Elliot's Impulse waves.(Part-5)

IMPULSE WAVES :- The Basics

Waves that move the market in the direction of its main trend either up or down are called Impulse waves.

1. Impulsive waves are made up of 5 waves which themselves are made up of 5 waves. This is called the fractal nature of waves. This fractal nature of waves can be carried down to the smallest time frames. You may hear that we are in W5 of W5 of W5 of daily W5. Fractals within fractals within fractals ... This is important to a trader when he/she is trying to catch the end of a move while waiting for all patterns to be complete. Trading a reversal as it is completing its final wave into a strong resistance or support, is a very high probability trade.

2. Within a 5 wave pattern, Waves 1, 3, & 5 are themselves impulsive.

Below is an illustration of impulsive waves that move the market in its trending direction.

3. Within this 5 wave impulsive pattern depicted above, Waves 2 and 4 are corrective. We will cover corrective waves later. These corrective waves can be either simple or complex and one finds the lower the timeframe, the more complex these corrections become. Simple corrections are 3 waves (ABC or Zig Zag) and complex corrections are combinations of 3 and 5 wave structures.

4. In a 5 wave impulsive pattern, one of the impulsive waves (W1, 3, or 5) will generally extend and be longer than the other two. In the case of ES, Wave 3 is usually the extended wave. (Commodities, it is often Wave 5).

5. Truncation: Sometimes when the market is weak, we see a different reaction from Wave 5. We see a failed W5. A hint that W5 might fail is a 5 wave pattern that is completing below the level of W3. When we see a W5 failure (truncation), we can expect a deeper than normal correction.
6.An ending diagonal is a special type of wave that occurs in the 5th wave position when the preceding 3rd wave has gone "too far too fast". Ending diagonals can also be seen, sometimes, in the c wave of an "ABC". In all cases they are found at the termination of larger patterns suggesting exhaustion of the trend. Ending diagonals take a wedge shape with a sub waves of 3-3-3-3-3. A rising diaganl is bearish followed by a sharp decline and a falling diagonal id followed by an upward thrust. EW study helped to identify the "ending diagonal" possibility when Nifty made its low @ 2539 in Mar.09. Wave Personality: First waves are part of basing formations and "sell on rise" continues, though breadth and volumes tend to rise with prices retrecing the previous decline in shorter time. Second waves retraces much of the first wave convincing the bears that the downtrend is still on and the sell on rise has yielded good results and is followed with declining volumes. Third waves are strong and broad and the trend is unmistakable. They generative highest volumes and tend to be extended with many gaps in them. Fourth waves are predictable in both depth and form because of alternation as well as their tendency to terminate near the 4th of the previous time cycle and also a small break of the trendline.Lagging stocks build their tops. Fifth waves can be explosive and quite sharp if third wave has extended as it did in 2007-2008. And if 3rd wave was quite powerful, 5th can be an ending diagonal as it happened during the decline in year 2008-2009(A wave down).
The following is a summary of points that help to project price targets based on wave relationships:




The best approach is "Whatever Elliott rule will not allow, you can deduce that whatever remains is the proper perspective, no matter how improbable it may seem".
Wave Principle trains the trader/ investor to discern what the market is likely to do next before it does it. Wave principle limits the possibilities and then orders the relative probabilities of possible future market paths.
When you have conquered the essential task of applying a method expertly, you have done little more than gather the tools for the job. When you act on that method, you encounter the real work: Battling your own emotions. Thus it makes it clear that "Analysis" and "Making money" are two different skills and there is no way to understand that battle off the field....Only speculating in the real markets can prepare you for "Speculation in Markets". And you must do it yourself. Choose the wave principle..It will start you thinking properly and that is a first step on the path to trading successfully.
Get Rich Slowly.

Retracement strategy, a must for traders.

 Trading strategy that works wonders besides the supports & Resistance is "Retracement strategy":

The strategy that has worked consistently well with low risk-high reward ratio is:

"Initiating a trade at 50%-61.8% retrace with 80% as SL".

Understand its workings.

A trade is not complete once an opportunity is spotted & it is initiated.

A trade needs managing, monitoring.

a. After a trade is initiated at the key retrace point, you keep SL around 80%.

b. Once the prices start to move from your trading point generating profits, you monitor
the "key retrace of that rise, if up move OR the key retrace of that fall, if down move" and

trail your position.

This important part helps you "lock-in the profits as well as points to your new exit points in case of adverse reversals".

c. You manage your trade by part booking and holding the rest with the trailing number that keeps changing based on the price advances or declines.

Follow prices using HH & HL or LH & LL. Do not look for perfections.
Trendline helps to identify end of a move so that you can choose a "retracement".
Ideal is 61.8%; but 50%-61.8% is the zone; 80% is the SL

Do these above and see how your trading results improve substantially during every month.

Nifty's next 12345 underway fm 23222, targeting minimum 24067 (3 = 1 ) & 24388 (3 = 1 x 1.38 times)

 #Nifty 

#tradeplan 5th Feb. Wed

#CPR 23593-690⬆️

1. #Elliottwave 

Next 12345 underway fm 23222.

(3 = 1 = 24067)

2. #retracement 

23823-24067⬆️

23553-633⬇️

3. #movingaverage 

BIAS +ve⬆️

50DEma, 23665

200DEma, 23640

21HEma, 23494

21DEma, 23387

10DEma, 23367

Nifty down trending in all t/f, below key 21Ema.

