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A new look at Wolf Waves

  • #541
  • Edited Mar 2, 2017 12:48am Mar 1, 2017 10:18pm | Edited Mar 2, 2017 12:48am
Quoting Krossaren96
{quote} Yes I am very interested, but don't you want any other confluence at all? They are profitable on their own? Had a failed one this afternoon, 15 min EJ... The 5 is a bit too high, but still gave it a go. Went green and then hit sl I also had divergence. Would love to see this thread revived! {image}
As profitkeeper stated, a bit of a bumpy road, but still valid with potential to trade if you understand the sweet zone. I am assuming you entered to early and got stopped out.

The chart below shows your trade. I used the 30 minute TF as it was the only way I could fiddle with the inputs of the ZigZag indicator to show the correct levels (due to the choppiness of the price action).

Per my analysis, the entry would have been at 120.14 which is the AB=CD completion and a pip from the 200FIB extension of BC. More confirmation can come from a TDI cross (green crossing red below). A stop loss of 15 pips would be a few pips above the 261FIB, giving the trade a little room to breathe. First target would be the level of X (119.87, very conservative but a good spot to take half off the table and micro manage from there).

Smaller time frames with volatile pairs (Yen pairs, EN EA GN, etc) can be tricky, especially for waves that are steeper than the classic set up. Using the FIB extension of BC and the AB=CD level within the confines of the "sweet zone" is critical in these situations.

Before price reaches the potential entry point, do 3 things

1) Draw a line from point B that is parallel to line AC to define the sweet zone.
2) Put the FIB extension of BC on the chart
3) Put a horizontal line at the AB=CD completion level

Steeper waves angles tend to reverse at the 161 to 200FIB levels with extreme angles all the way to the 261FIB. Imho, the steeper angle waves are harder to trade.

Classic waves structurally tend to reverse at the 127, 141, or 161 levels. I find the 141 level to be my bread and butter, which is ironic because I've never seen it mentioned in other WW analysis.

Flatter waves tend to end at the 113 or 127 levels.

Anyways , hope that helps.

When I get time I am going to open a thread myself specifically for Wolfe waves along with some other related waves that I have been studying. I considered trying to revive this thread but thought it may be best to take ownership of a new thread.

If anyone is interested, I found this free ZigZag indicator somewhere that shows the pips/candles which is really nice for this strategy. Unfortunately, you can only change the colors by changing it in the code which I have done for a few different colors.
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Attached File(s)
File Type: mq4 ZIGZAG-VALUE.mq4   17 KB | 787 downloads
File Type: ex4 ZIGZAG-VALUE.ex4   21 KB | 724 downloads
Pride always comes before destruction.... -Proverbs 16:18
  • #542
  • Mar 1, 2017 11:21pm Mar 1, 2017 11:21pm
[quote=Expo33;9616075]{quote} As profitkeeper stated, a bit of a bumpy road, but still valid with potential to trade if you understand the sweet zone. I am assuming you entered to early and got stopped out. The chart below shows your trade. I used the 30 minute TF as it was the only way I could fiddle with the inputs of the ZigZag indicator to show the correct levels (due to the choppiness of the price action). Per my analysis, the entry would have been at 120.14 which is the AB=CD completion and a pip from the 200FIB extension of BC. More confirmation can come from a TDI cross (green crossing red below). A stop loss of 15 pips would be a few pips...


Interesting analysis, however to my simple mind you are making a simple visual pattern very complex. I am sure that it works for you.

