It has been another great week on the indices with DOW again at all-time highs. The harmonic pattern traders will have probably done some projections and not been surprised by where price got to. DOW didn't surprise us in the Skype Trading Group - we'd been looking for TZ2 on D1 all week.
TheHarmonicIndi has, for quite some time, had the capability of doing D point projections from partial harmonic patterns. I had included the code into eWavesHarmonics (eWH) a couple of years ago but never got around to finishing it. I'm happy to say that I've made some progress with that recently and it now appears to be functioning well; and better than in THI.
Using the new 'D Pro' feature on DAX D1, back on 14th October (as in the above left picture) two possible patterns were projected: Butterfly and Deep Crab. This week, a month after the projection, price did indeed climb to complete the Butterfly pattern: about 800 points up from the 14th.
Projecting harmonic patterns can be a great way to add confluence to your targets for taking profits. The upgrade is now available as a Beta version from the eWH installation page, if you would like to try it out; I might make some further improvements to this feature in the coming weeks.
On the subject of eWH ... Michael in our Skype Trading Group (a super nice chap and terrific trader) asked me how the wave count could be restricted to bullish or bearish. I didn't think it could be done but he discovered a way that I really should have known about. Press the Bu0 and Be0 buttons then delete the start of the bearish or bullish count (the target symbol). Le voila! ... you have one or the other counts - simple!
Trading the lower timeframes is great fun, particularly the one minute chart, but over-trading it can often be the thing that kills a trader's account.
Have you experienced those days when the trading demons take control, and every price move seems like a good setup worth trading, or there is a need to keep moving stop losses in too tight?. In the space of a few hours, an entire week's profits have been wiped out, or worse. It's easily done and I know plenty of traders who suffer from this affliction. See this blog post, for more about trading demons.
To help control those demons, I've made some changes to the 'Trade Levels Indi' - the free add-on for the Advanced Trade Manager - that was originally created to show risk:reward levels. We call this upgrade the 'sleeping policeman' (speed bumps in the road) because it's intended to slow traders down and prevent over-trading. The new features include parameters for: -
In addition to the above, there is an option to limit the pip-risk on your trades, using the ATM swing lines, so you look for the best R:R opportunities.
And ... there is a summary of trades for the day and personalised messages, that you define, to remind you, at regular frequencies, of good trade practices, as in the picture.
It's available for download now - completely free if you have a valid ATM licence.
Many Forex trading system sellers love to quote probabilities and statistics but there are usually two main problems: -
Here are some real statistics, from eWavesHarmonics (eWH), that I’ve just shared with my friends in the Skype Trading Group. It’s an exercise that I did a few years back that seemed worthy of being repeated with more recent data.
Before we get into the numbers, I’ll just define some key points.
eWH, like eWaves v1.0 shows: an impulsive wave labelled ‘3’; a corrective wave labelled ‘4’; another impulsive wave, with divergence, labelled ‘5’
The wave labels often align perfectly with Elliott Wave counts but not all the time – that’s an important point to note.
From the waves 3 and 4, eWH automatically projects target zones (TZ) 1 and 2, using Fibonacci expansion levels.
Now onto the statistics … the analysis, gleaned from several instruments over all available data with my broker, looks at how often TZ1 and TZ2 levels are hit, when a W5 has been identified. The W5 could be a truncated 5, where price has just corrected to the 3 level, long before TZ1 or TZ2 has been hit. I hope that makes sense.
We are particularly interested in the percentage of times the TZ levels are subsequently hit and how much the W4 needs to retrace the W3. As we’re not talking Elliott Wave definitions, all of the time, the depth of retrace could often be significantly more than what you’d expect from a regular wave 3 and 4.
This information is designed for traders with eWH but can also be used by those with eWaves v1.0; although it should be noted that eWH uses some different algorithms for defining the start of waves and thus the TZ levels – they will often be the same though.
Let’s start with Bitcoin 15-minute chart, from 31st May 2019 to 18th Oct 2019.
