I’m having internet problems here, so I’ll be posting until tomorrow. 
Have a great and profitable start of the week. 
[B]Why is it important?[/B]
Market itself has a rythm, not a perfect one, but when we can spot that particular rythm and a series of repetitive patterns on it, we can have good chances to know when the next important event will take place.
It’s like a heart rate. Not always we will have 70 beats per minute, but we know that if we have less than 50 or more than 130, things are not going well.
Also, everything in life needs time to get to a point of maturity.
Think about food and how a fast cooked meal, more than likely will result in a raw, flavourless one.
On the other hand if you take too much time to cook it, it will end dry, or burned!
Well the same applies with market structures.
If a correction takes too little to show signs of completion, it is probably not finished at that particular time and will take new levels.
If it takes too long, well it probably is no longer a correction, but a new trend, or nothing that we could properly identify at that time.
[B]
Practical uses.[/B]
For this particular method market timing gives us the benefit of knowing well in advance the hours or days in wich a correction will probably be completed. Not always this will be the case, but certainly this is another tool to take into consideration.
How to detect a period on time when a reversal/trend continuation is more likely to occur?
Well we use three techniques, in this particular order:
- Fibonacci time retracements.
- Time cycles.
- Fibonacci time projections.
Honestly, 2 and 3 I don’t always use them, because of the time it takes to spot them, and because on irregular corrections, you have to incur in several modifications, but sure they’re worth it.
Let’s say that when the Fibonacci time retracements are not enough, we proceed to the next analisys.
They work very similar like fibonacci price retracements.
Since we’re using harmonic patterns, price is not the only harmonic characteristic we’ll have, but time.
Many times price makes a higher high or a lower low on one of these levels, but instead of talking of exact time levels, like in price, we’re going to talk about ranges.
Before explaining how to spot them, I’d like you to add to your fib time retracement tool, the following extensions.
- 138.2
- 150
- 161.8
- and 200.
Just like in price, we’re going to spot or starting point at the XA leg, but backwards, so we’re going to draw our fib time retracement from A to X, like this,
This is an eur/jpy 4hr chart. You can check it in your platform. Fib time retracement was drawn from A to X, and you can see the 138.2, 161.8 and 200 extensions.
For a correction to be considered completed in a reasonable period of time, we assume that simple corrections are going to be completed in between the 138.2 and the 161.8 fib time retracement.
Complex corrections could take up to the 200% extension, but no more.
Corrections completed before the 138.2%, are more than likely minor support/resistance zones and not the true end of the correction.
This is a very basic rule, that also allows symmetry to be developed in the pattern. It makes sense.
What I really like about this tool, is that it keeps us away of what I call pseudo gartleys.
I can’t find a real example right now, but I’m going to show you what I mean with the following scheme.
You might as well have found an Ew structure, a gartley, and the fib convergences, but time is not the minimum ideal.
Well more than likely that is not the real end of the correction, and there are more legs/correction left to be completed.
Like in the following example.
A way of reducing the range of time in wich a correction has the highest probability to end is projecting the fibonacci time tool, just like we project the fibonacci price levels from AB to CD
Ok with the same Eur/jpy 4hr chart, now I drew my fib time tool from B to A, and then moved it right to C, and what do we see?
Well the recent highes high, (red arrow) was made at the 161.8% fib time extension of BA from C (red thick vertical line), and it’s located within the 132.8 - 161.8 range of the XA fib time extension.
See the utility on this? 
If we had a fib price convergence there it surely would be a great pattern to trade.
There’s a way of narrowing the possibe time target for the resume of a trend, along with fib time retracements and projections… time cycles.
Time cycles are nothing more than projecting the possible completion of a swing high/low, based on how long did it take for previous swings to be completed.
I’m sure there has to be an indicator out there to know this, but I do it manually and maybe that’s why I try not to use them, lol.
[B]How to identify time cycles.[/B]
We have to count two different ranges.
