Mickey's Journal

[immy]

You're asking Kyle to interpret something that he has understood! Now lets see if the choice of his words and the sentences that form a paragraph will convey his "light" to our prisms and lenses as accurately as possible and then there is this complex part of that light going through to the other side without much "deflection" and "distortion" so that we could understand his light as accurately as possible!

Its therefore important for us to create our own personal trading plans, trading methodology and tactics. They don't necessarily have to be 100% novel and unique. Which is why we shared our strategies and tactics so that others can start by following the method as it is in its original form and gradually "make it their own". A word caution must be noted here that this process or tweaking or making the method your own, must be carefully calibrated and watched. The changes must be subtle or noticeable but not to the extent that changes the whole theme all together! The symmetry of the trend must remain in tact. The following paras might shed some more light on the Symmetry of things!

Now on to the question. The following words, not yet written down, would be MY understanding of the concept rather than my interpretation of kyle's understanding of the concept. I hope this and the following both make sense.

4th waves or corrective waves have a tendency to create many patterns unlike impulsive waves where you see the 5 waves sequence most of the time. there is more irregularity within those waves which is a perfect example of Chaos! (higher form of order).

There are however, two patterns that are most visible and easily identifiable patterns out of the myriads of patterns it creates. One is the 3 waves pull back otherwise known as the zig zag pullback in the general trading world aka PC pattern in AIMS world.

The other is the tight range pattern. If you happen to understand the Famous pattern, its based on 4th wave following a strong wave 3 where the 4th wave is pancake flat. The box range is very tight relative to the normal range of the chart and time frame in question. The zig zag pattern is closely linked to the PC pattern. It can still be identified even on a naked chart. The ZigZag pattern often can retrace almost 62% of the wave 3 however our favourite arease are 38% to 50%. Because based on the authentic research of the profitunity group, 4th waves usually terminate, 8 out of 10 times, between 38% and 50% retracement of the wave 3. The Flat wave 4 gives us The tight Setup 1 or Classic breakout entry setup and the zig zag offers PC and Apple Entry Setup. The flat tight wave 4 may not always retrace between 38-50%. Kyle has cleverly incorporated this into his Flow chart by allowing him to take an Apple between 23% to 62%. The reason, in my opinion, he's allowed himself to take apple even if it retraced more than 50%, would be because of wave 2 pullbacks. Wave 2's often pullback upto 62% and by the rules of pure ellioticians a wave 2 can pullback even all the way to 100% and still not break the symmetry of the upcoming trend. [hence price between box high and box low within tight wave 4 could often be a tight, small and hidden wave 2. Here I must mention The Monarch pattern because this pattern often depicts these hidden 1-2's within a tight range market allowing us to get into the market before others can see it! In case you question, why do I mention wave 2's when we are actually discussing wave 4? Well, that's because by the rules of "Fractal Geometry" all wave 4's on a certain time frame may well appear as wave 2's on a certain higher time frame.

So here I must talk about our Turkish friend Adem who used to say, "I'm looking for the big 1-2s". He traded the hourly time frame and looked for big 1-2. The big 1-2's would be a nice wave 3 down followed by a wave 4 on m30 or m15. The biggest advantage of Higher time frame is that you can drop to lower time frame to further confirm your count using the expanded bars on eWave. e..g if you see a certain wave on h1 and assume it appears as wave 1 and 2. You have the powerful option to expand the charts to fit within the criteria of eWave counting by dropping a time frame a step or two down. If a the pattern in question is comprised of less than the minimum bars of 100 (on ewave) you need to split those bars and bring them between the 100-140 level so that you can get the accurate count. If a wave on current time frame is less than 100 bars it might be too less bars to get the accurate count if its more than 140 then it might be too much information and complicate things. So we want to zoom in out appropriately within the 100-140 bars.

A trend starts off smaller waves and gradually "spirals" into larger waves. (the word spiral is not a choice word, I had to use that word because that is what it does, in chaos terms.) This proportional increase of wave length has a structure and symmetry. The moment this symmetry is broken we are not comfortable trading the situation. This is what Michael Zlabinger calls the presence or absence of structure. The divergence on eWave lets us see this expansion or contractions of the wave via its momentum indications. Do I have to remind here that eWave looks at the average of the last 5 bars and compares that to the average of the last 34 bars? It shows whether the average of the current 5 bars is proportionally increasing compared to the 34 bars or decreasing. do I have to mention this?

