4xForecaster

Wolfe Waves Pattern: Aftermath ... Lesson | $AUD $NZD #RBA #RBNZ

FX:AUDNZD   Australian Dollar/New Zealand Dollar
1730 27 12
Wolfe Waves Pattern: Aftermath ... Lesson | $AUD $NZD #RBA #RBNZ #forex


Friends,

Last March 06th, I presented a potential short signal based on an advanced geometric             pattern called the Wolfes Waves pattern. Now that its 1-4 Line was hit and price nearly hit our defined TG-1 = 1.05260 (missed by a mere 4.3 pips, unless you generously front your take-profit orders), we are contemplating a potential reversal to the upside. At least, this is what my predictive analysis and forecasting system indicates at this point.

Before formulating a new bullish directional opinion - that will come on a separate chart - I would like to quickly review the features that a trader, unfamiliar with this Wolfes Waves Pattern (or "WW" for short) should consider before taking a position.


WOLFE WAVES FEATURES:

1 - 5-POINT REQUIREMENT:
The primary features of a WW are its 5-point definition, simply numbered points 1, 2, 3, 4 and 5. Typically, points 1, 3 and 5 fall in line and remain opposite to points 2 and 4.

2 - 2-LINE REQUIREMENTS:
As points 1, 3 and 5 fall into a line, a 1-3-5 Line comes into shape, opposite and convergent relative to the 2-4 Line passing through its defining points 2 and 4.

3 - CONVERGENT LINES:
Lines 1-3-5 and 2-4 should converge and form a wedge. While it is best that the convergence occurs while both lines are pointing in the same direction (i.e.: both lines point up with the bottom 1-4 Line being pointing up steeper than 1-3-5 Line to maintain their convergence, and vice-versa: both pointing down with the top 1-3-5 Line being down steeper than the 2-4 Line to maintain their convergence). This total up or down direction is paramount to define the resulting direction in price.

4 - WEDGE DIRECTION DEFINES PRICE ACTION:
Now, we have 5 points, articulated into convergent lines that form a wedge. We also agreed that the overall direction of the two convergent lines will define either an up-slanting convergence (a rising wedge), or define a down-slanting convergence (declining wedge). What follows are rather simple rules:

...

(lesson continues in the comment section)
David Alcindor, CMT Affiliate #227974
Alias: 4xForecaster (Twitter, LinkedIn, StockTwits)

Signal Service or Private Course - Contact: admin@KADAInstitute.com
All updates on https://twitter.com/4xForecaster
( ... Wolfe Waves Patter Lesson ... continued:)

a - All wedges are complete at point-5
b - Point-5 becomes the starting point of a trading entry
c - A RISING wedge is required for a classic WW and should send price DOWN from Point-5
d - A FALLING wedge is required for a classic WW and should send price UP from Point-5

5 - DEFINING IMPORTANT TRADING POINTS: STOP-LOSS & TAKE-PROFIT LEVELS
As price action should be anticipated by the rules just defined above (i.e.: a counter-trend move once Point-5 is hit), now the trader must decide a Stop-Loss ("SL") and a Take-Profit ("TP") levels.

- DEFINING A STOP-LOSS LEVEL:
Assuming that the trader has knowledge of good money management and is capable to define his/her own risk exposure, I recommend that this trader sticks to rules defined by his/her successful habits. However, the following are market geometry-based assumptions that may fall within the trader's risk tolerance, or may exceed that risk level.

If the trader has a wide tolerance range, I recommend that he/she considers alternative points which come with the WW, namely: Points 5-prime (5') and 5-second (5").

POINT 5-PRIME:
Take the 2-4 Line, copy and place its origin (Point-2) at point-3. This resultant line defines a new 3-5' Line that will act as a back-stop to a price that exceeds Point-5. This is in fact the event that occurred precisely in the chart above (See it here: https://www.tradingview.com/e/5OKs9iez/).

POINT 5-SECOND:
Take the 2-4 Line, copy and place its origin (Point-2) at Point-1. The resultant line defines a new 1-5" Line that will act as a back-stop to a price action that exceeds bot Point-5 as well as the 3-5' Line. This is a much rarer event, but one you should remain aware.