Elliot wave "Principle" , "Rules & Guidelines".(Part-3)

What is the Elliott Wave Principle? In its simplest form, it is that most market trends unfold in 5 waves in the direction of the trend, and in 3 waves in the direction counter to the main trend. Simple! 5's and 3's. The 5 wave patterns are impulsive waves that cause the market to trend. The 3 wave patterns are corrective, and can be thought of as the market taking a breath so it can continue the trend. EW believes that these patterns are caused by group psychology and the interplay of fear and greed. A complete Elliott Wave pattern has 8 waves: 5 during the “impulse” phase and 3 during the “corrective” phase. EW is a fractal concept, so look closely at Wave (1) and Wave (2). The entire 8-wave structure that comprises the first and second wave is exactly the same as the complete 8-wave structure that completes the whole chart, which itself might be a larger Wave 1 and Wave 2 of a higher time frame. It is important to understand that Elliott Wave is fractal. In an impulse (an uptrend, for simplicity), Waves 1, 3, and 5 will ’subdivide’ into their own smaller 5-wave affairs. Waves 2 and 4, which move against the larger trend, have a 3-wave structure. EW principle is fractal, meaning a complete five-wave impulse up might just simply be part of Wave 1 or Wave 3 (or Wave 5) of a larger complete wave structure, which itself might be part of an even larger wave structure.This is how to understand Elliott Wave Fractal ‘waves within waves.’ Here are the ‘ideal’ correction types: It may take few sessions to elaborate on these corrections which make up 85% of market moves. Efficient trading requires mastering of these. We will take it up later. Rules:- Keep these three "Hard rules" (Unbreakable) always in mind while assessing/ counting/ labeling the price moves to help you arrive at a correct count which can result in a unbelievable forecast & stupendous trades. - An impulsive wave always subdivides into five waves (1-2-3-4-5). - Wave 1 usually subdivides into an impulse or seldom into a leading diagonal. - Wave 2 subidivides into a zigzag, flat or combination. - Wave 2 never moves beyond the start of wave 1 (Rule-1). - Wave 3 always moves beyond the end of wave 1 and is never the shortest (Rule-2). - Wave 5 subidivides into an impulse or an ending diagonal. - Wave 4 subidivides into a zigzag, flat, triangle or combination. - Wave 4 never moves into the territory of wave 1 (Rule-3). Below is an illustration of these rules. Guidelines:- These are flexible rules but quite useful in identifying/ recognising a wave and its likely type or pattern. - Wave 1, 3 or 5 is usually extended, while wave 1 is the least commonly extended wave. - If wave 3 is extended, it’s common for sub wave 3 of 3 to extend as well (the same applies for wave 1 and 5). - Subwave 3 of 3 almost always has the steepest slope within the parent impulse. - Wave 5 often ends when hitting a line drawn from the end of wave 1 or 3 that is parallel to a line drawn between the ends of waves 2 and 4. - Wave 5 normally ends beyond the end of wave 3, if not it’s called a truncation. - If wave 2 was a sharp correction, wave 4 will almost always be a sideways correction and vice versa (Alternation). - Wave 2 is usually a zigzag or zigzag combination. - Wave 4 is ususally a flat, triangle or combination thereof. - Wave 4 usually ends within the price territory of the fourth wave of wave 3. - Wave 4 usually breaks the trendline . The most difficult part of Elliott Wave analysis is correctly labeling and counting the waves. A correct count can lead the analyst to amazing accuracy in forecasting the market. Applying what is learnt: Learning can go on for eternity but practice must start immediately to develop the "Intuitive capability" to understand and apply this knowledge for profitable trades. EW knowledge helped us to close the shorts @ 4960 and create longs too. A move past the "i" wave of the 1st wave and a faster retracement gave another entry point. Expanded flat of 2nd wave hinted at underlying bullishness and thus a shallow 2nd wave to hold on for the 3rd wave. The 5-sub waves of 3rd wave alerted us to book profits at 5300+. Shallow 2nd wave revealed an "alternation" in 4th wave to be steeper to play "Selling". An "abc" correction helped us to initiate a long near the lows. 1st wave is 4944 - 5197 = 253; 3rd wave is 5161 - 5310 = 149. 3rd wave cannot be shortest(Rule-2) and hence the 5th can not be more than 148. So if 5235 is the end of 4th, then 5th can not move past 5383. If it does, then the count is wrong and we should revisit the same. If 4th continues further down, it should not enter the 1st wave territory of 5197(Rule-3), and 5th measurement should start from that new low between 5200-5235. An alternative scenario suggests of an ending diagonal possibility in the daily time frame. In such a case, the hourly should sub divide into "ABC" as shown below. Use Elliott Wave however you see fit and however it works for you - just like any of the hundreds of technical indicators out there. Read the previous posts Part-1 and Part-2 here. Get 10 Lessons on The Elliott Wave Principle that Will Change the Way You Invest Forever from Elliott wave International by registering as a member (Free). We will discuss the impulse waves in detail including the ending diagonal in the next week. Until then keep counting the waves and money. Get rich slowly.

The sharp rally of the upmove from 5933 would complete the 3rd wave in the coming days, unless....xxxxx

Only EOD Posts will continue for a month.

Thank you for this wonderful journey.......................... We'll meet again without distractions..