red, blue, green

[maxriskfree]

hi, first time posting. I have a question about those blue gree and red line in wave 4. I do understan when wave 4 penetrates the line drawn from wave 2 to last X in red line, i should avoid the trade. but I have read articles and studied my own but I could not find many people who really cared much of those lines.
So, i am asking, do u guys use the lines into trading? or if other indicators are in order, is red blue green line the last thing u should be considering.

thanks for any opinions.
dave.

[gspiker]

My take on it:

Those lines are interesting, but not as important as the OSC pullback to zero. I might not (and usually would) take a signal that broke the wave 4 channel lines, but I would never take one that didn't have a osc pullback to about zero.

I would never count a reversal at a wave 4 channel line as too meaningful, unless the Osc also indicates that we are at a possible wave 5.

Garth

[hugh44]

I agree with Garth that the Osc "BEHAVIOR" is of prime consideration. My perception of the ~4 channels is that it is another tool to help evaluate the quality of the profit taking sequence and assessing the probabilities for an opportunity of a good ~5 (higher or lower). It does not mean that if the red channel is broken that I dismiss the evaluation of an opportunity. It usually means that the pattern will experience a 50 to 62% retracement of the previous swing. It serves as a warning that this might not be a normal ~4. The real protection to my sometime impulsive nature is, and why Garth's point is so important, that the Osc must be in place and that there is a proper trigger for any trade. I use 6/4 ma or regression trend channel if on a single slope. If these factors are viewed in conjunction (for ME) the quality of a type I opportunity is greatly enhanced.

hugh44

[MR]

Well said Hugh44 and Garth....

The Wave 4 Channels are not a trading tool, but rather more a 'visual guide' developed in the late 1980's as an attempt to help identify the quality behind a Wave 4 pullback and the Type 1 setup. Do you trade just the Wave 4 Channels, no. (but there are times I wished I did when it bounces off the blue channel only to keep going!) You just use them as a part of the process of trying to frame up a better trade opportunity if it

Statistically we know if the Wave 4 retracement holds above the Wave 4 Channels the odds for a strong second attempt is high. If the Wave 4 retracement breaks below the Wave 4 Channels the odds for a strong second attempt is very low.

For me Wave 4 Channels are an important consideration in helping identify a Type 1. It isn't the only consideration. It may not even be one of the top considerations, but it is a legitmate tool that can add insight into how, why, when, where to attempt a Type 1, particularly when you can paint a better picture using other AGET tools and studies that further identify a stronger support or resistance area to key in on in your potential trade setup.

For example, if I know the Red Channel has been broken, but below that I have a key MOB, Ellipse, Fib Retracement or Extension number, Gann line, good PTI, an XTL trigger, the .90 to 1.40 Oscillator rule working, a 6/4 DMA or RTC breakout confirmation, a cross-referenced quick double check saying it is ok, so on and so forth, I still may attempt a trade but will make changes on the management of that trade because of the higher risk associated with it. I may not bet the farm on that trade and may only do a smaller position, trail a tighter stop, take profits quicker if there is not the follow-through I would like to see. The Wave 4 Channels give me statistical evidence to guage how to trade a pullback range under the current Elliott Wave count.

Also, there are Wave count relationships that can determine how you better anticipate which Wave 4 Channel holds or not. For example, if the Elliott Wave 3 extends beyond 2.628 or higher, then when you see a Wave 4 pullback building, you can factor that into your pullback correction equation. Typically the only way the Blue Channel would hold in that situation is if the Wave 3 is still very strong, and something like a short Ellipse could help better define that setup... if it got broke, I would then look at it meaning we should expect Wave 3 not to extend any further, but now the lower Wave 4 Channels are definitely your focus, particularily if they coincide with a 50 to 62% retracement price support area.

As you get more familiar with the relationships, then the Wave 4 Channels can become a bigger part of the setup equation.

If you would like to read a few more details on the Wave 4 Channels, click on the following link:

http://share.esignal.com/groupcontents.jsp?folder=Wave%204%20Channels&groupid=20