Animal Farm (Renko system)

Hi Wab,

Thanks.
How did you come up with those numbers? Sorry if I sound pushy, I'm curious.



Thanks.

A bit of trial and error - plus they are all Fibonacci numbers. Other people have done similar things with
the Alligator on different time frames.

You may find other brick frames where that works if you experiment, but like the 10 pip 30 pip relationship.
So, that is where I experimented to see if I could get that HBF teeth line equivalent on the LBF.

I think it is time now, to steer the discussion to Fibonacci and how it fits in with our HH HL LL LH scenarios.

I will see about some posts on that topic as I get a chance to do so.

Hello Wab,

How are you doing? I hope everything is well.
Still lurking about and reading through this thread again would love to hear more from you.



Thanks.

Been very busy. Will get some Fib material here soon.

Great. Once you have recomended lecture of Robert Miner's book. I've read it and will have to do it second, third and possibly fourth time. Hope this will make absorbtion of the coming material easier.

Fibonacci - my thoughts:

First of all I am basically an Elliott Wave trader. That gives me a somewhat different outlook on Fibonacci compared to the people who have programmed MT4. They work on expansions and I work with contractions, then expansions.

If you start off an Elliott wave sequence at point 0 bottom and run up to wave 1 and back down to wave 2, you have an expansion (wave 1) and a contraction (wave 2). Essentially, this is a LL and HH and a LH.



If your point 0 is at the top of a move then you have an expansion (down to wave 1) followed by a contraction (back up to wave 2.) In this case a HH down to a LL and then back up to a LH.



You can see how this fits in with the HH HL LL LH sequence that we have been using.

Now this structure is very handy when it comes to Fibonacci Ratios. The problems begin when we think of how Elliott Wave works and how the MT4 Fibonacci is set up. If we start at point 0 and draw a Fib to point 1 at the end of our first expansion we then expect a contraction back to point 2. Usually that contraction is in the area between the 61.8 % and 76.4%. (An average of 69.1% is actually used by some traders.)

Now when you look at the MT4 Fib tool, If you draw the Fib so that 0 is on point 0 and 100 is on point 1 ... the contraction values are not correct.



If we expand a move from 0 to 100 a retrace between 61.8% and 76.4 % actually lands between the 38.2% and 23.6% levels shown on the default settings on MT4.

So what is the big deal?

Well as I said I am basically an Elliott Wave trader and I like my ducks to line up. I do not like to see a 0 Fib value at wave (1) because I expect it to contract back towards 0, as it heads into wave wave (2) and stop at or around the area between 61.8% and 76.4%. The labels are just wrong. So in my way of thinking they need to be fixed.

I haven't really seen anyone else raise a fuss over this and perhaps it is just me, but understanding this is important for what will follow.

So how do we fix the Fib tool? (next post.)

So here is how I like my Fibonacci Tool to look:




The settings are:



I have also attached an indicator "Set Fibo Price Any.ex4"

This is a nice little indicator that automatically displays all of the prices on the Fib in any chart where it is added.

Now, I have the Fibonacci Retracement tool set up (as I use it anyway) with the HH HL LL LH sequences. I will begin to show you how I use it.

Again, I am not knocking what other people do, it is just that a like a move of 100% from a start of 0. I also like a pullback from a 100% move showing on my Fibs so that a 61.8% pullback is in fact at the 61.8% level, rather than 38.2%

Fussy me.

Here is what is looks like, with our modified Fib drawn on an E line reversal and Set Fibo Price Any active on the chart.



I added in an Elliott Wave label (3) at the next up fractal. In fact the Fib level of 200.0% was hit a bit later.

Once you understand the relationship between Fibonacci and 0, 1, 2 and 3 (and how 0, 1, 2 and 3 are merely
a LL LH HH HL reversal) you will know more about counting Elliott Waves and trading them than most people on
Forex Factory ever will.

The Fibonacci that we draw on the E line reversal (just like this example) is the Boss Fib. When you locate it, draw
it and study what happens each time it forms. It is an incredibly powerful match of price structure and Fibonacci Ratios.

Have fun back checking for it and examining how price and Fib interact at each reversal.

Homework: A nice example currently under way (as of Oct 9th 2015) is the Ten Pip Renko USDJPY.

Maybe one of you will look at that and post a chart here.

