risen 214 pips to a high of 1.2096 and then bounced down 67 pips to 1.2029. It is likely to continue with another downwards pulse of the downwards corrective wave and then finish its upwards Wave A of Wave 4.

USD/CHF is currently trading at 1.2080. This is at the top of mini wave b of a downwards zigzag wave 4 aiming for about 1.2010 - 1.2000. From the bottom of this wave 4 it should reverse and continue its ascent in the fifth wave of the larger Wave A of Wave 4 targeting about 1.2100. After this should come a fall of about 100 pips in Wave B of Wave 4 to about 1.2000, followed by a rise in Wave C of Wave 4 to about 1.2150, followed by a Wave 5 fall to about 1.1800 - 1.1830 - the bottom of a large downwards trend.

Hi Miguel,

The way I see it, Miguel, EUR/AUD shall rise to 1.6890 from its current price of 1.6840, then fall to 1.6750, then rise to 1.7000 to 1.7100.

"EUR/AUD Impending Short Trade <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> Tuesday December 5 at 12:00 ET

The strong rise in EUR/USD has been impelling EUR/AUD up in a corrective Wave A 1-2-3-4-5 wave pattern. When the EUR/USD finishes its last big Wave 5 of the third wave of an extended Wave 3 up, then EUR/AUD will likely reach the top, and offer a good low risk : high reward trading opportunity for a Wave B down. The price of EUR/AUD will be at about 1.7000 at that time. The target will be about 1.6500.
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Itme your analysis and words are valuable to me. Really appreciate your time, thank you. Wish you all the best!

Monday December 11 at 9:00 ET

We recommended a temporary exit of this trade at .9087 for a wave 4 correction of the Third Wave up. The top was .9088, only 1 pip higher than our estimated top. We estimated a bottom of the a-b-c wave 4 at .9060. The bottom of wave 4 was at .9041, after an a-b-c pattern. This would have been the appropriate re-entry price. The price then rose to a high probability reversal value at the top of Wave 3 at the price of .9102 - a rise of 59 pips.

Since then the price fell 114 pips in Wave A of Wave 4 to a low of .8978. It is now due to rise in Wave B of Wave 4 to as high as .9100, then fall again in Wave C of Wave 4 to the .8950 area.

Then it will rise in Wave 5 to about .9200.

Re-enter Trade Experiment #278 Buy AUD/CAD at market price of .8985

Stop is .8975

Target is .9100

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Previous trade signals:

Temporarily exit AUD/CAD long trade at .9087
Thursday December 7 at 7:45 ET

RE: Trade Experiment #278 Buy AUD/CAD at .8966

Temporarily exit AUD/CAD long trade at .9087 to lock in 112 pips of profit and re-enter at the bottom of a medium sized wave 4 correction forming an A-B-C pattern. (The previous potential exit / re-entry related to a smaller order wave 4 correction.)

We estimate that the bottom of the corrective wave will be at about .9060
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Previous trade experiments:

Possible temporary exit point for Trade Experiment #278 Buy AUD/CAD at .8966 <hr style="color: rgb(209, 209, 225);" size="1">The price of .9075 was reached just now, which appears to be the top of wave 3, so there will be a wave 4 correction now. However, it may not be very large in this case, so we will leave it to the discretion of the trader to decide whether to risk losing profit in order to enhance profitability of this trade by exiting and re-entering at a lower price.
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Wednesday December 6 at 8:00 ET

A fresh look at AUD/CAD indicates that we have recently completed a corrective wave down, at the low of .8942, which would have been the correct entry point for a long trade to the ultimate top of this trend at about .9200. However, we can try to enter at the bottom of the small wave 2.
Trade Experiment #278 Buy AUD/CAD at .8966
Stop is .8929
Target is .9200
Risk is 43 pips
Reward is 225 pips
Reward : Risk ratio is 5.2 to 1
For research purposes only.

The price should now rise to complete the long upwards trend at about .9200.

p.s. - the entry price of .8966 was just met at 8:40 ET December 6

hi itme

what do you think of the fact that glenn neely (mastering elliot wave) says that even he can only predict the market accurately 50% of the time

itme, correct me if i'm wrong.
according this the next steps to be follow should be:

1-LONG @1.3180 TP: 1.3245-55 (has been completed)
2-SHORT @1.3245-55 TP: 1.3080
3-LONG @1.3080 TP: 1.3350
4-SHORT @1.3350 TP: 1.3150
5-LONG @1.3150 TP: 1.35

is that the right way to read what you posted ?

Itme, that is truly awesome! (your analysis and projected targets for waves for EUR/USD & USD/CHF). Many thanks for sharing this analysis with us.

