Low Risk, High Reward Trading Experiment

mmmhh, "1.9467" has been passed. the top of this extended wave-5 is 1.9503. extensions always get tricky in trendy markets.

so far, i´d say we finished wave-4 and heading south now.

termination targest for the last wave-5 may be: 1.9150 or 1.9048 somewhere there, i think.

Wallboroff, could you please post your wave count chart? Thanks.

For me, only subwave 3 up of wave C or 3 has finished. Subwave 4 is in progress. Just my opinion.

here you go traex, that´s what i think has happened.

thanks, Wallboroff, for your chart. Would you please give us 40 days or more, so we can see how this fits in to your larger wave hypothesis?

here is a daily chart, hope this is what you wanted.

Thanks, Wallboroff. I essentially agree with you in both the larger scale and the smaller scale, with the exception that I am not convinced that we have started the final upwards wave 5 on the smaller scale.

Yesterday, on March 15 at 7:00 ET I said, "Wave 4 of upwards GBP/USD trend over? The current low for GBP/USD is 1.9309. This could be the bottom of [the small downwards corrective] Wave 4. But then again, we could see a further decline to about 1.9295 before the rise to about 1.9400 to 1.9500..."

On March 14 I said, "My best guess for an upwards target for GBP/USD is about 1.9500. But anywhere from 1.9400 to 1.9550 is possible. Since for me its a guess, I prefer to trade the Fifth Wave down, not the C Wave of Wave 4 up. This first part up of Wave C is fine, though. So far, the high is 1.9368, and I think we're in a wave 4 correction, though it could be a wave 2 correction.

From where I sit presently, the size of Wave C is only semi-determined; how it precisely plays out depends on the news over the next few days. Today's US news was fair, as was the GBP news, so that might ameliorate the size of this upwards move on GBP/USD....

The downwards target of Wave 5 is 1.9000 to 1.9100, but that's only an estimate at this stage. As I said on March 10 based on EWT and the Q Theory, " Presented trading opportunities.

If our hypothesis turns out to be correct, then the trading opportunities will consist of:
.........
2) shorting GBP/USD at 1.9400 to 1.9500 (depending on the elaborated wave pattern), with a target at 1.9000 to 1.9100."

Today's high for GBP/USD is 1.9503, which could be the ultimate high of this trend, but then again, we could see one more upwards impulsive wave to a higher high before this trend is complete.

Thanks for the chart, Wallboroff. Do you count your waves based on the EW rules?

Like for examples, the vital 3 rules for an impulse wave:
- Wave 2 can't pass the start of wave 1.
- Wave 3 can't be the shortest among 1, 3, and 5.
- Wave 4 can't enter the area of wave 1.

And the counting rules like:
- Wave 1 can be a leading diagonal triangle or an impulse wave (5-wave sequence).
- Wave 2 can be any corrective pattern except triangle.
- Wave 3 must be an impulse wave (5-wave sequence).
- Wave 4 can be any corrective pattern.
- Wave 5 can be an ending diagonal triangle or an impulse wave (5-wave sequence).

Those are main EW rules and are considered unbreakable. R N Elliott wrote them by himself I think. Hope all wave counters here follow them.

yeah itme your´re totally right, everything is possible in this market. we could see a turn around and test the levels of 1.9526 or even higher.

to treax: yes i use EW-theory and fibos, the basis for this kind of technique.

my believe is, if you have the right wave-count on your chart, you can read the market like book, with an accuracy of 90 %. hope i can achieve this one day.

the backside is, sometimes you have to much space for speculating.

I'm going to now share the new (perhaps to you) "No Risk, All Reward Trading Strategy" and apply it to the GBP/USD. This strategy is premised on being able to consistently and accurately determine viable intermediate wave counts and bounce points based on some kind of S/R analysis. My Q Theory is extremely powerful and precise in this regard, but skilled Fibo masters and practitioners of other styles of analysis can do just as well.

Our larger studies well in advance indicated the likely beginning of a long downwards impulsive wave on GBP/USD at 1.9400 to 1.9550. As the pattern unfolded, the termination prediction focused more on 1.9500. At 1.9500 the Q Theory gives us a double convergent high probability of reversal value on 2 timeframes. This means that it might reverse the trend at or very near to this value. It also means that it will almost certainly bounce off of this value, or very near to it, in the case that this isn't the trend high. Short term Elliott Wave studies indicate that this point is a viable completion pattern for either 1-2-3-4-5 or 1-2-3, though we favor the second hypothesis.

