response to your eWave questions
Valid response #5: re: Indicators for eWaves. The practical application / art of eWave trading is to identify and participate fully in impulse wave sets and scale back or avoid corrective wave sets. How or if you apply this is ultimately up to you and your minds’ structures. (Actually it is ‘way before’ ultimately up to you and your minds’ structures…but that’s way out of scope) To help you explore this, here are some comments on the use of indicators to appropriately de-jag price and represent underlying wave patterns. Wave purists can make strong arguments that ‘filtering noise’ by ‘de-jagging’ is bad practice. If one is establishing a solid eWave context for the whole impulse wave, taking alternation, extensions, x’s, and other eWave ‘rules’ into consideration, then why the sudden need to occlude / corrupt direct observation of a count with an image of a derived indicator. Also, don’t forget that in addition to simplifying a particular 4 wave (using the William’s example), that exact same MACD ‘visual image’ could be calculated / brought into being from a huge host of other, non 4 wave, price patterns. From another perspective, if instead from the beginning you are practically identifying trend with an indicator, then where is the purpose of a drill down to see the waves creating it.
Valid response #8: Do waves create trends or do trends create waves?
Valid response #13:
Valid response #21: Wearing approved hazardous material gear, contain and properly dispose of all your elliot wave thinking as expeditiously as you can. However …
Valid response #34: If, and only if, waves are something your eyes were made to easily see and your mind was made to understand and trade, I would recommend that you first read everything you can find by Tony Plummer, then really master Glen Neely in detail, then quickly blow through the early Robert Prechter books, then do anything you can google or procure by Tom Joseph, Don Vodopich, Ruggiero, etc. Along the way, also give due consideration to any material that objectively addresses the limitations of Elliot Wave and wave analysis in general. Round out your sylabus with a thorough, detailed chronological study of all Zoran Gayer’s archives.
Concurrently, during this coursework, also take the following ‘lab’ / ‘practicum’. On daily charts, do live wave analysis AND live eWave trading on 1, 2, or 3 instruments. Start with a variation on this - use multiples of 1 lot for corrective wave trades, multiples of 2 lots for impulse wave trades, and multiples of 3 lots for wave 3 trades. Do this and you’ll build the foundation and experience to create your own wave ‘system’ at the level of complexity that’s appropriate to you. Like the Fleetwood Mac song – ‘you can go your own wave’…
Valid response #55: Time frame? Even if you feel a need to be close to the action, get in early, day trade, whatever; across time it’s best not to eWave on less than hourly charts. One general reason for this: eWaves are about collective population patterns. The shorter the time frame, the more it becomes a study of an inadequate fractal ‘sample’ instead a fractal study of the ‘population’. The mystic seers and fractalicians lied to us - As above is not really as below. For ‘populations’, classic 5 3 eWaves are the norm. For ‘samples’, well formed 5’s and 3’s are an anomaly. From a more practical perspective – On very short time frames, a few ‘pretty’ eWaves get mixed in with a bunch of hard to count and even harder to trade waves. ‘Of the essence’ market action only occurs during a small percentage of the total ‘times’, but the auction continues all day and night piling up ticks upon ticks… I don’t think ‘noise’ is the correct word or concept to apply here but it is one that is broadly used, so I’ll just let it throw a brevity blanket on it. With this in mind, you could possibly get below that 1 hour recommendation by using tick bars instead of time bars, but still I wouldn’t advise scaling tick bars much below the equivalent of one ‘during market hours’ hour.
