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Elliott Wave Theory and Patterns


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Elliott Wave Theory and Patterns

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  #1 (permalink)
 Fat Tails 
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I have never been able to identify Elliott Wave Patterns in real time. My impression is that there are always several scenarios at choice, and the correct one can only be identified with hindsight.

The Market Technicians Association CMT Level 2 Exam Requirements include the following

Frost, A.J. and Prechter, Robert R., Elliott Wave Principle, Tenth Edition, New Classics Library, Gainesville, GA c. 1978-2005, ISBN 0-932750-75-3

Chapters:
1. The Broad Concept
2. Guidelines of Wave Formation
3. Historical and Mathematical Background
4. Ratio Analysis and Fibonacci Time Sequences

So, the MTA does take the Elliott Wave Principle serious amd requires it for the preparation of the level 2 exam.

I have read that book, but did not help me to understand the labelling of waves. Could anybody help me out with this?

I attach a simple 60 min chart of ES below. How can this be understood in terms of Elliott wave counts?

The only thing I noticed, is that the first retracement showed a larger adverse excursion than the following retracements. This is in line with the uncertainty, after a bottom has formed. So I do understand that there is an accumulation period with larger retracements, followed by a trending period with smaller retracements. But how can this fit into a corset of numbering waves?

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Fat Tails View Post
I
I have read that book, but did not help me to understand the labelling of waves. Could anybody help me out with this?


I can't get yours to fit, here is a schematic.

Super Simple Overview:

Basically, 5 wave patterns are Propagation waves, while 3's are corrections.

Just remember, 3 steps forward and 2 steps back. The end of Wave 1 is usually end of Wave 4.

Waves 1 ,3 and 5 usually made of 5 components, while 2 & 4 are usually 3 component, with one complex and one simple. Declines are the opposite of advances, with 3 downward propagation waves and 2 upward correction waves.

If you read BigMIke's Price Action thread he talks about interpretation. Well it is the same here, there is a lot of interpretation necessary, as well as some mental curve fitting, to make it work.

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 Fat Tails 
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ZTR View Post
Waves 1 ,3 and 5 usually made of 5 components, while 2 & 4 are usually 3 component, with one complex and one simple. Declines are the opposite of advances, with 3 downward propagation waves and 2 upward correction waves.

If you read BigMIke's Price Action thread he talks about interpretation. Well it is the same here, there is a lot of interpretation necessary, as well as some mental curve fitting, to make it work.

Well. I have read and understood the Elliot book by Frost and Prechter. I could explain everything, which is written in there, but I cannot apply it to trading.

If you look at my chart above, what does it mean? Can you number the waves? Can you tell me, whether price will be up or down tomorrow? Or can anybody develop two alternating scenarios for tomorrow, so that I can validate one of them, when confirmed by price?

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 aviat72 
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Good Elliot Wave folks, always have two or even more interpretations of the past action; one typically bullish the other bearish. Each of these interpretations will have some projections, and some price levels which will validate or invalidate the count. I really wish we could code a simple EW projection system. There are rules to be followed but from that point onwards it should be fairly simple to project multiple interpretations.

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 Fat Tails 
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That's perfect to start a newsletter. You always have two options, so nobody can blame you. And in the end you can perfectly explain, why prices turned the way they did.

I am bit sarcastic here, because I hope that a hidden master will come out of his hole and show me how to use Elliot Waves for trading.



aviat72 View Post
Good Elliot Wave folks, always have two or even more interpretations of the past action; one typically bullish the other bearish. Each of these interpretations will have some projections, and some price levels which will validate or invalidate the count. I really wish we could code a simple EW projection system. There are rules to be followed but from that point onwards it should be fairly simple to project multiple interpretations.


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 aviat72 
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Here is McHugh's projection.

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aviat72 View Post
Good Elliot Wave folks, always have two or even more interpretations of the past action; one typically bullish the other bearish. Each of these interpretations will have some projections, and some price levels which will validate or invalidate the count. I really wish we could code a simple EW projection system. There are rules to be followed but from that point onwards it should be fairly simple to project multiple interpretations.

Two ways to look at, but the way the real market works is much more complex and this is really bending reality to fit the rules.

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Fat Tails View Post
I have never been able to identify Elliott Wave Patterns in real time. My impression is that there are always several scenarios at choice, and the correct one can only be identified with hindsight.

The Market Technicians Association CMT Level 2 Exam Requirements include the following

Frost, A.J. and Prechter, Robert R., Elliott Wave Principle, Tenth Edition, New Classics Library, Gainesville, GA c. 1978-2005, ISBN 0-932750-75-3

Chapters:
1. The Broad Concept
2. Guidelines of Wave Formation
3. Historical and Mathematical Background
4. Ratio Analysis and Fibonacci Time Sequences

So, the MTA does take the Elliott Wave Principle serious amd requires it for the preparation of the level 2 exam.

I have read that book, but did not help me to understand the labelling of waves. Could anybody help me out with this?

