Plan the Trade

Someone else has already started a 'Trade the Plan' thread, so i have shortened my preferred title!

I am combining a couple of systems, so i will try to explain as i go along, rather than list all criteria here in the title.

I am basing my trading method on a style i learnt from a brilliant trader with the handle 'Divergence'. He selflessly shares this method on a thread under 'Trading Systems', so whereas, i wanted to start a thread, i thought i would list it under 'Traders Journals' instead.

I will include some Elliott Wave work within my own style.

Two of the main variants that i will be looking for are the following;



Firstly a Cup & Handle or Head & Shoulders set up, which can be either as trend change or trend continuation (after a pullback). I think it is self explanatory.
The second is a pullback within trend, followed by a 123 or a flagline, (but preferably both). The 123 can be used as entry back into trend. Looking for divergence in both instances will be important. Regular together with the first and Hidden divergence for trend continuation.

1) Determine a trend (HH/HL or LL/LH's)
2) Wait for a pullback
3) Enter back into main trend with a 123
4) Manage trade

I'm going to run through a few set-up examples to show how it works in practice. Plan the trade - Trade the plan;



As above, but (obviously) in reverse.
Negative Divergence, followed by the last HL taken out in one direct channel, then a shallow pullback to form a flag off of a 123. Trigger is a break of point 2 by a full pip.


I say 'in one direct channel' (Wave A), because this is important. If it pulls back in a 3 wave sequence it is likely to be merely a pullback within trend already completed.

Just a pointer about Divergences. Regular Divergence is always over-ruled by Hidden Divergence and is something that must be looked for. Sometimes (by going peak to peak), it takes 2/3 bouts of Reg Div before it leads to more significant trend change. The point where we get a fresh High/Low is where Hidden Div can no longer form.

Here's an example;

I mentioned combining a couple of methods. I use Elliott Wave combined with Fib levels to confirm likely counts. If i can determine my likely preferred plan in advance, on a longer time scale, i can then drop to smaller timeframes to look for set-ups (pullbacks) within the overall plan to make the most of it.

Dow weekly (04-11-15);



and recent (05-03-16);



EU50STX 15min (29-02-16), here we have an abc pullback, Wave 'C' is always in 5 subwaves. subwave 'v' of 'C' was extended and was exactly 100% of waves 0-3, in itself an abcde expanding diagonal;



and later;

Looking for common Fib levels between wave counts.

Dax 1min chart (29-02-16), with a corrective abc move - wave 'C' was exactly 161.8% of wave 'A';

On the FTSE chart from a month ago, the daily looked like this;



To me, it looked as though a cycle was complete with an abcde expanding diagonal. Just to confuse things, the market likes to disguise a further reaction off of the top channel line, but it wasn't fooling me. I expected a pullback and subsequent break out (as per chart).



On the hourly, at the time of the first chart, i identified a possible top of 5w cycle, with wave 5 being exactly 61.8% of prior wave 3, this is 1 of the 3 most popular levels for a 5th wave to end;



So i indicated a 3w corrective move to follow, but of course, i do not know whether this will be sharp, shallow, irregular, complex, simple etc.



What we actually got was an irregular move, (with wave 'B' making a fresh high). My evidence was that wave 'C' was exactly 161.8% of wave 'A'

One of my favourite combinations for a set-up is a simple abc move where we have a zigzag and wave 'c' is 100% of wave 'a, within parallel lines (Flag);



Look for the 123 to occur. Aggressive stop is above point 3.

I do not claim to be a hotshot trader. I make mistakes all of the time. This is not a $1k to $10k in a month thread. Simply sharing and recording what works and what doesn't, but imo, the simplest method is too determine a trend by HH/HL (or LL/LH) combo's, look for a pullback and join the trend.

EurGbp weekly;



Complex move with Y = 123.6% of wave W and reaction at lower trendline.

Now the move up from the low on the daily, (inc abcde ending diagonal);

and now the current plan on the 4hr;

Last night charts of Dax 1hr and S&P 2hr;

It's been a funny ole day. I committed the cardinal sin of going out and leaving a position, with only a stop in place. I did not have a set limit in mind. It was slightly underwater when i had to go out and i figured i would be back in time to deal with it... i wasn't, it was a winner, but i was delayed and came back to see it stopped out.

Anyway, i caught the Dow earlier. I will not attempt to label it's recent hourly moves, but the chop suggests naturally a complex move and thus i switch for looking at series of 3w moves. If an obvious fib relationship occurs between waves 'A' & 'C', it is likely to reverse;



Here the two waves are equal to each other and PA reversed hard, once the last HL was taken out it was good to go.

The UsdCad has provided some nice trending action recently, here i traded the simplest plan, pullback, 123, back to trend;



The second set-up in the chart was most likely going to lead to Pos divergence, thus R:R only 1:1

Earlier i posted a previous set-up on the EU50STX;



an abc pullback where within 'c' wave (v) was equal to waves '0'-'iii'

Now compare to the Dow a little earlier;



The 'C' wave was a 5w move with crossover, thus an ending diagonal and again the final move (wave 'v') was exactly 100% of 'a-c'

I find that 123's are best used when you are expecting them to occur, thus they become the excuse to take the trade and provide the stop placement.
Another place to expect them is at double tops or bottom's. This is from the FTSE earlier, although i missed it at the time;

So basically we are talking about patterns that repeat themselves time and time again on all charts. It's simply a case of deciphering them.
The 123 gives you the chance to do any EW counts and prove/disprove the prior corrective move. The 123 should also preferably break out of any channel line created by either the entire corrective move, or at least the final wave (C);

Here are a couple of charts from the 15sec Dax. See the similarity to the above DOW&EU50 charts;



HH/HL combo, abc corrective wave, then 123 and back to trend.

Same index and timescale a little later, see what happens again;

Dow, wave 5 was equal to wave 3 (within 'C')



Stoploss at +1

Closed +50;

UsdCad; easiest to spot 5th waves - ending diagonals (contracting);

3 common targets for end of 5th wave;

a) 61.8% of waves 0-3
b) 61.8% of wave 3
c) 100% of wave 1 (usually if wave 3 was extended);



Update;