Elliot Wave... Identification

[melteye]

Any advice, requested or not, is greatly appreciated. I am currently in the process of switching over to IB. $4 cheaper per trade then what I'm paying now.

"Work on less volatile undrliyng and define firts your TF: is your world, actrually the world in which all the other partecipants to the auctuion on that TF watch the market in the same way as you do."

I don't know what you meant by this...

As for getting caught in changing waves, my original plan was to only trade the pullbacks after the ends of fifth waves using a trailing stop loss. Since I have very limited capital I want a lower margin of risk.

I understand I should stick to only one approach. But would it not be worth it to look at renko if I'm having trouble identifying an extension? I do not even know how renko works, but I know that glancing at it for even a fraction of a second aided me in my analysis of my normal charts (candlesticks).

And... I know this is contrary to your advice, but after spending an hour analyzing 15 minute PNF charts I am much more confident and able to find breakout and continuation patterns. After analyzing my candlestick charts I switched to PNF and located literally dozens of patterns I overlooked!

I guess that means I need to practice my analysis much more.

As for having such a small budget, I'm pretty much limited to ES and NQ aren't I?

[fabrizio]

"Work on less volatile undrliyng and define firts your TF: is your world, actrually the world in which all the other partecipants to the auctuion on that TF watch the market in the same way as you do."

I don't know what you meant by this...

Simply this: market is an auction in which there is different groups of people: very short, short , long , very long term operators.
Lets make a bold skim: Long a short term operators. The OPPORTUNITIES prices will not be equal for the 2 different categories. So they WILL not look at the unfolding of the auction - consequently price levels- at the same manner. So very unlikely the supply of one group will match the demand of the other.
So said, divide into more clusters - as many as are the Main TF , the universe of the operators. The 5 min. trader will see the market from the 5 min. perspective in terms of moves, R/R ratios, objectives, total duration of holding the trade. This world - the 5 min- is different from the 60 min.
Simplier you cannot trade a TF with the mentality of a differnt one, becasue you will see a different world. Irrispective of that each TF GIVES YOU VERY IMPORTANT INFO ABOUT THE MARKET ACTION. So It is of the OUTMOST IMPORTANCE SLIDE UP AND DOWN CHECKING THE DIFFERENT TF. Like a zoom objective.


"As for getting caught in changing waves, my original plan was to only trade the pullbacks after the ends of fifth waves using a trailing stop loss. Since I have very limited capital I want a lower margin of risk....

Uhmmm. Firts go back to the other point and add: wave counts often differs from TF to TF. So said make note of this:
A) Sell the market at the end of a W5 means ( provided that this is a really close W5) TAKE A VERY LONG MOVEMENT : ABC 12345 .
So lot of money you say: Right , but very risky since the structure is unfolding and creating and the possible pullback coulkd be very strong. ; consequently your stops must be wider.......You are in a CONTRATREND position or Total price Exaustion. All alone.....you should furthermore take into account that your Wave count could be wrong or can change from a structure to another.....tahn you must define your right trail ( not too tight not to loose).........sounds painfull....

B) Conversely if go for ca type I ( end of a W4 cathing a W5) you BUY A TREND, more easy, safer etc etc.......


"I understand I should stick to only one approach. But would it not be worth it to look at renko if I'm having trouble identifying an extension? I do not even know how renko works, but I know that glancing at it for even a fraction of a second aided me in my analysis of my normal charts (candlesticks)....
Sorry : I follow one way or another. No compromises. One charting put aside the Time element.........so. If than you are not a Renko pro ........


"As for having such a small budget, I'm pretty much limited to ES and NQ aren't I?)....

At the present moment the mostbinteresting Contract in trems of marginations an return for capital employed ids The EURO future (6E H4) on CME. Or the Canadian Dollar. Lewave the AUD aside for is not so liquid though a must.

[soylent]

> if I'm having trouble identifying an extension?

Unless you are going to 'test' this 1,000 times and develop a win/loss % of how much better your prediction is -- it's better to NOT do it because it will take you out of a good trade -- sometimes.

I've heard a lot of statistics but the minimum is 100 'tests' of a pattern before a reasonable expectation of what will happen on that pattern.

If you increase the complexity, you add to the number of tests required and make finding it much more difficult. As an example, I found a pattern that is 97% correct -- but, only occurs 2-3 times per year. Usefull? Yes. But, I'd be sitting on my hands 10 months out of the year. And, I can't 'bet the farm' because it DOES fail -- 3% of the time...