The importance of the 3-5' Line is that, assuming your money management allows you a risk tolerance that exceeds that line, then the trader who witnesses a completion of a WW at Point-5 might consider defining a SL above the 3-5' Line, giving price action enough range to move against the Point-5 short entry in the case of a rising wedge, or a long entry in the case of a falling wedge (i.e.: an anticipated price action advanced traders define as adverse excursion).

- DEFINING A TAKE-PROFIT LEVEL:
Now that 1) a wedge has been deciphered and 2) prompted a WW trader to 3) first defined a stop-loss based on a sound money management strategy or using above 3-5' Line, and 4) enter into a trade, the last step is to define a take-profit ("TP") level.

As with the 3-5' Line (and the 1-5" Line), which define a backstop via a dynamic trendline (i.e.: by the nature of being slanted, it is called "dynamic" as opposed to horizontal, or static, target levels), the 1-4 Line (which originates at Point-1 and runs through Point-4 forward) projects forward into the silent side of the price field, where price has yet to manifest itself. And this, my friend, is the exciting moment of geometry-based pattern trading (and one we like to play around using a different formula through our predictive analysis and forecasting system).


THE BIG PICTURE:

Now, without having to recapitulate all anatomical points, I would like to bring your attention to the current chart, so that you appreciate the precision of this WW pattern. I once introduced this pattern to another group of traders, and I believe that of those who were tenacious enough to stick to its classic anatomical-point definition, they must have enjoyed the predictability of price action as it turns quite often at Point-5' (in my experience), or classically at Point-5.

In my own research in occult market geometries, I have become tolerant of certain exceptions. The following are exceptions I have incorporated into my WW pattern trading (which is now a much rarer occurrence, since I moved to rely more on my system. Yet, it's worth for you to review, consider and back test these exceptions, as it may put you on a further path of occult market geometry discoveries:

1 - THE MEDIAN RULE (One I discovered and gladly share here):
The Wedge does NOT have to be convergent, but the NET geometry has to be rising
- Here, if the 1-3-5 and the 2-4 Lines are parallel or divergence, take the midpoints between points 1 and 2 as well as 3 and 4, and run a line at these midpoints. If it is RISING, you have a high probability that price will FALL at Point-5, and vice-versa.

2 - WW NEARS 3-Drives PATTERN:
A wedge will contain all points into a pattern already known as the 3-Drives pattern. Study that 3-Drive pattern and see that the WW's own wedge is closely related to the 3-Drives pattern as well. Now, use the MEDIAN RULE and see that it applies. Remember: a rising median will see price fall at Point-5 or Point-5', and vice-versa.

3 - There are other exceptions that may decrease the probability of defining a WW or simply a wedge, but I recommend the trader to stick to the strictest rules at first, and then open up to the possibility that price has other motives than a strict adherence to occult geometries. This relaxation will bring new geometries to your mind's eyes and make you a more relaxed trader.


OVERALL:

The WW pattern is a gate-way drug to occult geometry nirvana if you are willing to loosen your mind's eye into abstract discoveries. One does not need to invent mathematical formulas, but only to stick to known Fibonacci levels, which once applied to basic geometric, can expand the price field into a night-like sky of astrological patterns. But, most important of all, before you fire up that mental rocket into that abysmal mental sky, make sure to check all your safety gears: applying sound money management, anticipating Fib-based price action, allowing price to "breathe" in the range that fits your risk tolerance, and believing that something grander than price itself is at work, and price might simply submit itself to following invisible tracings of a pre-define path.

He who can forecast that path will trade not against, but with the market, a mental condition that far surpasses the profits that come with it.

Cheers,


David Alcindor
TradingView.com Moderator, Alias: 4xForecaster
Predictive Analysis & Market Forecasting


PS: If you liked the analysis, feel free to give it a "Thumb Up" and pass of a friendly referral to friends interested in occult market mathematics and hidden geometries. All targets generated are defined by non-price means, and confirmed by either proprietary patterns (Euclid, Janus, Great White, Deep Shark), or other well known patterns. However, we concentrate mainly on Shark, 5-0 and occasional Bats, to complement our predictive analysis and forecasting - Cheers, David Alcindor.


