Since we’re looking for tools that give us a much better edge on our trading, I want to highly recommend Gleen Neely’s book ‘Mastering Elliott Wave’.
Not an easy reading, but definitely worth it.
Happy New Year 
o dear i have that book, i dont get the normal EWT but that book makes me a grown man cry. HARD is not enought to describe it.
best regards
Well after these two mail alarts I started reading Miner’s book.
OK there is no magic here IMO. Talks about two different timeframes (fair enough), each with its own momentum indicator. Calls it Dual Time Frame (DTF). Take our pick. Weekly and daily trading.
Take momentum as the classic definition (mass x velocity). In this case mass being the density/volume of trades per timeframe and velocity being how fast the trade is moving in a given direction. If we have DTF, then we are talking about momentum indicators on two timeframes.
Now the question and IMO is an important one is “what makes momentum indicator so pivotal to this method?”
Yeah it’s hard indeed, but I think it’s worth it.
Well while it is easy to spot the main trend without any indicator, I think it really gives you an edge if you aren’t sure about where to start looking at. As you said, there’s no magic in it, but there are some aspects in the book that I was totally ignoring.
Second of all Miner’s suggest this momentum indicator for entries, (wich I don’t use), but it helps me trail my stops identifying swing highs/lows and stay on the trade for as much as it allows to, unless new patterns get formed (pennants, flags…)
Honestly I don’t totally get how you trade, wich I wish I understand, and that’s why I don’t comment on your posts, at some level I was totally naive in waves when I first started looking at this thread, maybe that’s why this book caused such and impact on me, while you are on a higher level in this matter.
I don’t suggest to follow exactly what the book says, but it definitely contains aspects worth taking in consideration, if you’re not already doing so.
I’ve found a little bit confusing the relation between momentum in timeframes (as I think was one of your points) since in order to ‘match’ one another, you need to look at very wide distant timeframes, e.i, one hour with daily, while I think a smaller timeframe ratio (1:4) makes more sense to me. But as for using the momentum indicator to manage the trade, I find it really useful.
Anyway good to hear your thoughts about it, and if you continue reading the book, I’d like to hear your insights about it.
what about it is great some people say it makes ewt unnesesary hard ?
Have you read the other book of miner he tryes to simplefie ewt he say trade only when you see something to know every wawe is only for academic, not nesesary for traders.
what can we use from neelys book ?
best regards
ps. have you seen the ewt thread started by blue bottle at FF.
I hadn’t read that thread until you mentioned it. Great thread. Actually one of the guys there mentions the book as the base for his Ew analisys.
I’ve also heard horrible comments about it. Who knows, what works for some won’t work for others.
Personally I find it practical, not that academic, I don’t think it can do any harm, I’m giving it a try.
Thanks for your interest in my points.
Well I have read 15-20 pages of Miner’s book. My understanding is that you enter enter a trade when the lower timeframe momentum indicator has changed and it is in tandem with higher time frame. Well I take weekly as my higher timeframe and daily as my trading timeframe. I used to do daily and 4-hour chart but I gave up on that.
Now the method that we are using is telling us note the direction of the price and note the way momentum works. Guide yourself with higher timeframe graph and trade at lower timeframe. OK fair enough.
Now I do not subscribe to the notion that I have to learn every bit about EWT. Well I looked at EW definitions in Wikipedia and have been observing EW charts on instruments. I am pretty certain about impulse waves and less certain about corrective waves. Nice one I understand 80% of EW and that is good enough for me. I only trade when I understand the wave and do not trade on that instrument when I suspect corrective waves etc.
So let me describe a scenario. I attach weekly and daily EUR/USD charts as of tonight. Well I am pretty certain that big downtrend line on daily chart is EWave 1. The weekly pattern shows the same as well. The weekly RSI is upwards and the daily RSI is sort of sideway at the moment as there is hardly any momentum there. So I am pretty certain about the price action and both RSIs are promissing (moving up in tandem). The 38.2% fib is fair bit up so what else do I need to give me more information?
Cheers
EURUSD_weekly_20100104.pdf (35.9 KB)
EURUSD_daily_20100104.pdf (37.8 KB)
Well nothing else actually, pretty simple indeed. So you are trading wave 2 in this case? and then the rest of waves?.
Now I know what you do. Let me read about rsi indicator since I’m not familiar with it and I don’t know what it tells me, but for your explanation I guess it’s for trend direction?
If I’m correct then I suppose your profit targets are based on fib levels and rsi?
Thanks for sharing Mich.
Np. Sorry always late about 24 hours.
Before going into P&L let me bore you the way I understand about RSI (Relative Strength Indicator).
Let us agree that trading first and foremost depends on the dynamics of the market and second the indicators. It is really to be able to make critical decisions when the information at hand is scarce and assumptive.
All indicators like RSI etc are nothing but normalised oscillators (0-100%). Take RSI itself. There is the formulae below:
RSI = 100 - 100 x 1/(1+RS)
With standard 14 period (that is your timeframe, i.e. weekly, daily, 15 min whatever we have)
RS (Relative Strength) = SUM OF CLOSES in the past say 14 periods where CLOSE > OPEN/ SUM OF CLOSES in the past 14 periods where CLOSE < OPEN
So simply you take 14 periods where the nominator is the sum of prices where the color was green (blue) and the denominator is the sum of prices where the color was red!
Now in a bull market where in the 14 periods there was no condition for CLOSE < OPEN, then RS = infinity and hence RSI approx = 100% (i.e. 100 – 100x 1/ infinity ). On the other hand if all was red then RSI = 100 -100 (1/(1+0)) and RSI = 0, i.e very weak.