Could you explain the numbers on the ZZ indie. You say it "shows the price/candles" but I don't see the price. I assume the first number is number of pips, but what is the second/third number?
  • #543
  • Edited 1:22am Mar 2, 2017 1:11am | Edited 1:22am
Quoting profitkeeper
Quoting Expo33
{quote} As profitkeeper stated, a bit of a bumpy road, but still valid with potential to trade if you understand the sweet zone. I am assuming you entered to early and got stopped out. The chart below shows your trade. I used the 30 minute TF as it was the only way I could fiddle with the inputs of the ZigZag indicator to show the correct levels (due to the choppiness of the price action). Per my analysis, the entry would have been at 120.14 which is the AB=CD completion and a pip from the 200FIB extension of BC. More confirmation
...
I edited my post. I meant pips and candles. It is hard to see but the first number is the number of pips (with a decimal as well) followed by a slash mark and then the number of candles for that line. It helps tremendously for seeing the ABCD as price is moving. Unfortunately< I haven't figured out hoe to alter the code to get rid of the decimal digit and to make the slash color white for easire viewing. Also, imho, better symmetry = better results. In the trade below (the first one you posted to start the thread) AB = CD in exactly 12 candles for each move. Perfect symmetry (Fib extension and sweet zone extension line also almost perfect)

I know it may seem complex but after awhile it's like riding a bike. Just a robotic process of mapping out the wave before it completes with the sole intention of getting the best possible entry and best RR.

My point was about "Krossaren96"'s trade. He/she traded a perfectly valid Wolfe wave and lost because of an incorrect entry ( in my opinion of course)

As an example, let's look at the first trade you posted on this thread. A winner! But, where do you enter the trade? And even scarier, where does a newbie enter that trade? There is 88 pips between when price initially hits the trend line XB and where the price ultimately stopped and reversed. Bigger time frame of course, but that's a lot of slack to deal with.

I mapped it out. The AB =CD completion takes place at 80.51, which lands right on the 161FIB and is a mere 15 pips from ultimate reversal. If one wanted to get in a little bit earlier they could have scaled in starting at the 141FIB and ending at the 161FIB (a 20 pip zone).

Point being, entering at the first touch of the trend line leaves you with a 100 pip SL. Scaling in starting at 141 leaves you about 40-50 pips at most. Entering at AB=CD completion leaves you with only 20-25 pip SL, not bad for a move that ultimately was 400 pips!!

Anyways, as you said it works for me. Once I locate a WW that has started down CD, I just go ahead and map it. It's very simple. The ZigZag tells you exactly where the completion should be so I just put down that horizontal line in advance. Draw the sweet zone extension line and slap on the Fibo extension and voila, my zone is visually right there in front of me long before price gets there. And you will be amazed at how many times the completion price is exactly on one of the fibo extensions.
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Pride always comes before destruction.... -Proverbs 16:18
  • #544
  • Mar 2, 2017 1:46am Mar 2, 2017 1:46am
Great Expo,
Your analysis is much clearer now. You have added a new dimension to WW. I like the fact that you have a heads up as point 4 is approaching 5. Too many people are trying to see a WW even before price reaches point 4.
  • #545
  • Mar 2, 2017 2:05am Mar 2, 2017 2:05am
Quoting profitkeeper
Great Expo, Your analysis is much clearer now. You have added a new dimension to WW. I like the fact that you have a heads up as point 4 is approaching 5. Too many people are trying to see a WW even before price reaches point 4.
Thanks brother.

I am assuming that most of us haven't paid to take "the course" so stands to reason that there has to be some other layers of thought in trading WWs. I have been fully immersed in studying WW charts for the last 6 months

Here is another one as an example. The EUR/AUD daily, playing with fire . The sweet zone is nearly 400 pips until reversal. trading these steep waves is nearly impossible. Where would one enter? Well, to mitigate risk on this one. same thing, look at the zigzag and the completion level.

AB = 645 PIPS in 14 candles
CD = 664 pips in 15 candles

Nearly perfect, and especially needed for these steep, practically untradable WW's. Otherwise, what does one do? Just enter haphazardly somewhere along the 400 falling knife zone? Or just pick a fibo level on the way to ruins? More like the hell zone than the sweet zone.