I attach a simple 60 min chart of ES below. How can this be understood in terms of Elliott wave counts?

The only thing I noticed, is that the first retracement showed a larger adverse excursion than the following retracements. This is in line with the uncertainty, after a bottom has formed. So I do understand that there is an accumulation period with larger retracements, followed by a trending period with smaller retracements. But how can this fit into a corset of numbering waves?

Never you will be sure until you miss the trade :-(, but i use the elliot oscillator in different set ups to help me adjust my count. 5/35 and 10/70

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Bottom line: At point 4 above the market will go up, down or sideways

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 vegasfoster 
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Fat Tails View Post
I have never been able to identify Elliott Wave Patterns in real time. My impression is that there are always several scenarios at choice, and the correct one can only be identified with hindsight.


Ditto, spent a lot of time and got nowhere with it.

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 Fat Tails 
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The trend channels are fine,.

But did you see that wave (e) on the second chart. That looks like a retrofit. As far as I remember (a),(b), (c),(d),(e) is used for flat triangles, but that triangle started trending up, and now retraced about 72% of the prior down swing. I am at least confused.


aviat72 View Post
Here is McHugh's projection.


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 Fat Tails 
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OK for that line in the middle. But that is classical technical analysis. I also carefully watch, whether swings overlap or don't overlap and the point where prior support becomes resistance is the key! But I do not need Elliot Waves to understand that.


ZTR View Post
Two ways to look at, but the way the real market works is much more complex and this is really bending reality to fit the rules.


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 ZTR 
 
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My last comment was obviously tounge-in-cheek. Hope everyone got as good laugh, I did.

But it is like Mark Douglas says Anything Can Happen.

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 Fat Tails 
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So you discarded the options that it goes back in time to search for a better universe or that it goes in full cycles.


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Bottom line: At point 4 above the market will go up, down or sideways


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 ZTR 
 
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That would violate the space time continum, no really.

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 Prtester 
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Here is something regarding counts

https://www.esignalcentral.com/university/get/getManual/eSignal_Manual_ch7.pdf
Advanced GET Trading Blog: Understanding the Elliott Oscillator
ELLIOTT WAVE FRACTALS

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 Fat Tails 
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The Elliott Oscillator is simply a modified MACD without the signal line. It measures the difference between two SMAs with period 5 and 34. I guess that a whole family of MACDs can be used for the same purpose. Actually there are better choices, as you can use more advanced moving averages to achieve this.

The Awesome Oscillator introduced by Bill Williams - it is available for NinjaTrader - also does the trick.

Basically, all these indicators show a divergence, which tells you that the trend has slowed down. You can get the same information from the chart directly by drawing a trend channel. The divergence will not appear when a parabolic move occurs, so the indie will only catch flat peaks and troughs.




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Fat Tails View Post
The Elliott Oscillator is simply a modified MACD without the signal line. It measures the difference between two SMAs with period 5 and 34. I guess that a whole family of MACDs can be used for the same purpose. Actually there are better choices, as you can use more advanced moving averages to achieve this.

Yes there's no holy grail, whatever help you see the big picture i think is good


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The divergence will not appear when a parabolic move occurs, so the indie will only catch flat peaks and troughs.

At that time i change settings to a bigger ones. but as said before you only be sure when miss the trade :-(

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The trend channels are fine,.

But did you see that wave (e) on the second chart. That looks like a retrofit. As far as I remember (a),(b), (c),(d),(e) is used for flat triangles, but that triangle started trending up, and now retraced about 72% of the prior down swing. I am at least confused.

He is bearish and his bias will show up in his counts

Some other good guys
https://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

https://kennystechnicalanalysisblog.blogspot.com/

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 aviat72 
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Here is my attempt at plotting the waves using RTH data only. Feel that is more reliable than overnight action. Yellow lines are the major wave. Green line are the waves of the last wave. I have the 5-35 oscillator (the "Elliot Oscillator")/ also plotted


It seems we are in wave 5 of 5 of 5 of an impulsive move. I am not using the typical Elliot wave numbering style.
We seemed to have made an ending diagonal at the lows, an impulsive wave 1, a strong pullback, a strong wave 3, a minor pullback wave 4, and now in an elongated wave 5. Today day session seems to have been 3 of 5 and the sell off into the close 4 of 5 and then after hours and hopefully this week we get the wave 5 of 5 of 5 to complete. Wave 5s can be long and elongated. Wave 3 was about 55 points and wave 5 started around 1055, so a 100% would be 1110. I think the 200 SMA will be the end of this wave.

Note I am novice and have no formal EW background or study. Just using some common-sense.

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 Fat Tails 
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Hi aviat72,

thanks for your answer. I do not understand the logic of the extended fifth waves.