Anything with more than a 50% probability is a great thing, in trading, particularly where the R:R is greater than 2. So, the chances of a W5 going on to hit TZ1 is 52% - that should tell you that it’s a good thing to lock profits, when a 5 has been identified, after you’ve entered on the W4 – e.g. on a TLB, with a view to price going up to TZ1. Once price has hit the TZ1, you can lock profits again, knowing there is a 37% probability of price going on to hit TZ2.
The average max R:R of 1: 11.37 is fantastic but, I hope, you’ll be wanting to know how that is calculated. I’ve assumed a perfect W4 entry – getting in on the open of the bar after that which formed the W4 extremum. Seldom will traders be able to enter with such finesse but it’s certainly not impossible, e.g. a clear rejection candle at supply/demand or support/resistance. I’ve then looked at how far price travels, over the next 1000 bars, without breaking the extremum of the W4. For most traders, the average R:R will be significantly less than 11 but, of course, there will be trades that offer significantly more. The maximum that I found for Bitcoin was 142 – and much more on other instruments (spread not factored). Needless to say, you would need to be a bit of a trading wizard to get that but, again, it’s certainly not impossible.
Now, with the stats fully explained, let’s look at some other instruments and timeframes. Remember, anything over 50% is great but, for TZ2, the R:R will be much greater than TZ1s, so we can accept a lower percentage hit rate.
Gold M5 29/7/19 to 18/10/19
Number of W5s found: 174
Number of TZ1 hits: 88 (51%)
Number of TZ2 hits: 53 (30%)
Average Max RR (for 1000bars): 7.65
DOW M5 20/12/18 to 18/10/19
Number of W5s found: 603
Number of TZ1 hits: 381 (63%)
Number of TZ2 hits: 258 (43%)
Average Max RR (for 1000bars): 10.45
USDJPY H1 22/2/19 to 18/10/19
Number of W5s found: 47
Number of TZ1 hits: 31 (66%)
Number of TZ2 hits: 20 (43%)
Average Max RR (for 1000bars): 10.30
DAX M5 6/5/19 to 18/10/19
Number of W5s found: 329
Number of TZ1 hits: 198 (60%)
Number of TZ2 hits: 135 (41%)
Average Max RR (for 1000bars): 9.88
EURUSD H4 2/3/10 to 18/10/19
Number of W5s found: 117
Number of TZ1 hits: 74 (63%)
Number of TZ2 hits: 39 (33%)
Average Max RR (for 1000bars): 8.60
GBPUSD H1 20/9/17 to 18/10/19
Number of W5s found: 122
Number of TZ1 hits: 74 (61%)
Number of TZ2 hits: 47 (39%)
Average Max RR (for 1000bars): 7.01
What’s the most common percentage retrace, that W4 does of W3 before forming the W5, you might well be asking. I can answer that for you …
With all the data, from the above instruments and timeframes aggregated, the results are: -
W4% retrace Occurrence
Probably no surprises there: between 30 and 80% is a good W4 retrace of W3, with 50 to 60% being the higher probability.
You might well have a few more questions, if you’re still awake after reading this blog post, one of which is: how did you get these stats? That’s simple – I wrote an indicator that works with eWH in ‘test mode’ – whenever a W5 is identified, from the auto-scrolling, the code writes the values to a CSV file. I then created some pivot tables and extracted the data. It’s all above board and genuine, the original files have been shared with my friends in the Skype group.
I have also done an analysis of the best times to look for W5s on DAX and DOW, but that’s for another day.
Buy the dips and sell the rallies, is what we’re looking to do with eWH. When we do that, we target the 3 SD zones, first, then the TZ levels. When all is said and done, this is a very simple approach to trading, with – as the above results demonstrate – a reasonably high-probability of having a very successful trade.
The art is being able to identify the possible end of a W4 – that is covered in the trading course.
Bitcoin has been in a deep correction since the incredible bull run that ended on 26th June, up near 14k. The recent criminal investigations and realisation that transactions might not be as secret as some shady dark-web characters had hoped, has done nothing to help the BTC bulls' optimism.
