Low Risk, High Reward Trading Experiment

Imo it's not possible. Wave 3 is wave 3 in the principle. Let's wait for Itme's answer anyway.

I am no authority on the topic of Elliott Wave, not being very conversant with the theories of either R. N. Elliott, Robert Prechter or Glen Neeley. I know the basic concepts and have made personal observations of market behavior for 18 months. From my deliberately naive and relatively scientific (empirical) perspective, I have observed that the market price movement does indeed organize itself into a classic Elliott Wave pattern much of the time, but not all of the time. I have observed the reason for the belief in the basic EW Theory and its "rules" - the market does indeed often trace out the specified patterns. But I have also observed on many occasions what I see as "violations" of the "rules".

The most common rule violation is Wave 4 retracing into the region of Wave 1 (according to my way of counting, which in some cases is the only natural way of counting the waves). I have also observed cases where Wave 3 is the smallest wave. I have also observed cases where Wave 5 is non-existent, though fortunately this is not too common. Of course, failed Fifth Waves are very common, but that is part of the theory.

What I think may have just happened with EUR/USD is a Wave 4 A-B-C down from 1.3410 to 1.3253. On the other hand, it may be that we have only seen the 1-2-3 of a downwards Wave A of a larger Wave 4, which means the recent upwards move was a smaller upwards wave A of an upwards smaller wave 4. If this is the case, then the downwards wave 3 of the larger Wave 3 was the smallest wave, which is improbable though possible imho. Note that the analogous Wave 3 on GBP/USD was not the shortest wave. The wave pattern there is fairly conforming. The world is imperfect, and any and all wave patterns can and do occur. Only the norms are probable, but not determined.

so what do you think about cable? is it still possible to be in a large wave-c?

if so wave-b would have finished it´s top at 1.9730 and we are now in a downtrend in a wave-5 of wave-c.

or the large wave-c has finished at the low of 1.9182 and we are now in a wave-5 upwards. waves 1,2 and 3 are completed and now we are in wave-4 heading to 1.9500-1.9470

i tend to believe the second one

any ideas?

To my mind right now, Wallboroff, I am uncertain, but I agree with the above described two options you describe. I need to reflect and study the patterns some more, and to consider the strategic implications of the two hypotheses to see whether there is a convergent trading opportunity that fulfills both hypotheses. I think the market was anticipating and reacting to the US new housing data this morning, so there could be an impending strong retracement of the upwards move. It may have to go to another high before a large retracement - either Wave 2 or Wave C.

Earlier today I said, "The price of EUR/USD continued down to a recent low at 1.3254, past the stop of the long trade at 1.3264, and is now likely to bounce up to about 1.3290 before the downwards trend resumes." I think the poor housing information augmented the upwards Wave 4 move, which a neutral data release would have supported to go to the normal point, which is about 1.3290. Instead it rose higher - to 1.3346 in what may be Wave A of an upwards Wave 4 or Wave B of a larger downwards Wave 4. We will likely now see Wave b and Wave c of this upwards Wave 4, and then a continuation of the downtrend in a Wave 5 to about 1.3200 or so. This assumes the hypothesis that the larger Wave 4 correction is far from over.

Here is what DailyFX has to say about GBP/USD:

GBPUSD – From Friday, “we are expecting a pullback with support at 1.9556 (prior 4th wave). 1.9693 is most likely the top of wave B within an A-B-C correction that began at 1.9729. We are looking for a C wave to complete the 4th wave correction and end near 1.9556.” With the pair bouncing at 1.9569 this morning and the decline from 1.9729 looking corrective, there is little reason to change our outlook for one more new high (above 1.9729). If price comes under 1.9569, then the next support is at the 38.2% of 1.9213-1.9729 at 1.9531. Regarding the longer term trend, only a decline below 1.9436 indicates additional bearish potential.

http://www.dailyfx.com/export/sites/...6-07techs4.gif

Monday 3/26

0:00 JPY BOJ Meeting Minutes http://www.forexfactory.com/images/m...impact_low.gif
10:00 USD New Home Sales http://www.forexfactory.com/images/m...mpact_high.gif 0.85M 0.99M 0.88Mhttp://www.forexfactory.com/images/m...us_revised.gif
19:50 JPY CSPI m/m http://www.forexfactory.com/images/m...impact_low.gif 0.4% -0.3%

After some upbeat news last week, the U.S. housing sector got off to a rough start on Monday. Sales of new homes came in considerably lower than expected.