Hi Wab,

Thanks again for not letting this thread die and sharing your knowledge with us.
Attached is my UJ chart, with the modified Fib settings, it's actually more readable this way, thanks for this.
* With my luck, that last candle will reverse and will prove me wrong still learning.


Thanks.

Wab (and all),

How would you recommend trading such a chart? Waiting for the break of the E (if I got it right) doesn't always work for me as the price usually touches the line and then continue its way up (or down).
Also, on a another message, you've recommended taking only longs when the 10 pips teeth is above the 30 pips teeth, since the 10 is sloping rather nicely, doesn't it mean that if price breaks the E line and continue down, following such a rule will "cost" us a lot of pips?
I'm still struggling with my charts, as you can see.



Thanks.

This is how I see it:
Wab mentioned about Elliott Waves and about importance of 61.8%-78.6% area. I don't see clear 3 wave correction on UJ and price didn't touched the 61.8%-78.6% area. So I'd wait for ideal situation when corrective waves AB=CD. That would end exactly on 61.8%. (sorry I didn't edit my fibo tool yet)

Good job Reamasesa and Krystyn.

A nice trade is to go long as the price breaks above the 100 level. When it pulls back to 50% the odds are pretty good it will expand to 161.85, but wait for that breakout above 100.00

As Krystn pointed out, we don't know if it has completed a contraction and it may yet form an ABC type of pattern and still test the sweet zone between 61.8 and 76.4.

As you look at different pairs you will find some of them may prefer a 50% contraction.

Also look for an E line reversal around the Fib retrace levels. You may not always see one there but always look for one.

When E is broken, remember that it has to continue for a bit to reach 100.00 at the wave 1 top, then it will move back down towards 0 into the Fib correction area to form the wave 2. Don't jump in at E wait for 100.00 plus a little bit.

Wait until 2 is confirmed and we only know it is confirmed when price breaks above 1 or 100.00.

There are ways to enter at or near 2. They are more risky than waiting for that 100.00 wave 1 breakout when wave 3 is confirmed. We will get to those.

Catching a third wave, either at the 1 breakout or at or near the 2 turn, is the trade of dreams.

We need to look at strategy and management of a third wave trade and how to get some of that contraction between 2 and 1 into the game as well.

Please go and really look as a lot of charts and locate the Boss Fib. The Boss Fib sets the whole thing up for us and determines how we approach it. Locate it on your NZDUSD chart after any E line. Find the 100.00 level and then trail a trade from there with stops below each fractal.

We learn by doing. When I get back, I will go over that chart.

I have to leave shortly for Canadian Thanksgiving Dinner with some relatives a two hour drive away. I have a pending order at the 100.00 level on the USDJPY and will enjoy a turkey dinner while the market does what it does.

If you are celebrating Thanksgiving Today enjoy the time with family and friends.

Hi Wab,

Happy thanks giving! I do hope you enjoy your dinner and family time.


This is how I view the NU, I'm not sure I would have survived going through the rectangle area
I really like the fact that we're seeing more and more EW stuff and other goodies. Thank you. Will we see more EW and learn more of it?


Happy holiday, Wab and all who are celebrating.

Hello Wab & All,

First, i like to say thanks a lot for wab willingness to taught us your knowledge.
I love your simple approach ( Less Indicator ) with deeper trading concept.

Oke, i just want to be little help to other that need indi & script for wab FOREX, especially with trading with Four, special handy when u want to quick set for scalping as i used it with 40 brick size.
This indi i put from other thread and adjust it to Four concept.

To use indicator, just change StartTime & EndTime to suit current time retracement.

To use script, u can set set file in opposite way and unreasonable price:
#Buy@Four : LongPendingEntryPrice >> -0,1
#Sell@Four : ShortPendingEntryPrice >> -0,1

I hope u can understand my poor english as im not really good at it

Thank you Tiong. I will have a look at those.

Hello Wab and all,

I would like to get some help reviewing my attached charts, please.

