Hey there Cpip, thanks so much for your kind words, we are happy to hear that our LTR discussions are useful for you. I will try to answer your questions as well as I can, however I think the course that we are preparing (quite detailed) on EW will probably make things even clearer. Anyway, your questions help me prepare this course, as I understand what it is that our traders are interested in in particular.
OK, let's take them one by one. First, there are impulsive waves and there are corrective waves. The impulses are a category of their own, as are the zig-zags, the triangles, the flats, and so on. I am aware of these waves and probably without mentioning them aloud I'm trying to classify them when we discuss in the room. Of course if I started classifying them and entering into all the theory the analysis would get way too complicated and everybody would just put me on mute
You are right, waves are more complicated than just impulses/retracements, however if you try to stick to the most general tendencies you observe that the markets have these 2 tendencies as clearly dominant. So, what im trying to say is that maybe not all moves are simple 1-2-3-4-5 / 1-2-3, but we are not too far away from ANY move if we simplify moves to these general patterns. Also, before moving on to trying to identify each type of wave it is essential that you be able to understand the market moves in terms of impulses/retracements (before going in detail to see what kind of retracement we are looking at, etc.)
We cannot determine price action in the future, that's something that is just not possible. But EW can help a lot in increasing probability for a certain direction - which after all is my primary target. Yes, you can be SURE that after an impulse you will have a retracement, that's 100% sure - but how can you be SURE that the wave you are looking at is an impulse? You may get a probability - yes - but being 100% sure that a certain wave is a retracement on any timeframe, is just not possible. The only moment when you know for sure that a particular wave is complete is once it is actually over - and then it's too late to TRADE that wave... What remains is to trade the next one, but if that one is going beyond the limits of the correction - bang! this new one becomes an impulse and the previous one will in fact turn into a correction...
so, what can we do?
EW have a predictive nature, and a way to give probable setups or "pictures" of the market (as I like to call them). But we should not get too excited about that and try to be magicians... Even the best EW analyst, a person that sees waves everywhere as accurately as it is humanly possible is not able to predict with 99% probabilty a certain move. But he will get a higher probability for his trades than a trader who does not go deep into any strategy, but instead tries to catch something here and there... With a good money management applied with discipline and a 65% probability to be right - here's a good trading model, a trader that can make good money in the market in the long run.
In the course that I intend to start in January, I will try to explain waves in some detail, then go on what we are mostly concerned about
: TRADING THE WAVES. Will try to give you guys at least a few scenarios where and how to try to enter on a EW and exit the position, together with a coherent strategy. That is where our bias will play its role... With your generous help and some open LTR testing we could devise a system together and then follow it up in the room, helping each other to make it every day better and support our trading, regardless of which is our primary strategy. I really want you guys to understand the waves, so as many of us to participate in spotting those points on the chart where a trade can be placed with a good probability and a good risk/reward ratio. Im not saying we should all trade on waves - but im quite sure it would not hurt anyone if the waves are confirming a certain trade that he/she is taking on a completely different technical pattern.
> I am aware of the Elliot wave slides in the forum, but what other rules are there about wave size. I am asking this because I recently saw you copying a wave 1 from a previous impulse and putting it as an A ( I think) and that's how you determined its size. Do you have any resource where this is all is spelled out CLEARLY? -> answer:
Wave size has to do with certain rules and guidelines of the EW. For instance, W2 must be minimum 20% of W1 (this is a must, a rule), or Wave B MUST retrace at least 20% of Wave A - these are rules. Also, you have facts like: Wave B is most likely a 38.2% ret of Wave A (a guideline, a probability), or Wave 3 is between 1.5 and 3.5 the size of W1 by price (most of the time=guideline), etc. We will study these rules and guidelines in the course, soon (I am now working on a good presentation form for these rules and guidelines, which are many). So, when I am duplicating Wave A and set that duplicated wave on point B to get a possible extension of Wave C, I am going on the guideline that says: "Wave C is most likely to have a similar price length to wave A". That means we have a higher chance of that being true, but we do NOT have a clear certaintly that will be the case. We can ASSUME that to be true, but we cannot bet our house on it.... It is just one more step in trying to stay ahead in this probability game and make the most of the edges offered by our technical analysis. If I was correct in one case that is not surprising, since the probability was on my side, however we must have our money management in place when we are wrong and probabilty is NOT confirming - trust me, there are many such cases and there is nothing I (or any of us) can do about it.
With all rules applied and as many guidelines that we can find respected, we can get a highly probable elliott wave - That's as far as I would go in the sense of "predicting" the market, or trying to guess where price is going. But if we do this well and are disciplined enough, that's all that we will need...
How much must or can an ABC retrace after an impulse and how large will the impulse be after an ABC? -> answer:
That's a question with many answers, let me try to offer you some.
First, it depends on the impulse (could be a W1, W3, W5, WA or WC - to name only the majors). If your correction is a W2, it MUST retrace minimum 20% (rule), most likely you will have minimum 30% (guideline), less than 80% (guideline), 50% or 61% most likely (guideline). If your correction is a W4, then you can expect a move of: more than 20% of W3 (guideline), very often 38,2% of W3 (guideline), rarely more than 50% of W3 (guideline). If your retracement is a WB, then B must be at least 20% of A (rule), more often minimum 30% of WA (guideline), most likely 38.2% of WA (guideline), next most likely 50% (guideline), next most likely 61% (guideline). Quite a lot of "possibilities", don't you think?
The extension of an impulse after a correction is also determined by the nature of the correction. There are many cases, and we will discuss most of them in detail in the course (we need to have a structured approach to these things, so as not to get overloaded with too much information). Also, I'm trying to keep the analysis free of such very detailed notions and only keep them in mind when drawing the waves, otherwise we will discuss them so much that the bird will fly off the fence before we get the chance to take its picture -> the wave will be over before we are done looking at it from all angles...
I must thank you for raising all these issues, hope this helps to clarify some of the questions to some extent. I promise after the course things will get clearer, and more fun - once we start applying the notions to the market and get some nice trades out of the charts
Have a great week, and see u all in the LTR tomorrow morning!
Mihai
Elliott Wave - waves size, rules/guidelines & more
Re: Elliot Wave Theory
Linear Mode