Most analysts consider this release more important than existing home sales or housing starts, both of which came in higher-than-expected last week. When existing homes are sold, no new construction takes place, so there's less impact on the overall economy. Housing starts do require new home contruction. However, new starts do not give a reliable indication of demand for new homes. They simply reflect the hopes and confidence of home builders.

The new home sales release, however, requires both construction and signed contracts. Not every contract will end up as a sale, but it is still much more indicative of demand.

Starting about an hour before the release, the USD began falling against other currencies. After the release, both the EURUSD and GBPUSD gained an additional 50-55 pips. At the same time, the USDJPY and USDCHF pairs each dropped over 65 pips. The USD began stabilizing and retraced a modest portion of its losses approximately 30 minutes after the release.
____________________________________________

The dollar fell across the board after a government report showed US new home sales dropped from an annual rate of 985K to 848K in February, the lowest rate since June 2000. This is an unusual big drop in housing sales during spring buying season. The currency weakened to above 1.33 and 1.97 against the euro and the sterling respectively.

Recall that an upbeat existing home sales report gave the dollar a boost on Friday. The weaker-than expected housing data released today reignited worries about the slowing US housing market, raising expectations for a Fed rate cut later this year.

Gains in the euro may be limited ahead of Germany March IFO survey which is forecasted to report a down turn in economic expectations.

Itme,
IMHO, looking at your given possible counts above for EUR/USD, I definitely choose the Wave 4 A-B-C scenario because it doesn't break the rule. And my stand is that every pair's wave count is independent of each other, meaning that one pair's count never affects other pair's count in any way.

As you said before, EW Principle is indeed subjective, that's why I need to follow its rules or I wouldn't be able to place a trade at all due to the many possible counts that always arise at anytime. And if the count is proved wrong, then so be it, I'd gladly do a re-count. Well maybe that's just my system anyway.

Thanks alot for all your works here, been helping me much. Keep it moving!

Tuesday 3/27

4:00 EUR German Ifo Business Climate Index http://www.forexfactory.com/images/m...mpact_high.gif 107.7 106.5 107.0
4:00 EUR German Ifo Business Expectations Index http://www.forexfactory.com/images/m...act_medium.gif 103.2 102.2 102.6
4:00 CHF Consumption Indicator 2.031 1.951
4:30 GBP BBA Mortgage Approvals m/m http://www.forexfactory.com/images/m...act_medium.gif 54.7K 46.8K 37.8K
4:30 GBP Business Investment q/q (r) 4.5% 3.3% 3.3%
5:00 USD Cleveland Fed President Pianalto Speaks http://www.forexfactory.com/images/m...act_medium.gif
5:45 GBP BOE Governor King Speaks http://www.forexfactory.com/images/m...act_medium.gif
9:00 NZD Consumer Confidence 117.7 119.7
10:00 USD Consumer Confidence 107.2 109.0 112.5
10:00 USD Richmond Fed Index -10 -4 -10
18:45 NZD Building Consents m/m 5.8% 3.9%

The IFO index has drifted lower over the past two months, although it remains at a high level in comparison to the past two years. (see attached chart)

The global equity market volatility in early March may have undermined the figure to some extent, although the underlying index will still offer important insights into business sentiment.