Anyways, safe trading to you. I'll shut up now
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Pride always comes before destruction.... -Proverbs 16:18
  • #546
  • Mar 2, 2017 2:33am Mar 2, 2017 2:33am
Great setups guys. Regarding my own chart, I traded on the vertical line. Shouldn't we trade once price comes down into the pennant? That way we know the amount of risk?

New chart added below. EURJPY 15 min. I think this one is perfect, what about you guys?
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  • #547
  • Mar 2, 2017 3:00am Mar 2, 2017 3:00am
Quoting Krossaren96
Great setups guys. Regarding my own chart, I traded on the vertical line. Shouldn't we trade once price comes down into the pennant? That way we know the amount of risk? New chart added below. EURJPY 15 min. I think this one is perfect, what about you guys? {image}
Not the greatest symmetry but a valid wave.

Per my analysis, I would have had my predetermined entry level set to scale in from the 141 to the 161 FIB levels. So from 120.38 to 120.44 with a stop loss about 120.60 a shade above the 200FIB.

In regards to your entry on the other set up, sure you could wait for re-entry into the broken wedge or pennant but I think that kind of defeats the purpose of the wave. We are trying to get in as close to the reversal point as possible so that our stop is as small as possible. Once you waited (especially on smaller time frame) then your stop loss either has to be much bigger or in your case, not big enough because price had already moved 15 pips in reversal.
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Pride always comes before destruction.... -Proverbs 16:18
  • #548
  • Edited 3:34am Mar 2, 2017 3:04am | Edited 3:34am
Quoting Expo33
{quote} Perfect wave there. Per my analysis, I would have had my predetermined entry level set to scale in from the 141 to the 161 FIB levels. So from 120.38 to 120.44 with a stop loss about 120.60 a shade above the 200FIB. {image}
Alright, now I know what it should look like.

But wouldn't that often result in losing trades resulting from you trading when it is an actual breakout? Trading once price comes back into the channel provides me with a proof that price has at least met some resistance (or support). By the way, news on the euro are coming out in an hour so be careful if trading the EJ pattern.

Edit: And you put your stop at the next fiboext? For instance if the sweet zone is at the 1.618 fibo extension then the stop goes a pip or two above the 2.0?
  • #549
  • Edited 4:15am Mar 2, 2017 3:45am | Edited 4:15am
Quoting Krossaren96
{quote} Alright, now I know what it should look like. But wouldn't that often result in losing trades resulting from you trading when it is an actual breakout? Trading once price comes back into the channel provides me with a proof that price has at least met some resistance (or support). By the way, news on the euro are coming out in an hour so be careful if trading the EJ pattern.
Absolutely it may be a breakout. But even if you wait for price to reverse back into the wedge, it still may just be a retest before the breakout. Only difference is your RR will be reduced significantly, especially on smaller time frames, steeper waves, and more volatile pairs.

What if price enters the wedge again and then you enter. Now where is your SL? Inside the sweet zone where you risk being stopped out on routine choppy price action or above the sweet zone in which case your risk is much greater.

I just found a potential WW forming here on the GJ hourly. Let's assume price reaches full AB=CD completion at 161FIB, now we wait for price to reverse back to the wedge before entering. That's already 30-40 pips of price reversal. What are we going to do with our SL now? SL of 40 pips back at D? That doesn't make sense to me as we are putting our stop inside the sweet zone. That's why it's called the sweet zone. It's the zone that provides the potential for the biggest gain with the smallest risk. If we enter just before D or scale in at 141FIB our stop only needs to be just above the completion zone to give price some breathing room.

Anyways, personal preference for each trader. I am definitely an aggressive person and like the concept of stalking the trade and pouncing on the price as it enters the zone, rather than waiting for price to run away and then go chasing after it. The concept as outlined by the founder or "discoverer" of the Wolfe wave is that the physics of the price action is out of balance and that the sweet zone parameter is where we can capitalize on the best RR. So that's where my soldiers are waiting in advance.

Good discussion though and a great way for us to challenge each other and sharpen our WW skills.