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Get signals, analyses and forecasts on Twitter
Alias: @4xForecaster
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Disclaimer: Forecasts, analyses and directional opinions generated herein are for educational purposes only and are not trading recommendations. We trust that you will do your own due diligence first, then seek professional advice from a licensed professional, then enter the market at your own perils - David Alcindor - TradingView.com Alias: 4xForecaster
+2 Reply
B10ckLanders 4xForecaster
2 years ago
very informative!
thanks for all your great posts!!
+1 Reply
Mirandole
2 years ago
In case it helps :
snapshot
Reply
4xForecaster PRO Mirandole
2 years ago
Hello @SergeBonaparte - I am not sure I understand what you are showing in this chart - David
Reply
Mirandole 4xForecaster
2 years ago
We are breaking the downtrend channel and we have got two bottoms on a very very very old support.... So I feel Bullish as you do !
Reply
Sandeep_Gupta
2 years ago
Dear sir, if we take stop loss at 5', sell/buy at 5 and take profit at 1-4 line, what is the win %? Thanks.
+1 Reply
4xForecaster PRO Sandeep_Gupta
2 years ago
Hello @Sandeep_Gupta - In my knowledge, I have encountered only one site that conducted its own success rate definition of patterns, and Wolfe Waves were not included.

Also comes into question what success rate really means. In one study, I read a success rate of pattern related to its ability to complete at a defined rage relative to its Point-D, which is the completion point of most patterns.

Yet, the argument against that was that a success rate should instead measure the ability of a pattern to retrace to at least 38.2%, since the purpose of pattern trading is not to see it to completion, but to profit from its reaction following its completion.

In the case of the Wolfe Wave, I have dug through PDFs and was not able to find any information on win rates.

Here is the site in question, which is the only reliable source I have come across that provides the most informative data on pattern performance:

http://www.fxgroundworks.com/blogs/results-performance/study-of-harmonic-patterns/

Also, among all pattern traders I have encountered, I would name @Akil_Stokes (member of TradingView) who knows a lot about these geometries, as he trades off of them for a living.

Is this answering your question in a helpful way?

David Alcindor
Reply
Sandeep_Gupta 4xForecaster
2 years ago
OK, thank you.
+1 Reply
4xForecaster PRO Sandeep_Gupta
2 years ago
@Sandeep_Gupta - There are several examples you might be able to Google by looking up the keys "dead-on hit + 4xforecaster + Wolfe", which are the Wolve Waves resulting in hitting the 1-4 Line, as well as reversing from it.

$USDollar - Target Hit Dead-On


Besides this, if you find any literature alluding to performance records of certain patterns, feel free to share.

Thank you.

David Alcindor
Reply
Sandeep_Gupta 4xForecaster
2 years ago
Dear sir, the rules given by you regarding wolf wave trading are very clear and informative, I only was suspicious about the stop loss given by 5' as many times I found that the price moved beyond this point. If we take 5" then reward to risk ratio will be very less.
+1 Reply
4xForecaster PRO Sandeep_Gupta
2 years ago
@Sandeep_Gupta - I see exactly what you mean.

In my experience with this WW pattern, most of the price will revert from 5 to 5' - Although I have NOT done any calculating studies on it, my empirical sense tels me that this would happen 60% of the time, whereas a reversal at 5 would represent about half that.

In contrast, the 5" move is a rare event and indicates a very aggressive market, which I rarely trade, unless I have other technical reasons to stay in it.

David
Reply
Sandeep_Gupta 4xForecaster
2 years ago
Thank you for the information, I gone through your page and I found the material supplied by you is very detailed and informative. I am learning a lot. lol.
+1 Reply
4xForecaster PRO Sandeep_Gupta
2 years ago
@Sandeep_Gupta - Great. I am very glad this was helpful. Let me know how else i can help regarding these waves.

Here is a link to my dropbox file, where I have some information on Wolfe Waves:

1 - https://www.dropbox.com/s/256iqbq5mnnmevk/Wolfe%20Waves%20-%20Synopsis.pdf?dl=0

and

2 - https://www.dropbox.com/s/qqq5ljvdl33fktx/Wolfe%20Waves.pdf?dl=0

Enjoy.