Impulse Pattern

After a topping or bottoming pattern (distribution or accumulation), herding behaviour amongst investors creates a breakout. The breakout also reflects the relief of the investors, when the indecision expressed by prior price action has been removed. A sign of this are breakaway gaps on daily charts, or a couple of wide ranging bars on intraday charts, as can be seen below. Now this is the main section of the trend. The trend usually goes for a time, some times it loses speed (changing the angle). Finally the trend will end either with a climax pattern (trend channel line overshoot) or a wedge pattern. This is the difference between sharp and flat peaks. Index futures usually have flat peaks and sharp troughs.

Correction Pattern

If there is no breakout, the new move is lacking strength and will probably not lead to more than a correction.

Interpretation

You took the RTH session only, while my chart below uses the ETH session. The overnight low shown was the valid retest of the low and the end of the fifth wave down. So your wave count correctly identifies the start of the new upswing that follows the consolidation.

But why is an impulse wave down followed by an impulse wave up? Is this compatible with the Elliott Wave concept? I agree with you that the upswing has the characteristics of an impulse wave, as shown by the breakout. Also agree for the starting point of wave 3.

The initially strong trend so far has not seen any significant correction, so we might assume that we are still in wave 3. We also can take that price action of last Thursday and call it a correction, and assume that we are already in wave 5. But this is leading nowhere.

My idea of wave 5 stands for the end of a trend, so an extended fifth wave would be a useless tool. As a sign for a reversal I either want to see

- a trend channel overshoot (final flag, sharp peak)
- or a wedge (3-push-pattern, flat peak), which creates massive divergences

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 aviat72 
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FatTail:

Given the current context, Wave 5 is going to be the "I do not want to be left behind" or "The PPT screwed my shorts" wave. What you need to look at is the terminal wave of the wave 5 (green) to see the topping patterns.

And there is nothing which suggests that market will move down substantially to get that topping pattern you want. It might be a sideways correction, like the wave 4.

And please take anything I say with a pinch of salt. I am not an EW expert in any ways (not that it helps to be one)

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 Fat Tails 
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Seems to be a mind game without fixed rules....


aviat72 View Post
FatTail:

Given the current context, Wave 5 is going to be the "I do not want to be left behind" or "The PPT screwed my shorts" wave. What you need to look at is the terminal wave of the wave 5 (green) to see the topping patterns.

And there is nothing which suggests that market will move down substantially to get that topping pattern you want. It might be a sideways correction, like the wave 4.

And please take anything I say with a pinch of salt. I am not an EW expert in any ways (not that it helps to be one)


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 aviat72 
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Fat Tails View Post
Seems to be a mind game without fixed rules....

Of course...

Here is an updated chart. Today we seem to be forming the wave 4 of the 5th. Depending on the unemployment number tomorrow and China numbers tonight we might have another set of the bull-flag type zig-zags (5 wave) or may have already started the wave 5 of 5.

I am using the diamond for the waves of the latest big wave. Also thrown a Fib Extension comparing size of 3 versus 5.

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 aviat72 
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Another interpretation of the 24 hour ES.

Triangles are main waves 1,2,3
Diamonds are the smaller waves i,ii
Circles the even smaller wave (i) (ii) (iii)

There is a nice Ending Diagonal for wave v of 3.
We are now forming a bull flag which looks like wave iv of 5.

Wave iv hasn't yet penetrated wave i of wave 5 so the count looks ok

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 aviat72 
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I went and read up a bit about the EW and they have an explanation for the rising values. There is a class of corrective waves called flats which can actually go higher in price than the previous motive wave.

https://thepatternsite.com/EWExpanded.html
https://thepatternsite.com/EWRevSymmetrical.html
See Chapter 4 of
Elliott Wave International - Login

I have attached an updated chart which seems to make sense. Wave iv of 3 was a Rev Symmetrical Triangle (megaphone) and Wave 4 was an Expanded Flat. The absence of the zig-zag corrective waves which lower price confirms the bullishness.

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 Fat Tails 
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That's different wave count, if I compare it to your first interpretation. But I think this one makes more sense, as the three days were clearly consolidation days, even though for tow of them there was an upward drift prior to the close.

Consolidation means just getting the feel of the new value area, to which prices have shifted after the impuls wave. There is a number of variations for the balancing action, and effectively an expanded fourth wave is one of them.



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I went and read up a bit about the EW and they have an explanation for the rising values. There is a class of corrective waves called flats which can actually go higher in price than the previous motive wave.

https://thepatternsite.com/EWExpanded.html
https://thepatternsite.com/EWRevSymmetrical.html
See Chapter 4 of
Elliott Wave International - Login

I have attached an updated chart which seems to make sense. Wave iv of 3 was a Rev Symmetrical Triangle (megaphone) and Wave 4 was an Expanded Flat. The absence of the zig-zag corrective waves which lower price confirms the bullishness.


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 aviat72 
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Fat Tails View Post
That's different wave count, if I compare it to your first interpretation. But I think this one makes more sense, as the three days were clearly consolidation days, even though for tow of them there was an upward drift prior to the close.

Consolidation means just getting the feel of the new value area, to which prices have shifted after the impuls wave. There is a number of variations for the balancing action, and effectively an expanded fourth wave is one of them.