Markets will also fret over the impact of a firm Euro and higher oil prices on German confidence. A figure beow the 105.0 level would raise more serious doubts over the German economy and would be negative for the Euro, especially as there would be increased pressure for the ECB to halt interest rate increases.
Attached Images http://www.forexfactory.com/attachme...1&d=1174945101

Felix Homogratus said, "If the German Ifo Business Climate Index number comes out at 108.8 or higher, it would be the highest reading in this millenium, if not ever, and EUR/USD may possibly go up by 40 pips or more in the first hour of the report. If the number comes out at 104.5 or lower, it would be a huge drop from previous 107 reading, and the lowest reading in the last year, so EUR/USD may possibly go down by 40 pips or more in the first hour..."

Regarding the US Consumer Confidence figure also released this morning, he said "the Consumer Confidence is expected to come out at 108.5, which would be a huge drop of 4 points from previous reading of 112.5. Since real estate is not doing too well, and gas prices are high again, they are expecting the consumers to be less confident than last month. Plus previous reading of 112.5 was so high, that many think it was a fluke. This indicator is a bit tricky, because many times, it comes out together with other important indicators, and because of that, the moves are usually either muted, or overhyper. It's difficult to judge the power of this indicator on its own, and many times the current country situation matters a lot too. I do believe that if tomorrow, we get a reading of 112.5 or higher, it would be good for the dollar short term, and GBP/USD may possibly go down by 50 pips or more in the first 30 minutes or so. If the reading is at 104.9, or lower, GBP/USD may possibly go up by 50 pips or more in the first 30 minutes or so..."

The focus will remain on the durable goods orders and the Chicago PMI later in the week for a closer analysis of the manufacturing sector. .... We anticipate the greenback will come under renewed pressure against the major currency pairs this week as a result of the reports pointing to continued slowdown in economic fundamentals.

Looking ahead, markets are likely to focus on US Federal Reserve chairman Ben Bernanke's crucial testimony to the Joint Economic Committee. 10:30 ET Wednesday USD Fed Chairman Bernanke Speaks
'After mixed US housing data has drawn differing views of the state of the housing sector, the market will be interested in Bernanke's assessment of the subprime situation,' said Gavin Friend, currency strategist at Commerzbank Corporates & Markets. 'As important will be his remarks on whether the FOMC has ended its explicit tightening bias given the ambiguity in the statement,' he added. Though the FOMC kept its key Fed funds rate unchanged at 5.25 pct, it appeared to soften its rhetoric, sparking a dollar retreat. The Fed dropped its reference to "additional firming" in its monetary policy in the last FOMC meeting.

Also tomorrow (Wednesday), the fourth-quarter UK current account data will be released at 4:30 ET. During 2006 as a whole, the general trend was for a deterioration in the trade account with the annual deficit at a record level. The current account data, however, has been more favourable and resisted a further deterioration with the deficit slightly lower for the first three quarters of 2006. The third-quarter deficit of GBP9.4bn was equivalent to 2.9% of GDP. The UK has recorded a stronger investment account position even though net overseas debt has continued to rise, the same pattern that has been recorded in the US over recent years. Sterling will be vulnerable to significant selling pressure if the deficit is above GBP15bn for the fourth quarter as UK structural fears would intensify. A higher deficit would also be liable to lower GDP growth estimates and the revised fourth-quarter growth data will also be released on Wednesday. Any upward revision to the GDP data would be a small positive for Sterling.
4:30 GBP Current Account -8.9B -9.4B

eur/usd m5

Tuesday March 27, 2007 at 13:30 ET

Thanks, Oedipean, for a useful chart. Good markups.

Here is what DailyFX , who are doing some good EW analysis lately, has to say about EUR/USD, including a one day chart of their view of the "big picture":

"EURUSD – The EURUSD has rallied off of the 1.3262 former resistance level (now support), but as long as 1.3413 holds as resistance, we’ll continue to favor the downside. There is plenty of bearish evidence on the daily. RSI is divergent at the recent high and just declined below 70. CCI is above 100 and a decline below 100 would signal a reversal. Regarding the longer term structure, it is appropriate to treat the entire rally from 1.1640 as a 3 wave correction. There are 7 waves higher – but 7 divides into two 3 wave corrections linked together by an X wave. This is known as a double zigzag correction and is labeled W-X-Y. We are looking lower. It is possible that the rally extends higher but the oscillator action on the daily gives us reason to be skeptical.