It sounds like you are focusing on the TYPE 2 trade. As you notice, the question always is: Will this be an extension? Well, fact is, folks that take the TYPE 2 -are the reason- for an extension. Since a bunch of people go short on the divergence, they all cover and create a continuation when just a little extra wind pushes it past their stop-loss.

BUT, the Type 2 is nice because you can catch all of a wave 3.

Suggestion: Don't worry about an extension. BACKTEST your win/loss % and total dollar take. If you are making money you have a good plan. Just set your stops where your plan says to. (And, if your plan isn't profitable, then look for a way to increase your win % or work on your stop/loss).

As for NQ / ES: Why not try SPY and QQQ trading STOCK until you get good enough? At least w/ stock your leverarge won't be 10:1 and you will develop your confidence w/ real money. Try at least a couple of weeks and see if real money works the same as backtesting?

Personally, I trade QQQ option contracts.

[soylent]

Or, you can GO FOR IT

Fabrizio says:
>> most interesting Contract in terms of margins on return for capital employed is The EURO future (6E H4)


Well, yes, you could go that route, too! <smile>

Me, I don't know a thing about futures -- haven't studied enough. I like synthetic longs / shorts in options.

Fabrizio: Sounds like you know a thing or two about FUTURES. This isn't a futures thread but -- give me a place to learn? Is there a good book / FAQ describing the futures market? In particular, currencies and NQ/ES? I'm so tired of the spreads on NQ options it would be great to find a more pure form of leverage.

Thanks!

[melteye]

Considering I only have experience with Futures, this could be considered a good place to ask. As I would learn more as well.

As for trading QQQ or SPY. My total capital is $2000... I don't think that is enough to trade those, but considering I know nothing about them...

I just used the ticker replay function and traded 02/03 - 02/05 for a total of 16.5 points (NQ). 5 trades total. Using fibonacci retracements, patterns and the consistent usage of point and figure charts... Will finish the next seven days soon enough.

Wish I could get a longer playback then 10 days.

It seems as if my esignal service does not include 6E H4.

[soylent]

>> My total capital is $2000

Yes, you're right. I don't know what I was thinking. That'd be 150 (2:1) shares of QQQ -- even a .50 move would barely cover the in/out cost of the transaction.

I look for longer-term / bigger moves (5% of the underlying or more) -- mostly because I need to cover a spread. But, maybe that is backwards thinking on my part...

I am interested in seeing how your project turns out.

[melteye]

Well... last time I traded I was impatient and would try to get into moves that weren't worth it. I had days were I would make literally of dozens of trades...

I took a break from trading (since I was failing horribly) and recently got back into studying. In the last few days (since the start of this thread) I have reread the only book on TA I have three times; and started studying elliot wave.

Considering I just paper traded 16.5 points over a period of three days totaling five trades I think my analysis and state of mind has improved...

Hopefully this 'project' turns out well. Just need to take is slowly and build my capital to a decent size.

[fabrizio]

Wish I could get a longer playback then 10 days.

you can . Every 10 day download the tick replay period in different files. Than with a simple text editor ( block notes) cut & paste all the files data in sequence in a single one.
Than $PLAYBACK it and you can have it as long as you like...

[Gavishti]

Given the amount of capital you have you may want to take a look at YM H4 (YM #F). It will give you a little more room than NQ and you don't have enough to trade ES. You will not be allowed to go overnight given the amount of capital you have so concentrate on intraday trading. Use other time frames for reference.

I sometimes find it useful to use EW on PNF charts. As you say, it helps spot the trends. Similar to using different time frames in your analysis. Using alternate methods for confirmation can be helpful. Just don't switch methods.

There are plenty of people making money using different techniques and intervals. All have their benefits and drawbacks. Find what works for you. You need to be comfortable that you will be be profitable and know when it is/is not working. Nothing works all the time. Whatever you decide to do, pick a time frame and a primary analysis tool and stick with it. The other stuff is to help you confirm your analysis. Switching horses in mid stream can be very dangerous. You can always stop and come up with a new set of rules, but never violate the rules in the middle of the game.

[melteye]

I just took a look at YM. A $280 move in NQ would be $245; but the price action is much smoother and easily followed.

But would the relatively low volume get me in trouble if I entered a bad trade?

[Gavishti]

You are only going to be trading one contract at a time. I believe you will find the volume sufficient during normal NYSE or CME floor hours. Probably not a problem during CBOT pit hours. IB will restrict your trading to 9:30 to 15:45 ET because of your low capital. Go to the CBOT site to find out more about volume. They have statistics available.