For bearish patterns, we count,
- Previous swings lows to highs.
- Previous swings highs to highs.
For bullish patterns, we count.
- Previous swings highs to lows.
- Previous swings lows to lows.
Up to five previous swings are good enough to take in consideration for this countings.
Once we have our count for each swing, we choose the minimum and the maximum number of bars in that swings, project them from the last swing, and our next swing should end sometime in between the minimum and maximun range.
This is easier to know when we have a simple AB = CD structure, but when our CD consists of various swings, it’s necessary to redraw and re project them. That’s why I don’t use them when the other elements are good enough for me.
Ok time cycle example in the next post. 
Eur/jpy 4hr chart.
Bearish pattern.
We need to spot cycles between highs to highs, and between lows to lows.
Make sure to consider only significant swings.
First let’s count highs to highs.
Ok now you see that instead of counting candle by candle, I use trendlines to know how long a swing is.
But for didactical purposes, let’s take a look at the distance, and let’s say that:
It took 18 candles from H1 to H2.
It took 52 candles from H2 to H3.
It took 41 candles from H3 to H4.
It took 29 candles from H4 to H5.
It took 34 candles from H5 to H6.
So we could tell that our range of highs goes from 18 to 52 candles, if they are way too apart from each other, you can eliminate the highest and the lowest, and use the in between numbers.
In this case 29 and 41 candles, that we project from the last swing high to project where the next higher high is more likely to be made. In this case, the area between the green vertical lines.
The same procedure applies for the lows to highs, or highs to lows process.
Now it’s time to integrate everything to find possible trades. 
Ok by now, we have all what’s needed to identify high quality set ups. We should have a coincide of this three characteristic.
-
We have identified and Elliot wave pattern, 12345 impulse waves, AB corrections, and now it looks like price is completing the C corrective wave. At the completion of D we should be looking for signals to go long/short.
-
We identify the Gartley pattern with the possible fibonacci convergences.
-
We identify the possible time of completion of the correction.
So, below I post an actual trade I posted on the 30 pips thread way in advance. Not every trade works, but this is what we’re looking for. :rolleyes:
It’s the eur/usd chart. Bearish pattern. By now you should be able to identify the possible time of completion. Convergence goes from 1.4023 to 1.4025.
50% XA and 161.8% CD
Price reached on time the 1.4024 level and dropped down.
Ok I have finished posting how to identify our trade set ups.
This is half the story, we need to talk about trade management, which I’ll be talking about until tomorrow.
Have a great afternoon.
Thanks man, you’re really outdoing yoself - my EW skills will shine with the fibo info you just supplied. I 've a post #173 burning money management issue over at the Ichimoku Trading System thread that no one has set straight yet, hoping you can check it out and include the answer in your tomorrows. Looking forward.
Thanks Chizzen, I’m sure fib levels will complement what you do with Ew.
I just took a look at your money management table, it’s just great, easy reference before entering a trade.
Did you solve your margin question?
The margin issue I just mention and it’s not the pressing problem. The problem was the disparity in the calculated dollar amt and the acc/platform amts for pip change for the same position size. For instance, on the platform (MT4-IBfx Mini) a position for 0.5 (5 mini lot sizes) for 50p move on table shows $250 net, while it ain’t so on platform it shows $25 net.
The Koala Alpari Statement (you’ve got to see it) conforms to the table I realized so it must be an IBfx thing? What is the situation on your side(s)? Again, guess my eyes were heavy – I read money- not trade-mgt! My bad finish yo thing first.
Once we have all the favorable conditions for a set up, we still need to evaluate some conditions before pulling the trigger.
As with every activity, you have to develop certain feeling about when things are in good condition or not.
I have four main reasons not to take at trade when a set up has shown up itself.
-
One, and only one of our main aspects (pattern, price, time) has became invalid.