All that truly changed was the location of the end of wave iii of 3.

More important to me was that the fact that your original question about how to draw corrective waves which have an upward bias has a formal answer. Let us see how this pans out. CL also has a similar wave structure, showing the correlation between the asset classes is very strong.

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 Fat Tails 
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You see, I would have left the original wave 3 untouched, but extended wave 4 into a complex updrifting correction. This is not quite conventional, as wave 4 should be down, but for me the essential characteristics of wave 4 is its consolidating pattern, as described by a Gauss distribution and the lack of positive feedback.


aviat72 View Post
All that truly changed was the location of the end of wave iii of 3.

More important to me was that the fact that your original question about how to draw corrective waves which have an upward bias has a formal answer. Let us see how this pans out. CL also has a similar wave structure, showing the correlation between the asset classes is very strong.


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 aviat72 
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Wave v of 5 got truncated and we seem to have started a correction. Anticipate it touch 1066 zone in due time.
Change in the wave count is that wave v of 5 started where I was still thinking it wave iv correction of wave 5.

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How did you get that value? My target is at 1066.25 - my proprietary indicator.


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Wave v of 5 got truncated and we seem to have started a correction. Anticipate it touch 1066 zone in due time.
Change in the wave count is that wave v of 5 started where I was still thinking it wave iv correction of wave 5.


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We overshot a bit. This turned out to be an impulsive move down. So far the overnight action suggests that wave 4 type consolidation. However given this schizo market I will not be surprised to see a leg up! After all, you do not expect an impulsive wave down after such a powerful move up.

On a different note, I discovered a new trading platform which has built in support for EW drawing. It has all the rules in place and warns you. Right now it is under a free trial-beta period.
MotiveWave: Stocks, Futures, Options and Forex Trading/Analysis Platform

I am attaching a chart of the ES wave count. Euro too is in an interesting place, Wave 5 of 5. Let us see if it can form an ending diagonal. Ashraf is looking or 1.0303.

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 syxforex 
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Andy, my heart is a tear.. Let's Skype Again... all you reading this, it's right here... ZTR spoketh the truth right here... Andy, are you gettin a bit sideways, my teacher, I miss you, I love you, ... Thank You Ridin Comets now eh! I'ma butt heads with ya''



ZTR View Post
I can't get yours to fit, here is a schematic.

Super Simple Overview:

Basically, 5 wave patterns are Propagation waves, while 3's are corrections.

Just remember, 3 steps forward and 2 steps back. The end of Wave 1 is usually end of Wave 4.

Waves 1 ,3 and 5 usually made of 5 components, while 2 & 4 are usually 3 component, with one complex and one simple. Declines are the opposite of advances, with 3 downward propagation waves and 2 upward correction waves.

If you read BigMIke's Price Action thread he talks about interpretation. Well it is the same here, there is a lot of interpretation necessary, as well as some mental curve fitting, to make it work.


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 syxforex 
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And I'll say this, if you don't believe, read no further.



syxforex View Post
Andy, my heart is a tear.. Let's Skype Again... all you reading this, it's right here... ZTR spoketh the truth right here... Andy, are you gettin a bit sideways, my teacher, I miss you, I love you, ... Thank You Ridin Comets now eh! I'ma butt heads with ya''


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Sometimes you have to say wtf at random shit, like page bullshit... f'EN ZTR get's this. sometimes you are on the edge, sometimes you are not. Most of the time i would say F ' details.. 12..34..1 haha. Andy, riding the east star right around the egdge... peace


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And I'll say this, if you don't believe, read no further.


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And I would just say this one thing, like, when you find out you had black eyes when you really had white eyes when you are least expecting it, ride that wave, do you know waves..hahah. oh, lol,, wave.. sorry folks, i'm drunk on California grapes now... don't mind ya the BCBUD neither..



syxforex View Post
Sometimes you have to say wtf at random shit, like page bullshit... f'EN ZTR get's this. sometimes you are on the edge, sometimes you are not. Most of the time i would say F ' details.. 12..34..1 haha. Andy, riding the east star right around the egdge... peace


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I might also say, get off my wave... ok, I mean that, do not step on my wave cos I own it, get it.. .. keep your head over the wave and under the trench.. .. . . .



syxforex View Post
And I would just say this one thing, like, when you find out you had black eyes when you really had white eyes when you are least expecting it, ride that wave, do you know waves..hahah. oh, lol,, wave.. sorry folks, i'm drunk on California grapes now... don't mind ya the BCBUD neither..


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Y'ALL just stay off my wave you hear... This is BC Country.


syxforex View Post
I might also say, get off my wave... ok, I mean that, do not step on my wave cos I own it, get it.. .. keep your head over the wave and under the trench.. .. . . .


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I'll have a few bottles of wine this evening, maybe this will help me to understand Elliot Waves.

I am quite sure that it will work and I'll be seeing waves everywhere.