Under these conditions, 1.9500 is both a possible starting point of a large impulsive wave, and a high accuracy, high probability bounce point. The strategy is to enter a short trade at 1.9500, with an appropriate stop. When the price falls, as it should, once it has dropped 20 - 25 pips from the entry price, then move up the stop to break even. There is a strong chance that the price will either continue to fall strongly in the beginning of a new, large downwards impulsive trend, or in a large wave 4 corrective trend.

If the entry price of the short trade is not the trend top, then the price will rise and trigger a trade exit at break even. If it is the trend top, then one will earn large profits. If the price rises again to do a possible double top, then one will have to study this pattern very carefully to try to decide whether to adjust the stop to a higher value, or to let the trade exit for a break even. The safest thing would be to let the price rise and exit the trade for B/E and then wait and see. If it is a double top and one is kicked out for B/E and the downwards trend continues, then choose an entry point at the top of a corrective wave along the way. This may happen 25% of the time. In any case, if the initial conditions can be met, then this strategy affords the trader "No Risk, High Reward" trading opportunities.

This is a long term tested strategy. It is highly effective.

If the trader is very skilled, and can reliably detect the reversal point of a Wave 1 down or a Wave A down, then they can exit there and re-enter at the top of either Wave 2 up or Wave B up. But this requires a much higher level of skill than the previous strategy requires.

In this example, according to this strategy one would enter a short trade on GBP/USD at 1.9500, because this price meets the strategy conditions very well. Then we bring down the stop to break even once the price dropped 20 - 25 pips, and then hold on to the trade, in hopes that 1.9500 is the trend high and not just the Wave 3 high, and that there won't be a double top, or if a double top has already happened. GBP/USD has subsequently dropped over 100 pips to 1.9399.

Wallboroff, by entering and trading in this market we have basically already declared ourselves as speculators. You admit it too, by putting it as your nick message "speculator".

Itme, reading waves and projecting their ends are really difficult, especially in forex. I've tried to read the market and project ends of waves many many times, but the success percentage is still disappointed. Really, waves in forex appear to be far more complex than in stock markets, considering that approx. ~70% of time prices move in corrective waves.
Compare forex with stock market. Example is DJIA index logarithm chart below (I've posted it before in another thread in FF). It'll be pretty scary when the meltdown (end of current mega impulse wave) comes, won't it?

yeah totally right traex. sometimes there are so many different possibilities to be considered that it gets hard to see the light at the end of the tunnel.

i love speculating but my love has boundaries.

i´m working on a parallel system to get a confirmation from both systems the EW-fibo-system and the new one.

i think it´ll be great seeing my possible reversal point being proofed by both systems at the same time .

My GBP/USD wave count charts in m30 and h4. Currently cable is looking to form a triple zigzag (W-X-Y-XX-Z) formation from 1.9915 top based on the count. Ultimate target for this formation might be 1.8780. Just my opinion.

H4 chart.

Hi itme,

I've been reading your thread recently with great interest - greatly admire the structureness and attention to detail that you have!

I'm hoping you can briefly divulge what you mean by "the Q Theory gives us a double convergent high probability of reversal value on 2 timeframes"...

Can you simply describe the basics/fundamentals of the Q Theory?

Thanks

Q Theory is a proprietary model of market analysis which I discovered, which is relatively original, and which has been under development for about 1.5 years.

It is different from all other methods that I know of, and is used at this point to come up with prices where the market is likely to reverse trends. When the analysis is done on different timeframes, and there are two or more exact same prices that come up, then I call it a two timeframe convergent target; a three, and occasionally sometimes even a four timeframe convergent target are possible. The more convergent high probability reversal calculations at different timeframes reinforce each other, the more likely the price trend is to reverse very close to that price, or at the very least to bounce quite strongly. Q Theory performs some of the same functions as Fibonacci analysis, but it is also different.

After explaining the theory for about two hours, the two most experienced and successful traders that I know of instantly considered Q theory to be a substantial contribution to technical analysis. One is a lifelong professional forex money manager, certified technical analyst and chairman of a group of investment firms; the other an engineer and a trader who will likely become legendary for his extremely high success rate and accuracy, and the many original discoveries in technical analysis that he made as well.