http://www.dailyfx.com/export/sites/...7-07techs2.gif

Tuesday March 27, 2007 at 14:00 ET

Here is what DailyFX make of the current GBP/USD situation:

GBPUSD – We are still looking for one more high to be registered above 1.9729 before a big turn lower. We are looking higher in order for a 5th wave to complete a 5 wave bullish sequence that began at 1.9243. Wave 1 would equal wave 5 at 1.9823. The bullish structure is strong above 1.9569.

http://www.dailyfx.com/export/sites/...7-07techs4.gif

Here are some sensible thoughts from FXThoughts.com:

FX Thoughts for the day GBP-USD @ 1.9659/64...Buy a dip
R: 1.9680 / 1.9729
S: 1.9625-20 / 1.9587 / 1.9560-50
GBP-USD had a sharp fall during the day to a low of 1.9619. With the fall the pair has come near its important Support of 1.9620-25, which is expected to hold for the remaining part of the day. However if that is broken then there could be a fall towards 1.9560. Note the statistically projected Max Low for the day is at 1.9587.
On the upside the Resistance is coming in at 1.9680 and then 1.9729, a rally above which is not expected today. The statistically projected Max High for the day is at 1.9790. The bias for the day is currently neutral and we would like to buy a sharp dip.

Limit Buy order:
Buy GBP 15K at 1.9610, SL 1.9550, TP open

hi itme,
where u get EW analysis chart for GU above? can i get the link?

http://i14.tinypic.com/33eklfb.gif

DailyFX.com is, I believe, a division of FXCM brokers. They hae adopted Elliott Wave analysis, and post it daily on their site. Also, Forex Factory reposts it on the front page of this site under "News".

Thanks, Oedipean, for another good chart. The waves labelled 1,3,5 could be in fact 3.1, 3.3, 3.5 of an extended third wave. The first little upwards wave you didn't label could be wave 1. If that's the case, then we can go to a new high soon. Let's see what the news today can do to bolster the EUR/USD. That may be the determining factor.

Wednesday March 28 at 3:30 ET

I agree 100% with Forex Thoughts:

Buy GBP/USD at 1.9610, SL 1.9550, TP open

Trade Experiment #366 Buy GBP/USD at 1.9610

Stop is 1.9549

Move stop to Break Even at 1.9640

Target is 1.9775

Risk is 65 pips

Reward is 161 pips

RRR is 2.5

Confidence level: good
Accuracy: good
Reward / Risk Ratio : fair

Wave hypothesis: Wave 5 up.

For research purposes only.

p.s. - GBP/USD came down to 1.9601 to trigger our Buy Limit at 1.9610.

thanks for attentions .
but I am not agree with U.

. I think we are in a correction and I am looking to find end of wave 2 Or B to catch the sharp downside move .

Wednesday 3/28

All Day EUR German CPI m/m (p) 0.2% 0.4%
2:00 EUR German Consumer Confidence 4.4 4.5 4.4
2:00 GBP Nationwide House Prices m/m 0.4% 0.7% 0.7%
4:00 EUR M3 Money Supply y/y 10.0% 9.8% 9.9%r
4:30 GBP GDP q/q (r) 0.7% 0.8% 0.8%
4:30 GBP Current Account -12.7B -8.9B -9.4B
5:30 CHF Leading Index m/m 1.9 1.83 1.79
8:30 USD Durable Goods Orders m/m 2.5% 3.0% -7.8%
8:30 USD Core Durable Goods Orders m/m http://www.forexfactory.com/images/m...mpact_high.gif -.1% 1.8% -3.1%
10:30 USD Crude Oil Inventories -.9M 4.0M
10:30 USD Fed Chairman Bernanke Speaks http://www.forexfactory.com/images/m...mpact_high.gif
11:30 EUR ECB President Trichet Speaks http://www.forexfactory.com/images/m...act_medium.gif
18:45 NZD Current Account http://www.forexfactory.com/images/m...mpact_high.gif -3.9B -4.1B -4.6B
19:50 JPY Retail Sales y/y http://www.forexfactory.com/images/m...act_medium.gif -0.2% 0.1% -0.9%
19:50 JPY Large Retailers' Sales y/y 0.5% 0.5% -0.5%