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After the recent Elliott Wave Theory webinar, I wanted to see this thread bumped and possibly become active again.

Mike

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Big Mike View Post


After the recent Elliott Wave Theory webinar, I wanted to see this thread bumped and possibly become active again.

Mike

without wave software its not easy to follow.

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cory View Post
without wave software its not easy to follow.

Did you watch the last EWT webinar? I thought it looked pretty simple to identify this, in fact it is quite similar to how I trade already (just this Wave 3 portion).

Webinar: Elliott Wave Theory - Focusing on Trading Wave 3

You disagree?

Now for remaining setups I agree it is more complex, to know where a wave ends (C point) and a new one begins.

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Big Mike View Post
Did you watch the last EWT webinar? I thought it looked pretty simple to identify this, in fact it is quite similar to how I trade already (just this Wave 3 portion).

Webinar: Elliott Wave Theory - Focusing on Trading Wave 3

You disagree?

Now for remaining setups I agree it is more complex, to know where a wave ends (C point) and a new one begins.

Mike

I can't tell which is what on this one. For the wave I can see the move is more likely over thus the hope is software ids it faster.

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I would like to turn attention to the hard right edge, if EWT posters will indulge me.

Can you guys post some charts of current markets at the hard right edge, and then maybe draw some mock up scenarios of what price would need to do in order to trigger an important high or low, then the abc, then wave 3. I have an idea of what this should look like in my head, but models focusing on hard right edge, vs models focusing on historical, are more useful to me.

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Big Mike View Post
I would like to turn attention to the hard right edge, if EWT posters will indulge me.

Can you guys post some charts of current markets at the hard right edge, and then maybe draw some mock up scenarios of what price would need to do in order to trigger an important high or low, then the abc, then wave 3. I have an idea of what this should look like in my head, but models focusing on hard right edge, vs models focusing on historical, are more useful to me.

Mike

I second that request, would be interesting to know if some heuristic rules have been devised to anticipate these moves.

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Big Mike View Post
I would like to turn attention to the hard right edge, if EWT posters will indulge me.

Can you guys post some charts of current markets at the hard right edge, and then maybe draw some mock up scenarios of what price would need to do in order to trigger an important high or low, then the abc, then wave 3. I have an idea of what this should look like in my head, but models focusing on hard right edge, vs models focusing on historical, are more useful to me.

Mike

@Big Mike;

Trading Wave 3 is similar to an ABC after an impulse. When I requested help with writing an ABC indicator for Ninja, I was referred to Fib Extension tool.

At the risk of getting egg on my face, attached is an (not so great) example of ABC being formed on 5M ES. 1408 area is the previous high, so if ES going to bounce back and continue the uptrend, it should be around 1407.75.

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 aligator 
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@Big Mike,

Another ABC being developed. 107.40 level is a potential turning point.

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How do you know which swing to select for the 1,2,3,4,5 count. You seem to have skipped some swings in your count. There are more than 5 significant swings, no?


aligator View Post
@ Big Mike;

Trading Wave 3 is similar to an ABC after an impulse. When I requested help with writing an ABC indicator for Ninja, I was referred to Fib Extension tool.

At the risk of getting egg on my face, attached is an (not so great) example of ABC being formed on 5M ES. 1408 area is the previous high, so if ES going to bounce back and continue the uptrend, it should be around 1407.75.


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@Big Mike,

Another ABC being developed. 107.40 level is a potential turning point.

Perfect turn at 107.40 for 10 tick target 1, runner at BE+1

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trendisyourfriend View Post
How do you know which swing to select for the 1,2,3,4,5 count. You seem to have skipped some swings in your count. There are more than 5 significant swings, no?

Counting is totally subjective and after the fact. Following the basic EWT rules for an impulse wave, pick and choose HHs and LLs that make sense and are within the rules for wave count. For ABC though, all I look at is an impulse wave, if it has a five wave count is even better. For me, for example, a 100 tick move in CL is considered an impulse wave where I look for a retracement and formation of the AB leg and then project the C. The formation is most powerful when B and C are formed on or near S/R levels or fib levels.

ABC works great when confirmed with S/R levels and you don't really need to be an expert in EWT, very close to what MTPredictor does

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@Big Mike,

Another ABC being developed. 107.40 level is a potential turning point.

Update: Runner at 45 ticks profit, moved stop to 107.18. Expect pause at fib level 78.6% (106.92), is T2 now.


Edit: out at T2 @106.92, Total 58 (10+48) ticks.

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aligator View Post
@Big Mike,

Another ABC being developed. 107.40 level is a potential turning point.

For this chart, isn't wave 3 starting?

Mike

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Here is another ABC for YM developing now.

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aligator View Post
Here is another ABC for YM developing now.

For this one, you are talking about an ABC at the end of the wave, yes? Not the ABC after the important low, because there was no important low here, right?

In the last chart I commented on, I took that as an important low followed by ABC, where C is the start of wave 3?

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Big Mike View Post
For this chart, isn't wave 3 starting?