My 500 or so experiments above involve in some cases the Q theory, but in many cases the Q Theory was not properly applied, because it takes a long time to do a complete Q analysis, and I was often in a hurry, sloppy, made mistakes, or trying to analyse too many currency pairs. If the Q Theory was carefully and conservatively applied to each and every one of my trade experiments, then I estimate that from 50% to 80% of the lost trades would have been averted. Being my own "pet" theory, I am aware that I may be exagerating the merit of the theory in my own mind. This is part of the reason why I performed all the above experiments - to verify the practical merit of the theory. The results have been suggestive, not conclusive, for a wide diversity of reasons. First, because I am still gradually developing the theory, and its practical application. Second, because I applied it incorrectly or incompletely in many cases, so the experiments were not themselves always directly meaningful. Third, because I was performing experiments on a wide diversity of currency pairs, which greatly complicates the practical application, and the question of what can be concluded from any particular experiment. Fourth, because I was employing the Q Theory in conjunction with several other theories, so there are several other significant variables in each experiment.

ITME,

Your Q theory sounds interesting. Is it possible that you can make EA for it, or can somebody else.

It would be great if we can programmed it so mistakes like early implementation or wrong entry can be avoided for great accuracy.

Sajmeri

Thanks for suggesting to program the Q Theory, or have it programmed, sajmeri. I'm sure something could be done, but the theory is still in development, it takes many hours to teach one on one, and I am not yet ready to share it with others. I will post some of the calculated values here for one or two currencies, and we can see how useful they are, ok? Let's do a little collective research and see if the numbers I generate can be of value to traders as targets, entry points, components of a multi-factoral analysis such as Wallboroff described above to identify reversal points or to confirm trend direction and ultimate target, etc. The technique is quite elaborate, and it would be an extremely complicated computer program which could do the process mechanically. I would imagine that the complexity would be on a par with playing winning chess, or at least checkers.

Thanks for taking time to explain it, itme

Let me try to interpret what you've just said... it's about looking at the short, medium, long, longterm time frame, looking at the Fibonacci projections, Fib retracements for each timeframe, perhaps combining Fibonacci time projections, and then channels/SR, plus Elliott W to work out when and where there is a high possibility of convergence? Something like Fibonacci Clusters? Would sure take a while to programme this!

Would the objective be to create some fundamental rules, almost like the Elliott W basics, to make this theory simpler, and more applicable?

Anyways.. just me throwing some random thoughts!

Hi Pringy, Yes, you have described the general gist of the Q theory. The only adjustment I would make is that it involves an original element that I developed in addition to the above elements you mentioned. However, I think that exactly what you described, though formidable to implement and organise, would be a starting point for a very effective trading strategy.

Sunday 3/18

20:01 GBP Rightmove House Price Index m/m 1.5% 0.9%

Monday 3/19

4:15 CHF Industrial Production q/q http://www.forexfactory.com/images/m...act_medium.gif 7.8% 3.5% -0.5%
8:30 CAD International Securities Transactions http://www.forexfactory.com/images/m...act_medium.gif -3.76B 1.28B -3.01Br
8:30 CAD Wholesale Sales m/m http://www.forexfactory.com/images/m...act_medium.gif -0.5% -0.9% 2.7%
13:00 USD NAHB Housing Market Index 36 38 39r
17:45 NZD Visitor Arrivals m/m http://www.forexfactory.com/images/m...act_medium.gif -3.2%
20:30 AUD Dwelling Commencements q/q -0.6% 0.3%
Tentative JPY Interest Rate Statement http://www.forexfactory.com/images/m...act_medium.gif 0.50% 0.50%

The focus for the week ahead will continue to remain on the state of the US economy, with renewed fears of a slowdown prompted by turmoil in the subprime mortgage market. The housing market data will be closely scrutinized, with the releases of housing starts, building permits and existing home sales, for additional clues as to whether the subprime meltdown has spilled-over onto the housing market as a whole. Growing apprehension of the housing market, and its subsequent impact on the economy will be the key point of focus for traders in the FOMC monetary policy statement on Wednesday.

The Fed is widely expected to leave monetary policy unchanged this week when it announces its decision, holding rates steady at 5.25%. The subsequent Fed statement will be analyzed for the Board’s sentiment of the housing market, specifically its thoughts on risk stemming from subprime lending. Further, the FOMC’s outlook for inflation and economic growth will provide clues on the timing of any interest rate changes over the coming months.