The Importance of the Dog Leg

Yesterday I proposed a new system http://forums.babypips.com/free-forex-trading-systems/37156-hot-dog-leg-system-20-pip-eurodollar-scalper.html

I’ve been working for quite a while on getting something as simple and as effective as possible and here is one of the building blocks that I used for it.

The Dog Leg (Part of Elliot Wave)

Now at one point in my trading career I studied Elliot Wave theory very in-depth only to realise like most I was just searching for the Woolly Grey, the more sophisticated the better? NO.

But what I did realise over time is that you could use the basics of Elliot Wave theory to great effect.

So what am I getting at here?
If you look at the image above you can see a dog leg shape, and by checking if there is a dog leg shape coming up to your setup, the probability of your trade working out is massively increased.

As it happens the market did go short after I took that screenshot, but that is not the point, the point is that the chances of the market going bearish after the top peak is so much higher then the reversal right in the middle.

Listen up:

I don’t know what kind of dogs you’ve got in Wales there but I’ve looked at your graphic and my dogs’ legs for two days now and I can tell you that my dogs’ legs don’t look ANYTHING like that!!! LOL!!!

On a SERIOUS note though:

I’ve been looking for this ‘phenomenon’ since seeing your post yesterday and let me ask you this: would you not say that the DISTANCE of each ‘leg’ is important??? In other words: using your example would you not say that the distance from the beginning, or bottom, of your purple line to the ‘middle’ and then the distance from the ‘middle’ to the top of your purple line is indicative of ‘something’??? The only reason I ask this question / make this observation is because looking at some charts: I’ve noticed (most times anyway) that if the distance between the first retrace and the second retrace is very close (closer than say the distance from the beginning, or bottom, to the first retrace) then there is yet another ‘leg up’ before price turns??? And then again: are we not then talking about fib retractments and ‘stuff’ like that or that ‘ABC stuff’???

Just curious (and feeling bad for you because nobody had bothered to acknowledge your post)!!! LOL!!!

Regards,

Dale.

Yes Yes Yes, and thanks, I feel more and more like Cassandra every day, the more sense I make the less notice is taken!

Yes it is the ABC stuff, and I try to keep everything as simple as possible, we don’t want to be thinking too much do we ;), yes you can analyse and figure out if it’s ABCDE and so on and so forth and often it can be equal distance and Fib percentages, but simply your trades will be much more high probability if you are trading from a C point rather than a B, and I’m sure the Elliot Wave purist might well go in depth about which point is referred to as A,B and so on, but I say simply look at the diagram and it tells the story.

Nah: all that stuff is too ‘deep’ for me!!! LOL!!!

Regards,

Dale.

There was a time in the past when my eyes sticked at my charts I saw giraffes and camels there. Looking to get long at the neck or front legs and analyzing the shape of the body for probability check. Plus to decide if it was a camel or dromedary. A dromedary had more probability than a camel. I am however very lucky this time is over. How was that saying with if chaos looks orderly … something is weird? :smiley:

You obviously forgot Rule No1 - Never trade after taking LSD.

What I refer to in this instance as a dogleg is part of an Elliot Wave, very significant.

No, I was just kidding a bit. To me your chart looks more like a giraffe than a dog. :wink:

Don’t take any notice PPF! :slight_smile: Casting pearls before swine… LOL.

Actually in all seriousness your statiscally correct. And just to throw myself under the stampeding ‘Swine’ lol. Much more often than not you’ll notice that dog leg has another interesting feature.

In your example a break long then a retrace then another break long. Measure the first break long. Then from the lowest point of the retace add the first break long figure. Thats your TP area on a long. I have lost count of the number of winners I’ve had doing this. :wink: Its not pip perfect but its dam close.

Edit: I’ll even tell you were it most often occurs. :slight_smile: Across the hi/lo 20:2 boll on the smaller TF’s when theres volatility. Happens alot, take a look at the 5m EU. Take note ‘Swine’. LOL

Sorry folks, I was really just kidding. No bad intention. It just looks still like a giraffe and not like a dog. Look at this loooong neck. :smiley:

Ah, Elliot Wave “theory”, the scientific study of confirmation bias

The 3 ZigZag may help.

Elloitt wave theory on the 5m? :smiley: Speaking as a 4h and up trader you have me there. :smiley:

3 semifor Zig Zag will kill your account… just a guess! :smiley:

Edit: Forget the 3 and 6 and take 12 off lo/ hi and use an ‘Andews pitch fork’. It’ll tell you with more accuracy where PA is heading within the hi/ lo trend lines. If your inclined to use indi’s.

Elliot waves seem too subjective to me

The indicator only serves as a visual aid to help with spotting the dog leg.

LOL!!!

It’s like ‘feeding caviar to pigs’!!! LOL!!!

No: not directed at anyone (I know Buckscoder was only ‘taking the pis*’) i.e. it’s just one of my favourite sayings is all!!! LOL!!!

(Sorry I’ve got nothing ‘technical’ to add)!!!

Regards,

Dale.

Yes, you can’t really use Elliot Wave on 5m, but the Dog Leg shape equates to one wave, so you don’t trade on the ‘knee’ (for want of a term) because the chances are that the wave has not finished and will continue in the sme direction.

Thanks Carter for the great input on this thread.

I agree 100% with you (don’t think that happens often does it?) :slight_smile: that is why I say just look at for the Dog Leg, (still subjective but what isn’t in Forex), keep it simple, and accept that if it looks like a dog leg shape, your success rate is dramatically increase, because it is the end of a wave.

Yes, Yes, Yes, I couldn’t put it better myself, well obviously not because I didn’t did I :smiley:

Here’s another image that will help, see where support is being broken there, the probabilities of the support being broken there is high, because a dog leg has not been formed from the last peak, so the chances are high because you would expect a wave to be completed.