Hi blondy101,

Yes, you got my predictions correctly. If I am correct concerning my predictions of the future movements of EUR/USD, then you may not necessarily want to actually trade every movement up and down, although it is theoretically possible. The possibility of accurately predicting most fine movements of the market was explored by me in my "satire" thread currently buried in the bottom of the Readers Lounge Forum. This is a distinct possibility as far as me and my colleagues are concerned, because we have actually accomplished this for short periods of time (one day or less). However, our skill and stamina are not sufficient yet to guarantee consistent, prolonged, accurate results.

Two of the difficulties are - obtaining sleep, and maintaining a fresh perspective all the time - ie - not developing a fixed "opinion" that clouds our perception.

For a variety of reasons, but principally human limitations and news releases, every prediction carries a degree of uncertainty, and also a degree of inaccuracy. That is why I feel that it is not only necessarily to learn to predict the movements of the market, but to accurately assess the reliability and degree of accuracy of those predictions.

In addition, a reward : risk assessment of each individual trade setup will ensure that the trading program is profitable in spite of the inevitable errors - even if there are about 50% errrors. Generally, it is best to trade the larger moves -impulse waves - and leave the small ones, which are corrective waves, alone, according to my trading model. Also, there are times when the entry can be determined quite accurately with a high degree of confidence, and the stop thus placed quite close to the entry price. This is another way that an acceptible reward : risk ratio (for me, minimum 5:1) can arise.

Cheers!

Itme

hi itme

what do you think of the fact that glenn neely (mastering elliot wave) says that even he can only predict the market accurately 50% of the time

- clam61

I am quite encouraged by this news. I will be more than satisfied with a 50% success rate, which is in fact my immediate goal. Of course, the accuracy of predictions is just as important as the percentage of success in determining the performance or efficiency of the trading system. I believe that a higher rate than this is possible, if one combines a correct understanding of Elliott Wave theory with my Q model and announcement trading mastery. But all three are highly complex models, requiring a great deal of study and practise, and the integration of the three into a trading system is a very advanced human activity, comparable, in my opinion, with the most complex and challenging of human attainments.

Hi Itme,
I follow your thread usd/chf and i want to trade with your prediction.
Here it is :
from 1.208 trades down to 1.2010/1.2000.
up from1.2010/1.2000 to 1.2100.
down from 1.2100 to 1.2000.
up from 1.2000 to 1.2150.
down from 1.2150 to 1.800./1.830.
Is this your correct prediction ?
Thanks for your input.

wow thats encouraging too. i always thought u were shooting for 100% to the pip accuracy all the time.

Intra-trend pattern analysis:

I made an error in my internal wave count for GBP/JPY when I advised exit / re-entry for a supposed wave 4 correction at 228.07. There was a five wave upwards wave pattern in evidence, but in a large move of this kind the third wave is always an extended wave, which I forgot. Thus the correction that came was smaller than the 50 pips or so that I expected (it was only 25 pips), and not in the pattern of a flat a-b-c, but a zigzag instead.
The top of the extended Wave 3 of this last large Wave up in GBP/JPY was just reached I believe at the price of 229.44, which would have been a good time to exit and re-enter 50 or more pips lower after an a-b-c corrective wave. The target of 230.00 seems well within range of this trend. But wave c of Wave 4 will probably carry the price down to 228.60 from the current price of about 229.35 before it reverses and carries on with its upwards Wave 5 targeting 230.00 (p.s.- this did not happen).

p.s. - We are learning about the behavior of GBP/JPY when it is in a strongly trending mode. First of all, which is obvious, wave 3 is an extended wave. Second, the wave 3-4 correction is probably usually a zigzag, not a flat. Second, in this case, which may be typical, the wave 4 correction was also a zigzag, and not a flat as is very common, and it was quite shallow (ony 69 pips). When a currency has 450 pips to travel, as this one did, then we should expect the corrections to be shallow and shortlived. The high so far is 230.28, which is 28 pips past our initial conservative target, and we see the distinct possibility of one more upwards surge (wave 5 of Wave 5) before the trend is over. Actually, if we had done a late term target adjustment, we would have calculated the exact high that was just reached - 230.28 as the most likely reversal price. So this makes it a likely end of wave 3 as well.

Trend analysis: the current estimated ultimate high for this trend is about 232.50
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Previous trade signals:

Temporarily exit Trade Experiment #271 Buy GBP/JPY at 228.07
Monday December 11 at 3:30 ET
Temporarily exit Re-enter Trade Experiment #271A Buy GBP/JPY at 225.74 at the exit price of 228.07 to capture 198 to 224 pips of profit (depending on entry price) and re-enter approximately 40 to 50 pips lower after small wave 4 correction.

p.s.- GBP/JPY just rose to 228.38, a very high probability reversal value, and is thus very likely to reverse and do a smaller wave 4 correction down to about 227.50 before heading up to the top of Wave 3 at about 228.75
p.p.s. - GBP/JPY just fell 65 pips and then rose to form a double top at 228.38 - wave a down and wave b up. Wave b down follows, and then Wave 5 up.
p.p.p.s -A careful look at the 1 minute chart shows that the correction down of 65 pips from 228.38 contains an a-b-c wave pattern, so the wave c is already completed, and there was no need for a second descent in the corrective wave.
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Previous trade signals:

Re-entry opportunity Trade Experiment #271A Buy GBP/JPY at 225.74
Wednesday December 6 at 24:000 ET
Another opportunity to jump on the long GBP/JPY trade ( Trade Experiment #271 Buy GBP/JPY at 226.65 ) may offer itself at about 226.00

p.s. - GBP/JPY did descend to 226.00 to offer a good re-entry price

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Previous trade experiment:

Re-enter Trade Experiment #271A Buy GBP/JPY at 225.74

<!-- / icon and title -->Wednesday December 6 at 6:30 ET
Re-enter Trade Experiment #271A Buy GBP/JPY at 225.74
Stop is 225.28
Target is 230.00
Risk is 55 pips
Reward is 417 pips
Reward : Risk ratio is 7.6 to 1
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Previous trade experiment:

Tuesday December 5 at 11:00 ET
Exit Trade Experiment #271 Buy GBP/JPY at 226.65 at market price of about 226.90
After more reflection it seems probable that GBP/JPY will descend to a new low. Therefore exit at market price of about 226.90. Re-enter a long trade at the bottom of the downwards wave 5.
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Tuesday December 5 at 4:00 ET
Trade Experiment #271 Buy GBP/JPY at 226.65
Stop is 226.19
Target is 230.00
Risk is 55 pips
Reward is 326 pips
Reward : Risk ratio is 5.9 to 1
For research purposes only

The wave hypothesis of this trade experiment is that GBP/JPY has gone up on a wave 1, 2, and 3 of Wave 5 and then down in an especially large Wave C of a wave 4 of Wave 5 down to the recent low of 226.48.

The rising GBP/USD, especially if USD/JPY also reverses and heads upwards, will cause a strong rise of GBP/JPY in its wave 5 of Wave 5 up to a new high at 230.00 or higher.

Today 02:14pm
*FOMC: LEAVES RATES UNCHANGED AT 5.25% AS EXPECTED

- additional firming depends on outlook and data
- vote was 10-1 with the dissent coming from Lacker again
- economy reflects substantial cooling in housing
- core inflation reading have been elevated
- Economy likely to expand at a moderate pace on balance
- high resource utilization poses inflation risk
- lower energy prices to help inflation moderate
- inflation expectations still contained

GBP/USD update for Tuesday December 12 at 14:30 ET

GBP/USD is nearing the top of Wave B of a downwards corrective Wave 4. We are in the last wave (wave 5) of the "c" segment of the a-b-c Wave B. This move is being propelled by the injection of upwards directional bias into the market by the recent FOMC rate decision, and its comments (see above). The target for this move is between the current price of .9700, which is the topside trendline, and our calculated most likely reversal value at .9730

This top is a sell opportunity for Wave C down to a target of about 1.9450

I am not sure if this recent upwards trend in EUR/USD is the wave 4 correction of the strong downwards post non-farm payrolls move of last Friday, or an upwards Wave B of the large downwards Wave 4. EUR/USD received an additional upwards boost by the comments attending the recent FOMC interest rate decision. The upwards target for this move is about 1.3300, after which a descend to about 1.3100 is anticipated.

The theory below that "This is at the bottom of mini wave b of an upwards zigzag wave 4 aiming for about 1.3245 - 1.3255. From the top of this wave 4 it should reverse and continue its descent in the fifth wave of the larger Wave A of Wave 4 targeting about 1.3080." was incorrect. The predicted rise did occur to the target prescribed, but the anticipated reversal did not occur, and the gentle upwards trend continued upwards instead, augment by the FOMC rate decision vote and comments.

Perhaps this upwards 5 wave set is the upwards wave a of the larger upwards Wave B of the even larger downwards WAVE 4.

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Previous comments:

EUR/USD update for Monday December 11 at 7:30 ET

Since the high on Friday morning after the NFP data release of 1.3364 EUR/USD has fallen 236 pips to a low of 1.3128 and then bounced up 94 pips to 1.3222. It is likely to continue with another upwards pulse of the upwards corrective wave and then finish its downwards Wave A of Wave 4.

EUR/USD is currently trading at 1.3180. This is at the bottom of mini wave b of an upwards zigzag wave 4 aiming for about 1.3245 - 1.3255. From the top of this wave 4 it should reverse and continue its descent in the fifth wave of the larger Wave A of Wave 4 targeting about 1.3080. After this should come a rise of about 270 pips in Wave B of Wave 4 to about 1.3350, followed by a fall in Wave C of Wave 4 to about 1.3150, followed by a Wave 5 rise to about 1.3500 - the top of a large upwards trend.