Elliott Wave

[dlynch82]

This week I think I will trade the GBP/USD pair as the GBP/JPY is in a bit of a consolidation at the moment and I see a good op in the GBP/USD pair. The chart below shows my preffered count for this pair. Note the .618 extention of the extended wave 1. Elliott states that if wave 1 is extended then waves 2-5 TEND to end at the .618 extention of wave 1 which in this case should take us to 2.0220 give or take a few pips. Not to mention the expected UK rate hike on thursday.

ScreenHunter_01 May. 06 18.26.gif

[dlynch82]

Another interesting tid bit that supports GBP/USD over 2.0200 is shown on the daily chart below. The 1.000 fib extention for the larger scale count comes in at 2.0208 +-.

ScreenHunter_01 May. 06 19.32.gif

[dlynch82]

It looks to me like wave 2 is almost over. We are working on wave 4 of wave C. Then we will have a wave 5 down to the .786 ret of 1.9869 or so then wave 3 up will be in full effect (hopefully). See the chart below.

ScreenHunter_01 May. 08 15.06.gif

[dlynch82]

Looks to me like wave 3 is on it's way to the highs maybe tomorrow. The chart below shows my preffered count. Wave i and ii of 3 are about done and wave iii of 3 will be starting overnight or early tomorrow morning.

ScreenHunter_01 May. 09 17.59.gif

[dlynch82]

Well after this mornings trading it looks like the above count is out the window for the time being. The larger count still suggests a higher pound but we will have to wait and see.

[dlynch82]

Now even the larger count is out the window. The wave count has been invalidated by the drop below the wave 1 high of 1.9822. We either just had a truncated 5th wave(wave 5 fails to surpass wave 3 high) or the count is just incorrect. We'll see by what happens next.

[fractal]

Hi dlynch82,

Here is my GBP Daily and 240 min charts I have been working with. The count on the Daily chart I have been tracking since about October of last year. The count on the 240 min is more recent.

The main thing to note is that I have the count complete at the 2.0133 high. While the price action from that high looks corrective (overlapping), it's also important to keep in mind that, since the prior up-wave may be complete, it could also be a series of 1-2, 1-2, 1-2 developing. The "C" impulse waves in the A-B-C corrections are what qualify the pattern as a potential series of 1-2's.

I traded the last down-move, based on the Elliott wave count and the channel break-and-retest. Elliott channels can tell you a lot. In this case, the channel on the Day chart was tested 3 times. You can see the retests on the 240 min chart even better. You can see the charts of my trade on this thread:

http://www.babypips.com/forums/free-...ing-trade.html

The recent action should be proof-positive that the news doesn't matter. To me, the only news that matters are the really scary movers, like Non-Farm Payrolls. They are scary to me because they are traded by a large number of highly emotional people. I get out of the market before those big announcements and wait for a new week.

The main thing I keep having to remind myself is that Elliott Wave counts indicate probabilities, not certainties. The main problem, as Prechter says, is that when a correction starts, you don't know what is evolving or when will end until it is almost over. The impulses are easy to see.

Anyway, it looks to me like you have the methodology pretty well figured out. But like "divergences", wave counts can get "run over" for seemingly no reason. The important element is not to get frustrated when a count doesn't work out. The counts are just another way to estimate the probability for the next move.

Here's another great observation from Prechter. Two analysts can each be right 70% of the time, and still disagree 60% of the time, if they each are wrong at different times. Fortunately, you don't even have to be right 70% of the time...

Have a good weekend.

[fractal]

Hi dlynch82,

You posted in my thread while I was coincidentally posting in yours at the same time...

The main thing I have observed about trading is to try to not get into the price action when it is in the middle of a range. I like the "edges" much better. That statement is not easily translated into a rule, I realize, but if a person trades a while, they kind of get what it means.

I like Prechter's analogy best about trading "rules". Sometimes the best course of action is to break a rule. In my opinion, the only "rules" a person should have are 1) trade with a stop 2) don't move stop against the trade if in a losing position 3) don't risk too much on any one trade; 4) understand and actively manage your emotions. Beyond that, it's all setups and probabilities, and Elliott Wave is no different than any other method in that respect.

So my strategies right now on GBP are to wait for some more price action before taking action.

1. If there is more selling, I will look to see if support is found near the recent lows (deep pullback to .618 or .764), or just below (1.236 or 1.327). If so, I'll WAIT for the price to cross the 20 SMA again going up on the 60 min chart to consider buying.

2. If there is more buying, I will look to see if resistance is found near the recent highs - again a deep pullback between .618 and .764. If so, I will WAIT until the price crosses the 20 SMA on the 60 min chart to consider selling. This is my preferred strategy, because if this happens, there may be a downward 1-2, 1-2, 1-2 in place. The "third of a third" wave is swift and powerful, and I'll want in on that.

The current support is at C=A for the last 3-wave down-move, and at Fib =.382 on the daily chart. So, there is potential for a rally, i.e., a setup for Strategy #2. I'll post some cleaner charts next week if a good setup happens.

As you say, more price action is needed before new setups really starts to form.