Valid response #89: re Trading Chaos: My read of pgs. 123 – 131 (finally found the book!) as it concerns your questions is - Wave 3 is called over at the histogram osc going below the 5 period ‘signal’ line (fig 7-17). Wave 4 is confirmed by osc cross below 0 line (R on fig 7-19). Wave 4 is over and 5 is called at the hook up of the osc. and Wave 5 is confirmed when osc crosses above 0 late in session on 6/9 (fig 7-19). Osho, to answer your “has already crossed the zero line” question, I think the correct reading is - first crossing was to below 0, next crossing was to above 0. He wasn’t very clear about how to get long for Wave 5 was he? Here’s why – in real life Wave 4’s are more complicated than that. Using this osc. and technique, price can still be in 4 even though osc has gone below and then back above 0 several times. His osc. example is ‘textbook’ and doesn’t have the odds he alludes to – even if you are using the ‘correct’ (100-140) number of bars. Tom Joseph originated the 5/35 technique. Briefly here’s how he sees ends of Wave 4 and Wave 5 entry. His osc only has to pull back a minimum of 50% from the osc’s Wave 3 peak to begin stepping in. A pullback to or below 0 line and he enters with a stop where Wave 1 topped and exits the 5 where Wave 3 topped. Also, you might try osc setting of 3/21 which is almost as smooth and has a little less lag. Using these techniques in the raw will produce a bunch of false starts. False starts are ok only for patient long time framers – they suck for every other time framer. Corrective eWaves are the most variegated and intricate patterns. If a trader is so dang sure there is actually going to be a Wave 5, imho, he should be doing an indicator free granular study of Wave 4 with the intent of stepping in just past the lows and end time of Wave 4 (not the same as bottom fishing) . The material in William’s book for the ‘mental’ side of trading is good, verging on excellent. But NONE of the actual trading techniques are original (except for his clever re-namings) . None of them are breakthoughs. For example on pg. 124 he builds up to this big insight and puts it in italics – (referring to the osc) “It is always measuring an Elliot Wave”. When you break it down, all he really said was – ‘a wave is a wave’ . Well duh huh… in real life, a huge percentage of ‘preferred’ wave counts in ‘development’ are invalidated, a mental recovery is required, and an alternate count ‘activated’…
Valid response #144: Consider this - “Any wave count can be produced, and also collapsed… using ‘progressive zooming in’” and out (source unknown). ANY wave count you want! Did you get that? Furthermore, ‘progressive zooming and out’ can easily be accomplished by the mind spontaneously by the addition of the next bar OR by a viewing of the same chart at a different time even if the next bar(s) aren’t appended OR right before your eyes as you look at a chart – i.e. no change to your chart in timeframe or resolution or number of bars is really necessary for ‘zooming’ to any count. Believe it or not, ANY count can appear, flicker, zoom, be replaced, reappear, flicker, …zoom, zoom… in spite of left brain ‘management’, in spite of ‘disipline’, in spite of ‘rules’! Contrary to the striking computer graphics, few fractals are shapely and pretty. Most fractals are disturbing. Did you get that?
Valid response #233: If you are hooked on indicators, consider direct use of Moving Averages. Robert Kendall uses 10,21,and 40 period Ma’s with the following basic rules. Wave 1 start pattern: all three Ma’s flattening and converging. Wave 2 start signal: pattern: all three Ma’s flattening and converging. Wave 2 end pattern: price below all 3 Ma’s Wave 3 start pattern: close above all 3 Ma’s. Confirmation: 21 Ma reach .25% per period. Wave 4 end pattern: usually 21 Ma, sometimes 40 ma. also 10 and 21 usually converge at bottom. Wave 5 begin pattern: close above 10 ma. Wave 5 end pattern: close under 21 ma.
(Wave 0 begin pattern: convergence of all 3 Ma’s – but what’s a Wave 0??)
Valid response #377: “Hello, my name is ________ and I am an Elliolic. I am coming up on 12 years in recovery. Yes, I still ‘count’ waves but no way like an Elliotician would teach it. I still use G.E.T. on daily charts for one special study that has nothing to do with the Elliot Wave parts of that program. In other words, I can now have the stuff scattered around the office without being tempted… and I can associate with Elliotheads calmly and am not subject to post contact obsessions… I started doing Elliot because my ‘friends’ were doing it… at first it felt wonderful… after a while, doing it still felt great but things weren’t actually working well for me anymore…eventually even my body didn’t work the same, especially my eyes and brains and liver and heart and guts… I lost touch with reality and thought things were better or worse than they really were… as an addict my mood counts became more erratic and fragile and that limited my ability to make good choices… or make and keep commitments …
…The worst part about it is all of the innocent equity that is injured, lost, or killed by those who choose to disobey the laws when they are under the influence of multifarious wave counts… ”
Note: Response #’s 0,1,1,2,3 were excluded because they are not valid. Their ratios are simply not close enough to 1.618 (plus some of them are actually Lucas numbers who cross dress.) Also, some of these responses may subsequently be invalidated because they are opinions posing as views –Socrates, you are more than welcome to quickly point those out to us.
Osho, I sincerely hope this helps… enjoy.
zd