UK current account preview: Sterling will be vulnerable to significant selling pressure if the deficit is above GBP15bn for the fourth quarter as UK structural fears would intensify. A higher deficit would also be liable to lower GDP growth estimates and the revised fourth-quarter growth data will also be released on Wednesday. [Actual was -12.7B ] Any upward revision to the GDP data would be a small positive for Sterling.

Preview of Durable Goods: Later today, at 8:30 ET, both the Durable Goods Orders and Core Durable Goods Orders will be released. The difference between the releases is that Core Durable Orders doesn't include transportation orders. Transportation orders tend to be volatille and can skew the overall number for the release. Last month's Durable Goods Orders were released on a very memorable day: February 27. On that day, China's Shanghai Composite dropped almost 9% and set off a series of mini-crashes in worldwide stock markets. In addition, the USD dropped sharply against most other currencies. Despite the volatility, last months' these releases had little impact on currencies. Perhaps they were overshadowed by news of China and the sub-prime scare. Still, one would expect more reaction from such significant deviations (-7.8% vs. -2.4% for Durable Goods and -3.1% vs. -0.2% forecast for Core Durable Goods). Historically, these releases have been closely watched by traders. One reason is that they are leading indicators. Instead of reflecting past activity, Durable Goods Orders focus on future production. An increase in durable goods is bullish for a nation's currency. It suggests that businesses are anticipating increased production and a greater workload. With the current slowdown in the U.S., a reading in the neutral zone or slightly better than expected may be enough to prop up the USD. Tomorrow's release may again be upstaged, however. Fed Chairman Bernanke will be giving his economic outlook to the Joint Economic Committee of Congress just two hours later. Traders may avoid taking anything except very short-term positions before Bernanke's testimony.

Durable goods data disappointing The US durable goods data recorded a headline 2.5% increase for February. The underlying data, however, recorded a 0.1% decline for the month after a 4.0% drop previously while the January headline figure was revised to a drop of 9.3%. This data will provide no dollar support and the US currency will be dependent on a relatively upbeat testimony from Fed Chairman Bernanke to secure signiifcant gains.

February orders for durable goods increased 2.5 percent, boosted by a sharp increase from defense and non-defense aircraft. Economists had forecast a 3.8-percent increase in orders after falling by a revised 9.3-percent in January. Excluding transportation orders, durable-good orders slipped by 0.1 percent last month.

Regarding NZD current account at 18:45 ET, Felix Homogratus says, "Wednesday, March 28th, 2007 (6:45 pm New York Time) NEW ZEALAND: Then we have New Zealand Current Account coming out of New Zealand. New Zealand is one of the countries that really seem to care about their current account reading, because many times if there is a surpise in current account, we see a very nice move in the New Zealand cross pairs. this is a rare indicator that honors us with its presence only 4 times a year, and I like this indicator. This time, the current account is expected at around -4.1 billion. If the current account read -5.31 billion or more negative, it would be the lowest reading in over 15 years, so NZD/USD may possibly go down by 50 pips or more in the first hour of the report. If on the other hand, the current account comes out at -2.9 billion or less negative, it would be a positive reading, and would be a better reading than even in 2nd quarter of 2006, and NZD/USD may possibly go up by 50 pips or more in the first hour of the report. I may use less conservative triggers on this one, and you can too if you like, if you are okay with a smaller move."

Today 11:21am
- policy is still oriented tward stemming inflation and has not shifted away from inflation bias
- Fed needed more flexibility given the outlook on risks
- there were higher risks on both sides, but economic outlook has not materially changed

Federal Reserves Chairman Ben Bernanke testified in front of Congress today. His remarks were mixed and had little impact on the dollar. He said that core inflation remains uncomfortably high, trimming the expectations for a Fed rate hike in the short term. Recall that the Fed omitted "additional firm" in its monetary policy accompanying its interest rate announcement. Bernanke stated that economic uncertainty has increased recently. He said subprime problems seem contained.