If you have not traded futures before, you had better do some studying. They have different rules from stocks. Surf the IB site for starters. Also check out CBOT (e-CBOT) and CME (GLOBEX).

[melteye]

Originally posted by melteye
Considering I only have experience with Futures...

[fabrizio]

From the "Famous" page 43 of Original edition of WD GANN'S " How to make Profits in commodities" Pub. by Lambert , 1942

TWENTY EIGHT VALUABLE RULES

1) Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one tenth of your capital on any trade

2) Use stop loss orders. Always protect a trade when you make it with a stop loss order 1 to 3 cents, never more than 5 cents away, cotton 20 to 40, never more than 60 points away.

3)Never OVERTRADE . This would be violating your capital rules

4)Never let a profit run into a loss .......omiss...........raise your stop loss so that you will have no loss in capital......omiss......

5) Do not Buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules

6)When in doubt get out and don't get in when in doubt

7) Trade only active markets. Keep out of slow , dead ones.

8) Equal distribution of risk. Trade in 2 or 3 different commodities, if possible. Avoid tying up all your capital in any one commodity.

9) never limit your orders or fix a buying or selling price. Trade at the market.

10)Don't close your trade without a good reason. Folow up with a stop loss order to protect your profits.

11) ACCUMULATE A SURPLUS . AFTER YOU HAVE MADE A SERIES OF SUCCESFULL TRADES PUT SOME MONEY INTO A SURPLUS ACCOUNT TO BE USED ONLY IN EMERGENCY OR IN TIMES OF PANIC.

12) Never buy or sell just to get a scalping profit

13) NEVER AVERAGE A LOSS. THIS IS ONE OF THE WORST MISTAKES A TRADER CAN MAKE

14) nEVER GET OUT OF MARKET BECASUSE YOU HAVE LOST THE PATIENTE; OR GET INTO THE MARKET BECASUE YOUR ARE ANXIOUS FROM WAITING

15) Avoid taking small profits and big losses

16) NEVER CANCEL A STOP LOSS ORDER AFTER YOU HAVE PLACED IT AT THE TIME YOU MAKE A TRADE

17) Avoid getting in and out of the market too often

18) Be just willing to sell short as you are to buy. Let your object be to keep with the trend and make money

19) Never buy because the price of a commodity is low or sell short because is high

20) Be careful about piramiding at the wrong time. Wait until the commodity ius very active and has crossed Resistance Levels before buying more and until it has broken out the zone of distribution before selling more.

21) Select the commodities that show strong uptrend to pyramid on the buying side and the ones that shows definite downtrend to sell short

22) Never Hedge. If you are long on a commodities and it stats to go down do not sell another commodity short to hedge it. Get out at the market ;take your losses and wait for another opportunity.

23) Never change your position in the market withgout a good reason.......omiss........

24) Avoid increasing your trading after a long period of success or a period of profitable trades

25) Don't guess when the market is TOP. Let the market prove it is top. Don't guess when market is Bottom. Let the market prove it is bottom. By following definite rules you can do this.

26) DO NOT FOLLOW ANOTHER MAN'S ADVICE UNLESS YOU KNOW THAT HE KNOW MORE THAN YOU DO.

27) REDUCE TRADING AFTRE THE FIRTS LOSS; NEVER INCREASE

28) Avoid getting in wrong and out wrong,; getting in right and out wrong

[fabrizio]

Fabrizio: Sounds like you know a thing or two about FUTURES. This isn't a futures thread but -- give me a place to learn? Is there a good book / FAQ describing the futures market? In particular, currencies and NQ/ES? I'm so tired of the spreads on NQ options it would be great to find a more pure form of leverage.

Sorry for the late reply. I actually skipped last part of your post.

The simpliest yet very broad question.

A) You trade options so you know the rules of the game.
B) You have already an approach and - seems to me- you are wise and down to earth.
C) Assume you like to trade EMINI or YM, go to their respective sites and go for Education part. You'll have all the technicalia about the contracts and rules of trading.
D) Watch the market for a while to get attuned to the moves and the speed.
E) Chose your trade : Put in practice your technical approach

Start with 2 contracts: entry- MM- Exit.

Get attuned with the market. Get its feeling. Apply Discipline .
Analisys with many instruments, trading with no more than 3/4 This is my way.

Hope it helps...........

PS: Continuos education; good readings of the old and new masters ( Gann , Elliot, John Hill, Tom De Mark, Pesavento, Miner, ) and some others experiences ( Sperandeo's Trader Vicks I & II)