I know it sounds logical, but I need to put it so you don’t forget considerin it. It takes all of the conditions together to consider a valid trade, and only one missing to invalidate it. Right before hitting our D point, price starts ranging for a long period of time, and exceeds the time for it to be valid, then don’t take it. -
Long body candles.
This is an important one!. When just before hitting D price has so much momentum that it’s making long body candles (compared to the previous candles), then don’t take the trade. This condition totally contradicts the purpose of our analisys. We are looking for a trend reversal at D, thus signs of price exhaustion would be the best condition for the trade, not the opposite. -
Early retracement.
Many times, price will have an important retracement 10 or 15 pips before it hits D. When price retraces early before D and up to/close to the 23% AD retracement, consider the momentum gone and invalidate the trade. If price goes back up again and hit D, it will probably won’t respect the convergence and will continue to new levels. -
Stay away from important news.
While I’m of the idea that fundamentals are already contained in the technicals, big news can really ruin your trade if you trade during them. Avoid pulling the trigger when news are released, that’s no man’s land and you can’t know the reaction in advance. If you follow the news, observe the reaction, and with time you could have an idea of the reaction of the market pre and post news, but not during.
These are important points to take in consideration, don’t ignore them, and incorporate them to your trading strategy.
Well this is what I mean with the stated above, this is an example of a long body candle, and the pattern failed.
Well while I don’t like to use them, certainly they can confirm the information that we already have, that’s it, confirm it.
Regarding a completed pattern, I use the slow stochastichs indicator in order to spot divergences. When they happen, well I take it as a sign of confirmation.
Later I will tell you how I use the slow stochastichs to trail my stops.
Well I guess this is the easiest part.
Since we did all this job so far to spot really narrow areas of support/resistance, well I entry a trade at the convergence point, pips more pips less.
For pairs with wide spread, make sure you place your entry a couple of pips below the entry point.
Mainly I use entry orders instead of pulling the trigger at market.
The main reason is because many times my platform loses connection when I pull the trigger and I miss my entries, lol, but also because at that level price behaves crazy and volatile, and you can miss a good price if you pull the trigger instead of placing an entry order.
A really important part! I guess this is half the work, and what separated succesful traders from loser ones! Seriously, I bet ten traders with the same set up could end up with really different outcomes.
[B]Stop loss[/B]
Our fib convergences should provide us with strong support/resistance areas. I mainly use stop losses of 30 pips, maybe 33 depending on the spread, but to me that is wide enough to know if a pattern will work, and it even gives you room to get out of the trade if there is no momentum favoring our trade.
50 to 80 pips on the daily patterns, depending on how tight the convergence is and volatility of the pair.
G/J I use a 40 pips stop loss in the 4 hours.
Once you identify the fractals on the smaller timeframes, 20 to 30 pips are more than enough.
Getting out with small losses or at breakeven. The kiss and good bye
Well maybe all the conditions were met, but once in the trade, price doesn’t show momentum and it’s giving us signs of no reaction to the convergence.
Even though the stop losses are narrow for a good risk reward ratio, they’re wide enough to let the price show us fail signs and retest our entry point for a safe exit at breakeven.
A candle close on the negative is a sign that the trade is not going to work, and you can close the trade at that moment or wait for price to retest your entry point before taking off on the negative side.
This is what is call the kiss and good bye.
Price clean crossed the convergence point, went up a little, retested convergence and took off.
On the retest we can exit the trade at breakeven.
[B]Our convergence point worked nicely[/B] and now we’re seeing some action in our favor.
Many many times, price will actually find support/resistance at the convergence point, and will actually go in our favor once in the trade.
Even though price is already going green, the trade is not guaranteed and we have no certainty that it will end up resuming the trend effectively.
So once price reaches 30 pips I move my stop loss at breakeven, or breakeven plus 3 - 5 pips. That depends on the momentum that price shows at the time.
You have two options here. Close half the trade at 30 pips and breakeven the rest, or breakeven the full amount.
Personally I rather left open all my positions and just breakeven the trade.