The TDI crossover can certainly be used as a filter for entry as well. In the EJ 15 minute set up we just discussed, the crossover happened before price re-entered the wedge so you'd get a better RR with some added confirmation.
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Pride always comes before destruction.... -Proverbs 16:18
  • #550
  • Edited 4:37am Mar 2, 2017 4:17am | Edited 4:37am
Terrific information, it all makes sense now. You sure know a lot about WWs!

So the stop on the GJ hourly would be at the 200 extension?

Really interesting to talk to a pro. I guess you are very profitable?

Edit: GBPJPY 15 min chart:
The fifth leg seems a bit extreme but all of the other parameters seem to look good, what do you say?

Correction: I think I drew my fibonacci wrong? It's supposed to be from leg 3-4, right? So the first picture should be incorrect and the second one correct.
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  • #551
  • Mar 2, 2017 4:26am Mar 2, 2017 4:26am
GBP/CHF hourly, an example what we are talking about. Hind sight of course but a good illustration.

Entry option 1: Enter right at initial completion zone with tight SL, price bounces 30 pips, SL moved to BE.

Entry option 2: Enter after price reverses and enters the wedge. Do you place a wide SL below D or somewhere inside the sweet zone?

Price reverses and touches the D level. If prices continues back through point D then both trades are stopped out. Only difference being option 1 incurs no loss.

On the flip side, if price never bounced, option 1 suffers a small loss, option 2 incurs no loss as a trade would never have been entered
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Pride always comes before destruction.... -Proverbs 16:18
  • #552
  • Mar 2, 2017 4:36am Mar 2, 2017 4:36am
Absolutely, I am on board with what you are saying. Would rather take one or two "false" trades that doesn't come back to the trendline than use 1:3 instead of 1:6 on all the winners! About how many setups of these do you find per day?

Edit: I guess you are entering on limit/stop orders? No price action candle confirmation?
  • #553
  • Mar 2, 2017 4:41am Mar 2, 2017 4:41am
Quoting Krossaren96
Terrific information, it all makes sense now. You sure know a lot about WWs! So the stop on the GJ hourly would be at the 200 extension? Really interesting to talk to a pro. I guess you are very profitable? Edit: GBPJPY 15 min chart: The fifth leg seems a bit extreme but all of the other parameters seem to look good, what do you say? {image}
Thanks for the compliment and vote of confidence.

One of the reasons I want to start a new thread is to challenge myself and others. Also, I think taking ownership and full responsibility for a thread is a great way to learn and to give back.

As to your question on the GJ stop loss. There is of course some subjectivity but placing a SL a little above the 200FIB (50 pips or so) would make good RR sense as the potential TP is over 200 pips away. I tend to be very conservative on my TPs and rarely am targeting the full move back to the green target line. On the flip side, if price moved up above the 161FIB, lets say half way to the 200FIB, stands to reason price may make it all the way up to the 200FIB anyways so maybe place a SL half way up from 161. A lot for me has to do with the time frame and the volatility of the pair. GJ on the hourly obviously needs some breathing room so smaller scaled in positions with bigger SLs for sure.
Pride always comes before destruction.... -Proverbs 16:18
  • #554
  • Edited 5:13am Mar 2, 2017 4:58am | Edited 5:13am
Quoting Krossaren96
Absolutely, I am on board with what you are saying. Would rather take one or two "false" trades that doesn't come back to the trendline than use 1:3 instead of 1:6 on all the winners! About how many setups of these do you find per day? Edit: I guess you are entering on limit/stop orders? No price action candle confirmation?
There are many opportunities every day so you never have to force anything. Some pairs are better than others and they all seem to go thru phases where price exhibits good symmetry. Other times the zig zag looks like a gazelle running from a lion in 9 different directions