Mike

@Big Mike,

Yes, it is quite possible that BC leg continues as the Wave 3, however, if you look at the expanded chart or a HTF chart, the general trend is up with at least 2 complex ABC retracements occurring prioir to the impulse leg "X."

For this, you need to enter on a confirming bar and place your stops not too far from the C to limit risk. ABC needs to be confirmed with S/R levels or whatever other tools you may have.

Unless you swing trade, for day trading all you need a strong impulse wave, it can be Wave 3 or other waves, and formation of the ABC. A 5-count impulse X leg is more powerful.

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Big Mike View Post
For this one, you are talking about an ABC at the end of the wave, yes? Not the ABC after the important low, because there was no important low here, right?

In the last chart I commented on, I took that as an important low followed by ABC, where C is the start of wave 3?

Mike

You are right Mike, the idea is having a strong "Impulse" X leg (0.5 -1.0 times Average Daily Range), then look for the ABC to form. Important highs and lows can be used to project your targets or stops. This is not quite EWT, however, the more common with EWT, the more powerful.

For scalping and daytrading, you can do a full blown EWT count to find perfect ABCs (knowing that EWT is subjective and can not be perfect) but you will miss a lot of good opportunities. All you need is a strong X and the ABC.

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 aligator 
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Here is a link for a free 1-hour ( March 28, 4:00 - 5:00 PM EDT) seminar by Todd Gordon (one of the few true EWT technicians) on the A_B_C's of Elliot Wave Corrections. Todd is well respected and a frequent commentator on CNN and speaker at trading expos.

I have no relations with his company, Aspen Trading. It should be informative.

https://www3.gotomeeting.com/register/783467126

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aligator View Post
You are right Mike, the idea is having a strong "Impulse" X leg (0.5 -1.0 times Average Daily Range), then look for the ABC to form. Important highs and lows can be used to project your targets or stops. This is not quite EWT, however, the more common with EWT, the more powerful.

For scalping and daytrading, you can do a full blown EWT count to find perfect ABCs (knowing that EWT is subjective and can not be perfect) but you will miss a lot of good opportunities. All you need is a strong X and the ABC.

Can you help me understand the impact/importance of selecting an important low or important high, vs selecting an impulsive leg, when defining the start of a brand new wave formation? (also, what is the correct terminology for a "brand new" wave formation?)

I see you've said that an Impulse leg needs to be 50-100% of the average daily range. During the last EWT webinar, Steve never mentioned an impulsive leg (that I recall), instead focusing on an "important" low or high. I'd like to understand the significance of the difference when looking at a new formation, according to the EWT philosophy I of course have my own opinions...

Mike

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 GridKing 
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 aligator 
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OK, here is a revised ES example. Obviously the 1408 (previous high) did not hold (so much for EWT).

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 Big Mike 
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aligator View Post
OK, here is a revised ES example. Obviously the 1408 (previous high) did not hold (so much for EWT).

I am really only interested in trading wave 2-3, which seemed to work just fine

Mike

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 aligator 
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Big Mike View Post
Can you help me understand the impact/importance of selecting an important low or important high, vs selecting an impulsive leg, when defining the start of a brand new wave formation? (also, what is the correct terminology for a "brand new" wave formation?)

I see you've said that an Impulse leg needs to be 50-100% of the average daily range. During the last EWT webinar, Steve never mentioned an impulsive leg (that I recall), instead focusing on an "important" low or high. I'd like to understand the significance of the difference when looking at a new formation, according to the EWT philosophy I of course have my own opinions...

Mike

I am not an EWT expert, I just have taken enough, a snapshot of a strong wave, preferably Wave 3, to project the next likely move using the ABC correction. The most common motive wave is the impulse wave and as such starts at an established high or low within another higher degree wave structure. For day trading and scalping, the 50-100 % ADR for the length of the impulse leg is not science, but it is arbitrary and typical of an instruments' range of a persistent move before an appreciable retracement and correction is expected, i.e 100 ticks for CL.

For EWT, the historical highs and lows are the anchors and define the whole structure, thus they are significant. Once you revise one of the higher or lower level waves the whole structure is impacted. Often, one ends up revising the structure backward if the lower level projections do not materialize.

Assuming infinite data, theoretically, for every wave there is a larger wave and many smaller waves, so there is no telling when a wave starts or ends. However, within a certain size, once the 5th wave is completed a new 3 or 5 wave starts. I don't know what the new wave is called, but conventionally, EW waves are divided into 9 degrees starting from the Grand Supercycle to Subminuette.

For anyone interested in EWT, Elliott Wave Principle by Frost and Prechter is the best and an easy read.

Sorry for the long answer, more of a refresher for me than a lecture.

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Griff1
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Hi Everybody

An interesting thread, and one that I would like to contribute to, as the way that Elliott Wave is taught by many Gurus (in my personal opinion) does lead to confusion………..

