Fibonnaci Extension miscalculation on my part?

[MR]

Only approximately 2% of the time will a labeled Wave 3 be less than W1.

[MR]

As a rule, Wave 3 is never the shortest, usually longer than W1 and W2. I posted a while back a PDF file where I talked about this general rule. If you would like to review it, click here. I may be wrong, but I wish the rule said, "Wave 3 should never be the shortest," because it can happen in extremely remote or 2% or the time, if that. (I don't believe it is totally, absolutely impossible, just very very remote.)

[MR]

We anticipate 15% of Wave 3's trade between 1 and 1.60 of Wave 1....

[MR]

As an aside comment here, when I see a Wave 3 labeled that is only between 1 and 1.6 of Wave 1 and 2, I will typically call a wave count "Wave 1 or A, Wave 2 or B, Wave 3 or C." The reason why I do this is the mathematical relationships of Wave 1-2-3 and Wave A-B-C patterns is the same until Wave 3 finally extends beyond 1.618. When I think this way I tend to avoid trading surprises when a promising Wave 3 building fails and falls into a A-B-C pattern. I always have an alternative plan of escape or reversal strategy until Wave 3 becomes more successful.

[MR]

We can anticipate 45% of the time Wave 3's will push to between 1.6 and 1.75%....

[MR]

Again, I am always a little bit defensive and will manage a position with tighter trailing stops or escape stategies until I see more conviction in the Wave 3. Once Wave 3 is above 1.75, I begin to breath less deeply, relax a little bit more, and will adopt some conservative strategies to help me better stay with the trend as it becomes even more evident. To me, the 1.60 to 1.75 is the critical junction between a 'last-chance' Wave C failure or a stronger Wave 3 trend continuing to build.

[MR]

We can anticipate between a third or 30% of the time a Wave 3 pushes to approximately the 1.75 to 2.62 range....

[MR]

When I see a Wave 3 push this far, I personally am elated. I am more confident a higher quality, "possible Type 1 Buy/Sell opportunity" could be created with this type of Wave 3 strength. I am more confident in the possiblity Wave 3 could continue to extend higher in a more complex Wave 3 trend. In general, the odds begin to work 60% or greater in my favor I can manage to find some better quality trades still because everyone else who has yet to trade into this strength is now finally growing convinced with more evidence of strength behind the Wave 3.

[MR]

We can anticipate 8% of Wave 3's will extend beyond 2.62 or higher Fibonacci numbers....

[MR]

Here is where I wish I had time to add more advanced knowledge.

When we see 2.62 or greater Wave 3's in progress, these are the types of markets even non-Elliott Wave traders notice. This is what I think most institutional traders will recognize as "momentum" trading.

Momentum trading is where one attempts to buy shallow pullbacks in order to try and catch a piece of what now is recognized as clearly a strong trend in progress.

It is like going to Hawaii and surfing the bigger waves. It can be a lot of fun catching one of these bigger waves-- if even close to shore-- but boy can it be dangerous if an entry or exit strategy is not well executed!

[MR]

I will take a break now and return to this subject with many more illustrations later tonight.... marc

[MR]

Ratios for Wave 4

At some point during a Wave 3, it begins to lose energy. During this period, trader's start to wonder, and become willing to lock in some profits. We call this time period a Wave 4 "profit-taking" pullback, or a correction.

Once profit-taking is finished, the previous trend returns.

Wave 4 is related to Wave 3.

[MR]

Wave 4 is related to Wave 3 by the following standard ratios:

Wave 4 = either
24% of Wave 3, or
38% of Wave 3, or
50% of Wave 3, or
62% of Wave 3

[MR]

Background statistics of Wave 4 Ratios--

We can anticipate only 15% of the time Wave 4 to retrace between 24% to 38%....

[MR]

If you have followed my charts from the former Advanced GET "Trader's Outlook" and now here at eSignalCentral, you will see I really like to find 25 to 38% retracement setups for Type 1 Buy/Sell ideas. If 25-38% holds, it represents the quickest odds for a return to the strong Wave 3 trend.

Here is a very recent real example of a chart I posted. GLW daily was posted at an AGET Forum thread as it began to breakout. Click here to review the real GLW daily example and later results. One consideration at the time of posting, it was holding at a minimal 25% retracement, starting from W2 and ending at Wave 3 top.