In practice one never gets these extreme values as computer programs are adjusted to avoid divided by zero etc. The norm is that when RSI is above 80% then the instrument is over-bought and when it is below 20% then it is over-sold.
If you delve into it you will get something like
RSI > 60 Strong uptrend
RSI in between 50-60 is weak uptrend
RSI in between 40-50 weak downtrend
RSI < 40 Strong downtrend
There are other theories around but they tend to end up in some form of Intellectual M* something in my opinion!
On larger timeframes RSI tends to be a slower moving one and hence it is easier for us to gauge the movement of RSI. Again we always look at RSI in conjunction with the price position within the wave. We know how far the price is going to go in terms of its general direction. However, that could be few days. In the meantime the price can oscillate and RSI can tell us how far it is going to oscillate within a day or so which we can turn that into profit.
Again in this game it is all about making momey. If you feel that you are comfortably ahead then just close the position and take the money. A bird in the hand is worth two in the bush!
HTH,
Mich
Sure that helped!
Thanks
EDIT: Stopped out at Be.
Ok I sold aussie from what to me looks like the completion of a correction at 0.9200. Already at be, let’s see how it goes.
Hi,
Going back to EUR/USD weekly and daily graphs I mentioned the Fib ratio of 38.2 previously after Wave 1. Well as you can see see both these plots made it to this fib ration today and I doubled my money. Actually I closed my position because I am not sure whether the price is going to move towards that 50% fib. I will wait and watch for the rest of today and tomorrow to see what price and RSI have in mind and if I see that it is going to go up then I will open a new position.
Cheers
EURUSD_weekly_20100113.pdf (35.9 KB)
EURUSD_daily_20100113.pdf (38 KB)
Wow that sounds great. I was following closely PA on those charts. May I ask where was your entry, stop loss, and how you managed that particular trade?
Thanks Mich.
Hi,
As I mentioned before I enter a trade when I see:
- We have completed one wave. For example Wave 1 for EUR/USD on daily chart
- The weekly chart is confirming our findings
- The fib is telling me where the nearest stop would be 38.2% for both weekly and daily
- We are further away from 38.2% so in this case the price is going to go higher
- Both RSI are agreeing with each other and I can work out how far the RSI on daily chart is going to go higher
- Take your risk at around 2% of your capital. So if you have $2000 then 2% risk at anytime (on ALL open positions) is going to be $40. In other words you should not risk more than $40 dollar at anytime
- Fair enough. For EUR/USD one pip = one dollar. So if you open a mini-lot (10,000) then your stop-loss will be -40 pips from your opening position. If you open 40,000 lots then your stop-loss will be -10 pips (every pip that goes against you makes you lose 4 dollars)
- You then open your position and hope that price will go up or down accordingly. If after a day the price has gone in your favour and you are in profit, then move your stop loss to winning territory. For example you have made 60 pips. Then move up your stop-loss say 38 pips higher (yeah sort of Fib ratio) to 60-38 = 22 pips from where you are. What this means that in case things go wrong (and they do happen) then you walk away with 38 pips in your kitty
- When to close. When you see that the momentum is lost and RSI started side waving and say like my last time you hit that 38.2% and price is wobbling then that is the time to take your money. The best option I have found is to take the profit and wait. You have to make some observation. Did the price broke that 38.2% fib? Well no it did not. It went down. IMO this is the most risk taking position. Always wait for a day or so to see which way the price blows and then open a position. As it happened in this case the price went down.
- Now a bit about this technique. EW with RSI and candles (market sentiments) combined are reasonably powerful indicators. Personally I never read more that 20 pages of Miner’s book. IMO, there is no such thing as a trade that cannot lose or a book that opens the paradise. Regardless of the state of this book or any other book, if there was such a thing then any Bank would have ordered few copies of this book from Amazon and given these copies to graduates with 2-3 years trading experience, set up a six weeks workshop for them and then all of these guys would have been trading Miner’s book with $$$ for the bank. Well there is no such thing.
Cheers
It is way back I have been to this forum so decided to write something. Nothing special. Just simple points. I had about £100 on EUR/USD on Monday and today around 5:30PM London time, I managed to make it £400. No big money but a good return in a few days.
Now if you look at the daily EUR/USD plot you will see a very strong Wave 1 (downtrend) with a shortish Wave 2 and a longer wave 3. Now before taking too much note of Fib number, one needs to remember the common estimates for length of Wave 3.
Typically Wave 3 length is related to Wave 1.
I.e. W3 = 1.62 x W1
or W3 = 2.62 x W1
or W3 = 4.25 x W1
The most common multiples of Wave 1 to Wav3 are the 1.62 ans 2.62 numbers. The main point is that Wave 1 is fairly long itself (see daily attached PDF file). I also attach weekly PDF as well.
When I decide to close a position I look into 15 min chart (see attached). This diagram for me is more valuable for its RSI value. It is seldom that RSI goes below 30 and once it gets there I just close the position. I also check RSI on daily and weekly charts all the time. Often with Waves it is difficult to predict the price volatility. For example in see of reds in daily plot for wave 3 you see just two green candles. In that case RSI will hint if there is going to be an up candle for the day. The simple rule is that if you are not sure then don’t open any position and wait to see what happens for the day.
cheers,
Mich
EURUSD_daily_20100129.pdf (56.5 KB)
EURUSD_weekly_20100129.pdf (36.1 KB)
EURUSD_15min_20100129.pdf (36.4 KB)
Hi all,
Miss me!..lol
I’m still around and trading but just not putting so much time into the forums for now.
Anyways, here’s a pic of our boat from Christmas…finally lol…it’s so hard to get a good one at night.
a system that can’t lose. in my dreams i guess…
That’s a real sweet vessel.
Cool!, looks like Santa did come to town!
Hope to see you around more often. 