In my personal opinion, the best way to look at Elliott Wave patterns is in “isolation”, as this then removes the normal confusion of conflicting wave counts. The idea is that (as Traders) we are only interested in identifying a “low risk” trade setup.

The best of this setups is where we can get into a new trade as the Wave (2) swing is ending, to then be able to trade the strongest and longest of all the Elliott Waves – the Wave (3)

Please see the chart below, where there was a great example of this on a 3min Chart of the 6E just yesterday…..

I have added the Wave counts manually on this NinjaTrader chart…..

Thanks,

Steve

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 Big Mike 
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I assume that with EWT, like most methodologies, it is better to look at higher time frames to find key areas of support, resistance, trendlines, etc.

If this holds true for EWT, then do you only plot your patterns on the higher timeframe and not the lower time frame? Because otherwise, I could see confusion introduced where the two time frames produce independent and conflicting signals.

Mike

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 Kingsley 
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Hi everyone! Just wanna to give my 2 cents opinion in my FIRST post.

I will recommand using AdvanceGet from eSignal. AdvancedGet has a complete EW analysis tools. It has the analysis tool to determine when W3 has started or when is W5 has ended.

Well, EW analysis is subjective and it is subject to change if the predicted wave formation failed. So you need some skill to acess the validity of the predicted wave and flexible to accept the wave formation changes. Example, wave 1-2-3 can changed to be wave A-B-C.

Sad to said, MTPredator is no way near in term of EW analysis. It only use Fibo on pivot. However, MTPredator has more to offer in term of position sizing.

Cheers!

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Griff1
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Hi Everybody,

Exactly, that is why Elliott Wave is best used “in isolation”, then only use the best (and most obvious) wave counts, so this then removes all the subjectivity and confusion with normal Elliott Wave Analysis.

There was a great example on the 3min NQ yesterday, where we had a clear 5 wave rally off the lows yesterday. As you can see form the chart below, the high was at the end of this 5-wave rally.

Yes, you are also correct, in that Position Sizing is the key, as correct Position Sizing keeps the inevitable loses small, but still allows Profits to run.

Thanks

Steve

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 Kingsley 
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Hi Steve, can you explain how MTPredictor quantify EW?

Looking at your chart, the W1 length (23.75) is longer than W3 length (14.25). How could this possible?

Even EW analysis is subjective, but the core basic EW principle does not allow W3<W1. This is inaccurate and misleading.

Kingsley

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Griff1
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Hi,

Thanks for your reply.

What EW says is that "Wave 3 cannot be the Shortest Wave in a completed 5 wave sequence", so that is the filter we include...

I hope this helps ?

Steve

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Griff1
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Hi

As a PS to my posts earlier.....

This is a better example, on the 5min YM from yesterday, where the Wave 3 is clearly the longest wave .....

But the same principle applies, it is still much easier to use Elliott Wave "in isolation" and then only to find a "low risk" tarde setup, then use Position Sizing to keep the initial risk small.

Thanks

Steve

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 Rad4633 
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aligator View Post
OK, here is a revised ES example. Obviously the 1408 (previous high) did not hold (so much for EWT).

@aligator

Is this a correct assumption of EW formation? or am I just drawing childish lines again

thx as always
R

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 Deucalion 
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Hey Richard, am stuck in a hotel, so I downloaded NT on my travel machine. I think this is what happened here (RTH only) - a wave projection top (in blue) around 30 - 32 was violated. New buying has come in. This now, theoretically becomes wave support. So, the first bounce that violated resistance became W1, W3 is quite clear, and potential W5 is between 52 - 58. Intraday reversal, on high volume, will show where that happens. Or footprint. In addition, if a short is initiated, traditional momentum indicators (MACD, MTP STF, RSI, Stoch) need to show a clear div. A break of support is needed first.

I am almost positive that good fib guys can use the W1 amplitude, the W3 amplitude and project the W5 - but I don't try this anymore as I have found I am not very good at it. I will tell you this W3 was 261.8% of W1, W5 should atleast be as big as W1 if not more.


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 Rad4633 
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@Deucalion-perfect didnt ask u bc I knew u were on vacation thx for reply and info on fibs I ll try it and see how it goes, im short too so watching closely ES

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 Rad4633 
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@Deucalion

I am almost positive that good fib guys can use the W1 amplitude, the W3 amplitude and project the W5 - but I don't try this anymore as I have found I am not very good at it. I will tell you this W3 was 261.8% of W1, W5 should atleast be as big as W1 if not more.


if EW3=EW5 will be at least 59ish

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 Deucalion 
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Rad4633 View Post
@Deucalion

I am almost positive that good fib guys can use the W1 amplitude, the W3 amplitude and project the W5 - but I don't try this anymore as I have found I am not very good at it. I will tell you this W3 was 261.8% of W1, W5 should atleast be as big as W1 if not more.


if EW3=EW5 will be at least 59ish

LOL.... technically and sensibly you drew it right! Ideally I like to catch W3 as this is the best one, and trying to catch W5 is dangerous, as it can end prematurely (in which case one misses it) or worse (try to short it when no other conditions are present) and get slammed. Having said that, it can be done. And I have noticed that I have caught several W5 tops this year. This always bothers me as it can lead to top picking, which is a nasty business and un professional.