Fed Chairman Bernanke's testimony today may have set the tone for the week, but it's not over yet. Many data releases are scheduled for the next two days, so don't be surprised if the financial markets continue to be volatile.

Bernanke's comments revealed a mixed and complex view of the economy. He reiterated the Fed's concern over inflation and the potential for the housing sector to slow overall U.S. growth. However, he noted that the risk of a sub-prime spillover "seems likely to be contained." Bernanke also downplayed the probability of a near-term recession. Unlike former Fed Chairman Greenspan, he believes there's little evidence to support this.

The Fed Chairman's cautious approach to interest rates is still intact. He noted how pressure from inflation on one side and slowing economic growth on the other are both increasing.

Interest-rate futures pricing indicates that traders reduced their bets on that the Fed will cut its benchmark rate from 5.25% to 5.00% in August to 72%, down from 84% before Bernanke released his statement.

While traders continue to digest Bernanke's comments, they have much more to consider over the next two days. Key U.S. releases include GDP, Core PCE (an inflationary measure), PMI and Personal Spending. Japan has a particulary busy day tomorrow with CPI, Household Spending, Manufacturing and Industrial Production. In addition, both Canada and New Zealand have key GDP releases.

"As an investor or trader you must assess risk to succeed. You need to know that you'll enter an extremely complex market affected by many factors. You will compete with PhD's, statistical quants and fund managers who have lived and breathed markets for years. Statistics show that somewhere near ninety percent of speculative traders and investors lose money. Five percent break even and five percent make money. It takes most successful traders five to seven years to learn the craft. Eighty percent of mutual fund managers routinely under-perform the S&P."

I hope that some of us here will be among the 5% winners in the long run.

3/28/2007 5:40:20 PM
By Vadim Pokhlebkin

It's no exaggeration to say that most forex traders develop their strategies primarily based on the news and fundamental analysis. It's a common assumption that news and economic numbers move the markets, so for most people, it only makes sense to try and trade accordingly.

Well, today (Wed., Mar. 28), you probably ran out of fingers trying to count bearish signs for the U.S. dollar. Tuesday's shaky U.S. consumer confidence number; Wednesday's weak business spending report; a freakish spike in oil prices to $70 a barrel; new trouble with Iran; ongoing subprime mortgage crisis; and last but not least, Ben Bernanke's statement Wednesday morning that inflation "remains uncomfortably high" and that he only expects "moderate growth" for the U.S. economy.

Given all that, being long the EUR/USD Wednesday morning would seem like the only prudent choice. And yet at 11 AM, the dollar suddenly got stronger and pushed the pair some 60 pips lower.

Trying to explain the dollar's rapid turnaround, some analysts said the buck had gained because of Bernanke's concerns over inflation. As in, since the Fed thinks inflation is high, they won’t cut interest rates any time soon, and that's dollar-bullish. Isn't it funny how quickly "fundamental" angles on the same news story can change...

From an Elliott wave perspective, the reason for Wednesday's EUR/USD decline was much less ambiguous. What took place was a wave C decline. Our Currency Specialty Service had a hunch it was coming; here's what an intraday update said at 9:50 AM on Wednesday, an hour before the decline began:

09:50 ET/13:50 GMT
[EURUSD] Last Price: 1.3355 [Topping, lower in a correction] Based on the patterns elsewhere it's likely that a larger correction is unfolding. A decline below $1.3324 would best complete a flat correction from $1.3368.

http://www.elliottwave.com/images/fo...%203-28-07.gif

Here's how we did it: Having counted waves a and b, expecting wave c, the final leg of the abc correction, was only logical. And what helped us calculate the minimum price target for that wave c was a Fibonacci ratio. At $1.3324 level, the entire abc correction (a larger wave ii in itself) would have retraced 0.618, a common Fibonacci target (see that purple line in the chart?), of the preceding wave i.