All IMHO

[kiravon]

I didn't realize it was Kyle's variant but the link was in his journal.

Yes zigzag or flat W4's and varying fib level significance does
make sense, but EW theory is not always so straightforward in
practice

[kiravon]

I will simply watch and see if this develops into a Wave 4
and whether this actually helps get in on a Wave 5 or give
me any added confidence should a setup appear

Waiting for Confirmation of Wave 4.jpg

[kiravon]

Into Wave 4 or Continuing Wave 3?
At this stage how can anyone know with any degree of objectivity?
I won't say with any degree of certainty because there is obviously
no certainty in trading anyway

but AO just pops above Zl and already looks like it might go back under,
and the new corrective 'Wave 4' is indeed zig zaggy but it didn't peak
between 38% and 50% Fib so it looks to me like we're still in Wave 3

This isn't my strong point, which is why I'm giving it some attention

Still Wave 3.jpg

[kiravon]

So Wave 5 BEFORE and AFTER Wave 3 = False EW Reading
and this happens a lot so I guess a lot of
discernment is needed and why you would
never use EW as the basis for an entry, maybe
more for cooberation of an entry

5 before 3.jpg

[immy]

We don't take a trade because we think the wave is going to be this wave or that. We take a trade based on our systems generated trading signals. The background analysis that gives us confidence could be anything from Major Trend to Elliott Wave analysis to even S/R zones etc. But the trades are taken on the trading signals. as we all know! Makes sense?

sorry I did not understand the first sentence. Wave 5 before and after .... Could you please rephrase

[kiravon]

No I would never enter a trade based on EW even if I knew what
wave I was in which I never do. But of course if I had a really
good setup which also seemed to be leading into a Wave 5
that would give confidence. But so far I have never had this
experience so I am trying once again to try to see what everyone
else can see.

In the example above Ewave histogram indicated firstly Wave 3
then it goes straight into Wave 5 (so we must assume the little
bump over ZL was at the time considered to be Wave 4) even
though the number 4 does not appear on the Histogram but rather
we cross above ZL and revert back to Wave 3. So I have to conclude
that the indicated Wave 5 sandwiched in between the two Wave 3s
was in fact not Wave 5 but a false reading - which in my experience
is what all EW indicators give, although I don't doubt that ewave is
the most accurate. So the above histogram is all Wave 3 and we are still
waiting for Wave 4?

So in the H1 chart below I must assume that the 23% retrace arrowed
was not Wave 4 as it did not reach 38% and the whole chart is Wave 3?

wave 3 continuing.jpg

[kiravon]

Never Look Back!

I took a trade on the USDCAD M5 last night which
well illustrates the need to never look back!

In the first chart I saw a railway track (Tweezers ) pattern
with Gator pointing down on both TFs.

AO was moving down and price was 'twitching' in the
way it does just before a news release that tells you
its itching to make a big move ( unfortunately it
doesn't warn you about likely whiplashes )

so I could see it likely moving down but not probably
more than 22 pips to obvious prior AIMS, but with a SL
of just 2 pips it was a 1:10 chance well worth taking!

Straight away it started moving down exactly as expected
so I set my 22 pip TP and d SL to -2 pip and went out

Today I see it went down so far +177 pips.

I read everything right except the SL. but I had to be
strict on the SL because I entered on the prior break
of AIMS not a fresh break of AIMS, in other words
it was more intuition rather than strict rule based.

so I wasn't prepared to risk more than a couple of pips.

In hindsight if I had placed a 12 pip SL and just let it run
I would be +177 pips up by now

But I did the right thing because there was a very good
chance I would have lost that 12 pip SL and at the time
I couldn't justify that risk.

So I was actually successful in being disciplined enough
to set such a tight SL

and when I came home last night to find I'd lost 2 pips
I was quite happy about the trade, it was a good 1:10 trade
that taken 10 times would have worked out maybe 3, 4 or 5 times
so even 3 times would mean 66 pips profit against -14 pips total rents

it's just simple mathematics, it was a trade worth taking

My only mistake was checking this morning to see what
might have been and lamenting the 177 pips that I missed
out on.

It has affected my mood for trading today so i t wasn't
such a smart thing to do.

10 to 1.jpg

177 pips.jpg

[kiravon]

Watching USDCAD to Enter the Pullback

6.jpg

[kiravon]

Entered but not sure what to do next

6b.jpg