But once one screws down risk and uses robust position sizing and risk control, it can be done (one must, must appreciate such a trade is high risk trade and be prepared to scratch it fast)

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 Deucalion 
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I would like to ask either Fat Tails or BM to change the title of this thread to "Elliot Wave - A Practical Approach" or something like that instead of "theory". EW gets a terrible rap because of the new age analysts (generally not traders) who attempt to fit every squiggle and every swing on a chart into some sort of EW pattern as if EW is present on every chart at every possible instant. I am sure that RN Elliot did not lay out his theory to be used in such a dogmatic manner. In that spirit, here is an attempt to break down the weekly USD in EWP (Elliot Wave Practical) style.

  • Between 2010/11, a powerful two leg move down carried DX from 89ish to 73ish.
  • A wave decision point was identified at this point. This DP was honored and price then targeted a potential bull to 83.
  • Price went from 73 to 83 in that ugly sequence from 2011 - 2013. It is very hard for me to fit a clean pattern in that bull move, there maybe some sequence in there, but I am not going to attempt one.
  • Now, here is my take - 83 is a EW-DP, if price honored this, it should go back to 73 and violate 73, the bearish macro pattern should then violate all time lows.
  • At the moment, however, weakness is being bought, and the DP at 83 is not holding, I therefore expect that the impulsive on the DX is bullish, which would imply a logical violation of 83 first then 88 (from 200/09).
  • 88 is powerful resistance - but keeping with common sense, I expect this to be a powerful wave up - with an eventual impulsive violation of 88 and at least 92 (maybe more)
  • I do not expect the commonly held assumption DX-ES negative correlation to hold, as price action indicates a positive correlation at this time.
  • As the ES is shown recently, an impulsive move is relentless, it is my belief that a true impulsive on DX has not shown its face it - but I am patient and quietly watching, sitting in the tall grass. We shall see how wrong I am in the coming years (for the record - I have been bullish USD for a while, but recent action on USD and ES in the face purported QE has added strength to my upside bias)
  • Price on DX has not lined up with public opinion, and whereas I have little credibility in saying that we are in Macro Wave 1 or beginning of Macro W3 on DX, it is my belief we have a long ways to go, and the surprise might end up being how powerful this DX up move might end up being. The monthly potential on DX is also below - a lot of folks might think this is out of the question. Is it?

There I said it, I may burn spectacularly for this




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 Big Mike 
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The thread title is up to @Fat Tails since it is his thread.

Mike

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 Fat Tails 
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Deucalion View Post
I would like to ask either Fat Tails or BM to change the title of this thread to "Elliot Wave - A Practical Approach" or something like that instead of "theory".


@Deucalion: Thank you for posting and thank you for your suggestion. However, I think it is too late to change the title of the thread. The thread is around for 3 years, and if I change the title now, this will rather create confusion. Although I get your point, for "practical reasons" I would like the title to stay as it is.

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 Rad4633 
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@Fat Tails

Curious if you every coded a 5 wave indicator, if so is it public?if so would you share?

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 Fat Tails 
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Rad4633 View Post
@Fat Tails

Curious if you every coded a 5 wave indicator, if so is it public?if so would you share?

What do you call a 5-wave indicator?

If you are referring to Elliot wave counts, I have not coded it. I do not believe in numbering waves.

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Griff1
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Rad4633 View Post
@Fat Tails

Curious if you every coded a 5 wave indicator, if so is it public?if so would you share?

Hi Rad4633,

Are you looking to try and catch the end of a Wave 5, ie the end of the current trend ?

If so, (as a Elliott Wave user for 27 years), can I suggest caution on trying to catch the end of an impulsive wave., as Elliott Wave 5's have a nasty habit of "over running". Only try this if you have "added" analysis, for example higher time frames support/resistance at the same time as the end of the lower time frames Wave 5.

I am not saying that catching the end of Wave 5 is impossible, I am just advising caution and suggesting the best way to do this is with the added confirmation of additional analysis.

I hope this helps ?

Steve

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 Rad4633 
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@Griff1

yes I understand the concept, and am using additional criteria that has to be met. but I lose track over various instruments and charts when trading real time. I guess i just get confused easily and was looking for a indicator to help with this

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 forgiven 
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in a trend you should have 5 to 7 waves in the direction of the trend and 3 wave ABC counter trend ..wave c should not go through the bottom of wave 4. waves 2 an 4 are corrective so the price action should look like chop. like trying to figure out any trend it depends on what time frame you are looking at. most wave heads use a 240 min. for the power wave and fine tune the 3min. or 5min for some kind of entry like mt predictor... they use waves on fx more than index futures. most prop wave heads work for fx shops. you need motive wave to be fast at it and to scan for patterns.

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