AUDUSD - Took the trade on the red arrow, thought it was going to be a "4" as price broke the "E" (at least, I think it did). If it reaches the 38.1 mark, I think I'll close it.
CADJPY - Please ignore the red arrows, they are from a different scalping method I tried (ADX, not sure about it, repaints like crazy), I have a Boss Fib in place with two pending orders, one with TP just above the 150 line as the retrace was around 50, the other will be a free trade once profit is hit. I hope.
EURAUD - OK, I had the Boss Fib in place, "E" was broken, I expected it to retrace and then continue downwards, my initial pending trades are still on chart so you can see what I was planning. Price went up. Any insights on this one would be greatly appreciated.
GBPCAD - Price went down, broke a few HHs and HLs, I took the trade at the red arrow, closed it on the 123.6 line as retrace was only 23.6, but I think I should have seen the former "E" and let the trade run some more but I'm losing so much I just grab every pip I can get, I know it's not good. I know.
GBPNZD - I took a trade at the 100 line, please ignore previous arrows, and let it ride, I wasn't at home so I closed it when I got back after it dropped back to the 150 line, which was a good thing as the price went down to form a double bottom. WoW! I would like to get some insights on this one, as well.
NZDUSD - Boss Fib in place, price broke previous HH and HL, I took the trade at the red arrow, closed it around 132.8 line as it felt it wouldn't go any further. This one I was sure was going to go down some more.

Any insights, comments or anything, would be greatly appreciated.

TIA.

Hi Ria.

Enough questions there to keep me busy for a week. Let me start by responding to an earlier question about the NZDUSD.

I have marked up the trades on the NZDUSD 10 pip chart and added some detail to the way the AO is used to count Elliott Waves.

You will hopefully find the Boss Fib and the figure Four trades familiar by now.



The Boss Fib sets the stage for the move into wave 3. In this case wave 3 extended up to the 300 level and gave lots of Figure Four Trades on the way. When the AO started to diverge the Figure Four trades become risky. The divergence is marked on the AO.

The AO can be used confirm the Elliott Wave Structure. At the end of an expansion (see waves 1 and 3) it forms a divergence. In a contraction (see waves 2 and 4) there is no AO divergence. The AO also retreats to the zero line (minimum) or usually lower in a wave 4. Simply put, that is how the AO is used to confirm or count Elliott Waves.

To really get the full explanation of this, Bill Williams' Trading Chaos book is excellent. I don't want to try and recreate that here. I urge anyone interested in counting Elliott Waves with the AO or MACD to go and read his material over and over.

One peeve that I have, is something I see repeated again and again online by people who style themselves as experts. The highest peak of the AO is not the top of wave three. It isn't. The highest peak of the AO is the internal wave 3 of the larger WAVE THREE. Only when a divergence, like the one shown here is reached, can we say that was the top of WAVE THREE. This is a basic mistake that I see many "AO/Elliott experts " make over and over again. Be aware of that and you already know more than many of these people.

So, the AO divergence identifies a Wave 3 end, followed by a drop to zero (at least) usually lower for a wave 4. The NZDUSD chart shows all this very nicely.

Now if only it were that easy. If you change the time frame, or pip frame, the whole picture can go out of focus. For example, wave 4 will not go all the way to zero if you are not focused correctly. You can get caught up in a wave count inside a larger wave count. Or you can be trying to make sense of a wave structure inside a prolonged wave 4 of a higher time frame. (The EURUSD) has been like this for some time. Only by zooming out and in can you identify the larger wave structures and find the correct focus. It takes lots of experience and understanding and you will still get wrong at times.

My attempt to overcome this and to make it simple is to use the 10pip and 30 pip charts, so that two wave structures are visible and identifiable with the HH HL LL LH approach. As long as you can establish the trend on the HBF and trade in the same direction with the LBF things work quite well.

One thing I will suggest is to not over trade. When I find myself looking at too many charts and trading more than one or two at a time I lose. Some people claim they can trade all the charts and I take my hat off to them. I look at no more than six pairs and do an overview of each. I then focus on the best one, or two, maximum and trade those. In that many pairs there is always a trade setting up. Better to trade a little and make a little than trade a lot and lose a lot. If you are losing cut way down and develop a sharper focus.

I will try to look at some of the other charts you have posted, but I need to add to the Fibonacci materials.

You will have noted with the NZDUSD that the Boss Fib expanded to the 300 level. Not all Boss Fibs are equal and I will show you what to expect from them next.

Wab.

Words cannot describe how thankful I am for what you are doing here.