Just for a change, I thought it would be good to see where it might head to next, using some of the features of eWavesHarmonics (eWH). The red 3 shows where the last impulsive bear move ended and subsequently corrected - giving us a mini demand zone, shown by the green rectangle. This is obviously a key support level for us now - you don't need to be a trading wizard to work that one out. The important thing is what price does next with that level. If it breaks, as I suspect it will, we'll be looking at the TZ1 and TZ2 levels, auto-plotted by eWH.
The Fibonacci cluster-clusters (purple horizontal lines) provided resistance yesterday and give price some direction below, should price break the support. Needless to say, these levels will be good to watch, above and below where price is currently at. Another level worth watching for is 6400-ish (thick magenta line) - the gap formed back in May that was never properly closed.
There aren't too many reasons to be bullish on BTC at the moment but let's see if the green 3 forms a strong base, or breaks, in the coming days.
It's been a crazy week on the markets, with Brexit and USA-China trade talks. We've seen incredible daily ranges across nearly all instruments: the DOW 5 day ADR is 425 as I type; the DAX gained over 2.5% today; GBPJPY did 392 pips ... fantastic for us traders.
Last trade of the week was really something special, as you can see in the picture: risk/reward of 5 to 1 in one minute !!! DOW had been very volatile since FOMC Member Rosengran starting speaking (watch out for those speeches) but this quick move certainly exceeded my expectations.
The point is, as the lottery slogan goes: you have to be in it to win it. When you see a really nice setup forming, with a very low pip risk and good R:R potential, you would be negligent to not place a trade. In this case, I had ATM on a default of 5:1 R:R, price had corrected and looked like it was forming a base for another move up. In the blink of an eye, the trade was entered and closed. A nice end to the week, with a helping hand from the Trading Gods and eWavesHarmonics..
More of the same next week, we hope.
And that's pretty much what we do all day every day, with eWavesHarmonics. Trading really doesn't have to be any more complicated.than that but thousands of traders make it horrifically complicated; and there are countless scammers telling you it is very complicated.
Does it look complicated to you?.
Want to know how to easily identify impulsive waves and find the likely end of the corrective waves (sometimes well-before price gets there)? It's all in the Trader Training Course.
Every now and then, thankfully with a fair degree of frequency, we get some really nice moves on DAX that make trading seem so easy; today was one of those.
I've made a little video that shows how we used the eWavesHarmonics tools to identify the setup and targets. It also shows some of the discussions, about the trades, that I had with my trading friends.
I touched on the subject of the ABC123 indicator in the previous video ... it's a sort of MT4 Elliott Waves indicator - yep, only sort of - it doesn't replace the expert eye of an Elliottician.
It's not intended to do perfect Wave counting, at least not at the moment. But ... it does do the following: -
The ABC123 indi is still very much work in progress but I've made a video (in my usual rough-and-ready video producing fashion), that shows it in more detail - initially intended for a few of my trading friends who are putting the indi to the test; and already getting some nice trades from it.
Drop me an email (or use the contact form) if you would like to try the early version - I'll make it available (for a very reasonable price) as I did the Wave Finder indi if there is enough interest. It only works with eWavesHarmonics though.
This indicator is similar to the Snorm Labels, on the Free Indicators page, but has been specifically designed for Elliott Wave analysts.
There's nothing fancy about it - just a quick way to label the waves in a consistent fashion. You can see it in action on this short video ... which also includes a little preview of the project that I'm currently working on - related to Elliott Waves.
If this is something that you'll find useful, click on the eWavesHarmonics page and scroll down to the download file ... free of charge for nice people only.
If you have a current eWavesHarmonics licence., you might like to download this free indicator from the eWH Shop (link on the installations page). - it won't work without eWH.
The Snorm Pivot Confluence indi, draws daily, weekly and monthly pivot levels, along with daily ADR and/or ATR levels. It then looks for confluence of those levels plus any others that you have on the chart, such as: eWH target zones (including the multi-timeframe TZs that the Wave Finder plots), support and resistance, fibo clusters, or your own manually drawn lines.
As you can see from the above picture, bold yellow lines are drawn where levels align; you can choose a differnt colour if yellow isn't your thing. Seems like the bottom yellow line was enough to stop the collapse of cable for the week. If only it could stop Boris Johnson dragging the UK towards a no-deal Brexit :)