W4 Overlap

[Momentum]

What is the best overlap of W4 into W1 for eminisp?

Zero? I think the study has a default of 17% but I recall reading something different for futures.

Tx

[ACM]

Momentum
Yes for futures it is set at 17% to allow for slippage.
I personally set it to 0 with no exclusions. It seems to me that in doing so you also tend to have a more realistic and stable count.
Just an opinion
Alex

[gspiker]

The reason that most wavers allow for some level of overlap of W1 and W4 in futures contracts is because of the low liquidity and high volatility that futures seem to show. However for contracts like the S&P and S&P emini, I don't think these are a factor and I, like Alex, use zero.

Garth

[MR]

What others have said previously about the W4, W1 Overlap rule
is basically sound reasoning. Let me just expand a little on a
few things said about trading or not trading W4, W1 Overlaps.

(1) If you are familiar and comfortable with a market, allowing for
an overlap logic built into a trading setup strategy really works!
Two futures markets that jump to mind where I have good luck
allowing for W4, W1 Overlaps are cattle and copper, for example.

(2) I still would allow for overlaps in stocks/indices, just doing so
selectively, recognizing the more complex a wave structure-- which
they tend to be-- the greater the odds allowing for Overlaps can
backfire. While it may be harder to do with an emini or regular SP
contract, I have actually seen a few times where all the conditions
were perfect and it worked for that specific instance. While, yes,
it can be a tough proposition, it is not totally an impossible idea.

Again, it goes back to my previous comment, if you are familiar and
comfortable with something, consider allowing for overlaps. I am very
familiar watching CSCO for day-trade ideas. I will build into CSCO
variable charts an allowance for overlaps.

(3) Prebuild overlap possibilities into your Type 1 setup before you
take the trade. If you think it has a realistic potential of hitting an
overlap, consider redefining the trade idea as just a very aggressive,
higher-risk idea. Instead of loading up on the trade, why not just
reduce the risk involved, making the trade a smaller position?
Why not also readjust your traditional entry to now include the
higher-risk potential? An example of what I mean: where I might
normally place the stop loss, I will now use that as the entry area,
and adjust further out another initial stop loss. I have less to lose,
and have built-in an adjusted risk strategy, and it really works.

(4) There are other considerations when attempting a Type 1 trade.
The W4, W1 Overlap is one idea in a series of others. In the totally
of a Type 1 setup if it has congruence (some call it confluence) of
say a half a dozen or more key support or resistance ideas coming
together all at the same one price and time area, which happens to
be an overlap region; if I happen to be familiar and comfortable with it,
I am going to take the trade. The overlap is not the most important
factor in the setup, it is only one of many trade setup considerations.

One final consideration. Allowing for W4, W1 Overlaps really is
more an idea for experienced traders, and maybe even a personal
preference? If you have the experience, and really like trading them--
which I tend to do-- build this logic into your trading repertoire.
It works for me.

But, "when in doubt, don't" is always a safe motto.