I do look for confirmation in different ways. I admit, I am a Fibo-addict. Previous S/R is considered along with TDI cross. For equities where real total market volume is known, I would expect to see volume spikes near the point of reversal as bulls/bears fight it out. Unfortunately in forex we don't have true known volume. However, I do look at Bill Williams MFI. Bottom line: I feel confident just knowing that I am entering a trade based on a well structured WW with the proper entry point and a prudent SL. Any other filter as confirmation is just icing on the cake. Imho, a WW should be able to stand on its own

My daily routine:

At the start of each day I only keep charts up from the previous day that still meet the WW criteria and that are still on the final D leg. All of those set ups are already mapped out in advance. Many are longer time frames so I just keep them open and monitor them until the structure becomes invalid or the price reaches my entry zone. The rest of the charts I delete. Then I go thru every pair (or as many as time permits) and quickly scan through all of the time frames. After awhile your mind is trained so the WWs jump off the screen. Any potential set ups on the D leg are mapped out for the day to be monitored.
Pride always comes before destruction.... -Proverbs 16:18
  • #555
  • Mar 2, 2017 12:35pm Mar 2, 2017 12:35pm
Quoting Expo33
{quote} There are many opportunities every day so you never have to force anything. Some pairs are better than others and they all seem to go thru phases where price exhibits good symmetry. Other times the zig zag looks like a gazelle running from a lion in 9 different directions I do look for confirmation in different ways. I admit, I am a Fibo-addict. Previous S/R is considered along with TDI cross. For equities where real total market volume is known, I would expect to see volume spikes near the point of reversal as bulls/bears fight it out....
Starting your own thread would be super! Feel free to send me a message when you do so I don't miss it

Great, I am really excited to learn and trade these setups! I am used to use some additional confluence no matter what I trade, so I will most likely not trade them on their own, but we'll see

I haven't seen a single trade trigger today, have you? I would love it if you could send charts setting up as that would really help me in learning to spot the setups
  • #556
  • Mar 2, 2017 1:16pm Mar 2, 2017 1:16pm
GBPUSD and GBPJPY triggered:
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  • #557
  • Mar 2, 2017 7:25pm Mar 2, 2017 7:25pm
Saw this 1 , took entry at 200 fib line, should get some resistance at 144 ma (yellow line)

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  • #558
  • Mar 3, 2017 5:14am Mar 3, 2017 5:14am
Quoting Tbuild
Saw this 1 , took entry at 200 fib line, should get some resistance at 144 ma (yellow line) {image}
Nice one, but doesn't the 4th wave have to touch the trendline? Not sure though, nice profit

Expo, how would you have done on a pattern like this? I'm having a hard time deciding where the sweet zone is. The ABCD doesn't line up with the 2-4 trendline, where is the sweetspot then? or it's a pass?
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  • #559
  • Mar 3, 2017 6:45am Mar 3, 2017 6:45am
Quoting Krossaren96
{quote} Nice one, but doesn't the 4th wave have to touch the trendline? Not sure though, nice profit Expo, how would you have done on a pattern like this? I'm having a hard time deciding where the sweet zone is. The ABCD doesn't line up with the 2-4 trendline, where is the sweetspot then? or it's a pass? {image}
Technically that is a parallel Wolfe wave as XB is basically horizontal. I find them harder to trade because the sweet zone isn't really as defined as in the classic Wolfe wave. In addition the XB move took place in ONE candle while the CD move took 23 candles so the symmetry isn't there. Tradable, but one that I would likely pass on. As it stands, price stopped dead in it's tracks right at AB=CD completion. If I did trade it, that would be my entry, 161.61 with stop maybe 10 pips above 200FIB depending on my position size and risk

You know the saying brother map it out.

Anyways, good luck. I have spent the last 6 hours getting everything ready for the new thread, should be up soon
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Pride always comes before destruction.... -Proverbs 16:18
  • #560
  • Mar 3, 2017 7:01am Mar 3, 2017 7:01am
heres a version of extended breakout, something i saw on past videos.

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