Elliott Wave Trading

The main TA methods are chart patterns, trend lines, Moving averages, cycles, Elliott Wave, Fibonacci, Gann etc. But no single TA method works all the time. Perhaps you don't need to know all of them to trade properly. As Mark Weinsteins in Market Wizards said, You need to know when to use which method. And I agree. That's very important.

Hello.

Here`s my EW count.
We are making wave 5 of larger wave 1.
It`s a 4H chart.
Can somebody more experienced plese coment? Is it valid and right?

---------------------

The Dow Theory

That is the key, WHEN . We all knows TA technics, price formations, candlestick formations. They sometimes work, sometimes not. And the key is the qustion WHEN do they work .

i think ur wave 4 should be wave 3's sub wave 4, b/c in wave 3 doesnot have any proper size correction can match the wave 2 of wave 3

Kambooj, so your faith has been tested when it comes to EW and neely method. just wondering, do you still use EW as your main tool for trading the market? In your opinion, is elliott wave really the all encompassing patterns for price action? just how tradeble and usable is it?

btw, one of our own FF members have published a online ebook, sharing his new discover on elliott wave.


I plan to check this out, and i recommend it to all of youhttp://www.forexfactory.com/showthread.php?t=213760

BTW, the EWI is predicting that 2010 will forsee stock market declining after a B wave correction. personally, i am keeping my eye on this claim to see if EW is really usable.

Some possibility on EU...

nice chart, i agree

My rule for that is relatively simple: Just eyeball the chart first. If it doesn’t show a CLEAR 5-wave up, 3-wave down pattern (nor clearly shows other Elliott wave patterns), don’t use Elliott wave method; If the price moves in curve shape, don’t use trend lines or channel lines (MAs usually work better in a curve-shape chart), etc.

Each chart has its own shape and characters. You have several tools available, just use your experience to decide which tool for which situation. If none of the tools seems to be good for that chart, simply don't trade. Wait until the chart present the characters that you feel confident to use your tool(s) effectively on it, then you take action

I think experience is important for this.

This is a quick answer to your questions:

1. In your opinion, is elliott wave really the all encompassing patterns for price action?

No, elliot wave gives you a overall sentiment from a bigger time frame, but market action on smaller time frames adhere about 70-80% of the time to standard Elliot Wave/Neely system. But the other 20% someone else has to explain something about it or make a new discovery. These market actions dont go according to the so called standard Elliot Wave or NeoWave patterns.


What I have found is that standard Elliot Wave and Neely Method they both say after 5 waves of impulse you have a 3 waves of correction (or 5 waves of triangle or 7 waves of a diametric or 9 waves of a symmetric formation) but for all practical purposes we assume 3 for here. What happens is that you have Gaps, that means you have 5 impulse waves, then jitter action in the market, and this jitter action either makes a lower low or a higher high, and then after the jitter you have your 3 waves.


When Nelson Elliot wrote his famous paper, there were no computers at that time, so no jitter action. If you take the jitter out, then yes, you have 5 waves and then 3 waves of correction, and all that works so beautiful, but in real market you have noise and jitter, and when you go on the smaller time frames and you try to decipher what this jitter action is, it becomes difficult to relate to a 5th wave of one type or the other. Now you are entering the Grey area of pattern analysis and trying to find something in the book on explaining whats going on, and nobody has really been able to explain it properly where their explanation holds true for a long time.


Everybody who analyzes patterns have a tendency to avoid these market jitters that happen and try to adjust or formulate their charts as to mask these price actions off. So again back to your question, is it really encompassing all patterns for price action, answer is no, but some patterns only.


For example in the Neowave system they have something called a Terminal Impulse which is a 5th wave or a C wave of a formation. This terminal impulse according to the book is supposed to retrace 100% in less time than it took to form. Well I have seen numerous instances of terminal impulses that I could not possibly categorize as anything else aside from a Terminal Impulse that did not retrace 100%. They retraced a minimum of 80%, and most ended up at 80% to 90% retracement. These examples I saw a lot on the 1 minute and 5 minute time frames. So there is one example where a certain pattern is said to have a certain behaviour and then it didnt. Another example is with definition of a impulse wave, where we are told that a impulse wave supposed to have its 2-4 trendline broken after wave 5 completes in less time than it took to have wave 5 completed. Well in many instances you have market that mimics a impusle, it looks completely like a impulse wave with a 1,2,3,4,5 wave formation with waves 1 and 5 equal in length, but it doesnt break the 2-4 trendline is less time than it took for wave 5 to complete. So how do you categorize that??


2. just how tradeble and usable is it?

It is quite usable if you understand how Trendlines work. I strongly suggest you to read the following book:


"The best trendline methods of Alan Andrews + Five New Trendline Techniques".


The problem is that many people overlook trendlines and how much more price action adheres to trendlines rather than formation. Trendlines basically tell you when a certain formation is done, and when a new one begins. Ratios and all that kind of stuff hold little significance compared to trendlines. Once you get a grip of how trendlines dictate price, then you pretty much can say whether the formation has more to it coming later or its about to end. At that point you have had to memorize all the possible retracement ratios and patterns that you have learned in the book and plug it quickly to figure out what kind of formation you are in the middle of.


You then have your guestimate narrowed down to 1 or 2 possible scenarios and based on that you can make a risk assessment and dictate whats your next move gonna be. Is it worth waiting or you have a completed formation and its time to go in.


So after all that I have said. This is the way I analyze markets:

1. I first draw all my trendlines.
2. Checkout tendencies and behaviours of price action at the trendline level and bounces off the different levels.
3. I look for zones, Support and resistance lines / zones
4. I then try to see whether I can find a pattern. If I cant I go back to my trendlines and go in the direction of the main trend that the trendline is dictating only going shor or long at the trendline with 5-10 pips of stoploss
5. I figure out all my fibonacci levels on the daily to the M1 level
6. I figure out all the pivot point levels.


I only go short / Long if the price is at a trendline level, and the same price is a fibonacci level and its the end of a C wave, and its in a buy or sell zone. My wait times are from 18 to 36 hours for a good trade, and I catch 50-70 pips a week on average. Only trade 2 to 3 times a week,

Hope that answers your questions

Good points to ponder, kambooj and ridingwaves.

Kambooj, I think what's meant by a horizontal triangle is one that has a flat side (whether upper or lower) as opposed to a contracting or an expanding one (also called a pennant pattern elsewhere).

Kambooj

thanks for the explanation, And i will definitely check out the book

Sorry its not called a horizontal triangle. Its called a neutral triangle and the trendlines that are drawn for this triangle are horizontal. You can see a explanation here:

http://www.neowave.com/qow/qow-archive-8.asp

Interesting situation on EURUSD during the asian session...

Correlated to EURUSD - USDCHF...

Swiss Franc/ Dollar,

My count indicates that Swiss is in a uptrend. a possible impulse wave is forming on the daily. with the most recent peak as wave 1, and recent draw back as Wave 2, wave 3 is in the making, and will surpass the top of wave 1, which is 1.0505

my count shall be invalidated if price goes below 1.0120

Using correlation between USDCHF and EU it could be something like this...

good count Magic.

I am currently Shorting the GBP/USD. Because based on my count, Wave 2 have finished, I will be holding my Short for a long time.
First soft target at around 1.5800, final target at 1.4800

And this is something I'll do but not often. Correlation with other pairs. USDCHF - USDCAD. This could be fun if it's right . Then USDCHF still up and EURUSD still down until waves on USDCAD are not broke or they'll just finish like on chart. I can't wait for development of this situation .