* I am over trading. I've learned to put pending orders and step away from the keyboard though I do come to check on them from time to time. OK, I watch them all the time but I don't interfere with the initial setup unless something happens that demands it. Demands it. Not feeling like it.
* I've wiped my small account several times already, it would have been better to trade with more money since some of the trades that I closed or got stopped out eventually went into profit I think it would have helped me not feeling so bad over all those losses but it was and still is a good learning experience.
* My charts now are zoomed out, not to the maximum but enough so I can see the big picture. I still don't know how to trade this picture but I am looking at it and not on a few bars at a time.
* I'm planning my setups now and not jumping on each 123 formation that shows up on the chart.
* I'm participating and reading and saying I don't understand, you are helping with it and for that I am forever thankful.
You've opened a new angle to my trading, thank you.

If I understand correctly then the AUDUSD is heading up (1-2-3-4 and then 5 I think and then a-d, right?)(I would love to read more on EW and will certainly search for Bill's book) and I should close the trade but for learning purposes, I will keep it open, just to see if I'm right.

A quick update on my trades
* AUDUSD - still in play but slowly and painfully heading upwards
* CADJPY - Still to hit the pending orders
* EURAUD - Removed the pending orders
* GBPCAD - Closed by the time I wrote the previous message
* GBPNZD - Closed by the time I wrote the previous message
* NZDUSD - Closed by the time I wrote the previous message

* USDJPY - The one we were practising on, I had a pending order, took some time but it got there, closed it on the 123.6 mark and scalped a bit till it reached the 150 mark.


I usually set two pending orders (or market orders, if the setup is right), one with a TP and the other I try to monitor and set it to BE + a few pips once the first trade hits TP, if it's running well, I'll trail it, usually by 24 or 16 pips, I've discovered those numbers are working well for me, if not, I either close it or let it play out to BE, but most of the time I'm trailing it.
So I either have two losers or some other winning combination.


Wab, I didn't ask before but am I interrupting the thread? Should I post less or not at all?


Thank you very very much.

Rea. I don' think you are interrupting at all. I hope that the next material on Fibs helps a lot with your questions.

In fact your questions are timely as this Boss Fib material will help you I believe.

The depth of a wave 2 contraction often tells us what a likely third wave target will be.
I only presented some of the Fibonacci levels to consider. (Trying to keep it simple.)

When Wave 1 pulls back to the 61.8% area for example then a likely target for wave 3 is going to be 161.8%. It can
of course go higher as we have seen on the NZDUSD example. If it only pulls back to 78.6% then the likely target is not 1
61.8% but 127%.


Here are a full set of custom Fib levels.

I mainly watch the ones I mentioned earlier but the others are also to be considered.

(When you add the - $% after the numbers in your Fib tool settings, you will get the price level displayed along
with the percentage level. The Set Fib Any indicator also accomplishes this.)

Level
0
0.146
0.236
0.382
0.5
0.618
0.786
0.86
0.942
1
-0.18
-0.27
-0.382
-0.618
-1
-1.618
-3.236
Description
0.0 - %$
(14.6 - %$)
23.6 - %$
38.2 - %$
50.0 - %$
61.8 - %$
78.6 - %$
(86.0 - %$)
(94.2 - %$)
100.0 - %$
118.0 - %$
127.0 - %$
138.2 - %$
161.8 - %$
200.0 - %$
261.8 - %$
423.6 - %$

And here are the wave 2 – to wave 3 “likely” target projections:

23.6% >> 161.8%
38.2% >> 161.8%
50% | 61.8% >> 161.8%
78.6% >> 0% | 127.%
86.0 >> 0%
100.0+ >> Reversal


When we get to how to enter trades in a contraction we will use the levels that I suggested earlier.

For now the important thing to really focus on, is that we only know for certain that a third wave is going to happen when price breaks past the 100% (wave 1) level. We don't know for sure that wave 2 is confirmed either until that happens, but there are the wave 2 strategies that we haven't really discussed yet.

Here is the AUDUSD, looking like a wave 5 has now been confirmed by the break above the recent E line.

I should have waited for the second pass of the E line, that way I do not not have to weather the contraction.

Still, let's see what happens.

Hi Wab,

Thanks for the Fibo levels, I've added them to the default Fibo tool (pity it can't be saved as a setting file and I'll have to do it for all the the MT4 instances I'm using).


Still not sure how to count the waves but I think we're getting there so I'll wait



Thanks again, Wab.