David
+2 Reply
Sandeep_Gupta 4xForecaster
2 years ago
Thank you very much, this material is very helpful.
+1 Reply
4xForecaster PRO Sandeep_Gupta
2 years ago
@Sandeep_Gupta : Great, I hope you enjoy and have the time to read it - David
Reply
nikokoev 4xForecaster
2 years ago
Hi David! I read materials also and I think that they are really hopefull. And I have several questions . Do you use software, or you count waves by yourself. And after so meny time of observation, do you think that Walf Waves are more reliable on H4 and higher time frame than 5M and 15M. In exibits I see that Linda use even 5M, but I`m intersting from your opinion.
+1 Reply
4xForecaster PRO nikokoev
2 years ago
Hello @nikokoev - Great questions!

1 - Yes, all and any of my price field is 100% eyesight, or more like what I refer to the mind's eyes - no software, and I will tell you why:

Software have to have a predetermined Zig-Zag function in which the sensitivity is defined to allow for proper counting. However, it does not understand certain discreet motions that can foretell that a pattern will confirm or evolve to something else.

In addition, patterns recognition software will signal a pattern that it recognizes, such as a Bat, but may then fail to reverse at Point-D then move on to complete a Crab.

This comes in complete contradiction to how I trade, because I trade from Point-C, which is the point of origin that will define the impulsive Leg D. This is something that the software cannot even anticipate - This strategy is what I have called "E.A.G.L.E." for Extremely AGgressive Level of Entry (feel free to Google it under "E.A.G.L.E." + "4xQuad" + "4xForecaster", or any combination of the strat + name).

instead, I have ended up looking at charts for so many hours and days that it would become easy to see and at times anticipate price move without quite understanding why, until I discovered that the market is simply a repetition of the same words, into phrases, into paragraphs.

I would typically sit with my cup of coffee all day long and let the price tell me what it want to near towards in terms of pattern. That was the way I did for many years, on top of printing and pasting my wall up with charts, charts, charts.

At night, I would draw the Wolfe Wave pattern in my mind and see myself take the trade at the latest level, typically at the 5-prime (5') position, which is the one I prefer as the market will tend to go there.

There are software for pattern recognition out there, and I have bought into many of them (some are free, some demand membership, others are downloadable.

The only one I can recommend at this point is one built by a gentleman who goes by the name of Kor, from:

www.tradingarsenal.com

This links to a forum, but he has a downloadable material, which, best of all, I believe is free.

Let me know how this goes. f you have any problem with getting your hands on some good stuff, or you'd like me to take a look at your Wolfe Waves charts, I will do my best to take the time and look at it.

I could build a chat room for WW as well, but I am getting a bit spread thin. Let's see how things go.

David
+2 Reply
nikokoev 4xForecaster
2 years ago
Thank you David for your detailed answer. I also was try software but.... the eyes are the eyes. I now this person Kor (not personly) and l learned a lot from tradinarsenal but with indicators doesnt work and we have to look at the charts :). I use MT4 and I can show you chart with indi and my count but I dont now how to paste here chart from MT4. And one more question- do see differens in wolf waves (how they working) in curencies, stocks and index?
+1 Reply
4xForecaster PRO nikokoev
2 years ago
@nikokoev - Great, I am glad you are sticking to the true computer (your brain).
+1 Reply
4xForecaster PRO 4xForecaster
2 years ago
@nikokoev - I have not seen any difficulty applying the WW methodology across assets (indices, stocks, Forex, futures) - David
+1 Reply
nikokoev 4xForecaster
2 years ago
snapshot
I made this quikly. Is there rule that wave 4 should be higher than wave 2. In this case is little lower. How you think does my count correct?
+1 Reply
4xForecaster PRO nikokoev
2 years ago
@nikokoev - Here are a few links to Wolfe Waves I have posted over the past year(s):


==========================================================
1 - LESSON - Wolfe Pattern In Progress: $CADJPY (#CADJPY #CAD #JPY #Forex) http://on.fb.me/1cWi5Gl

2 - Wolfe Waves - USDollar: A 4xQuad's Perspective ... http://on.fb.me/1dtkXqN

3 - Wolfe Waves - USDollar: Hits Line 1-4'; Line 1-4 Remains Pending http://on.fb.me/1ktCEzB

4 - $CADJPY: Wolfe Target Hit Dead-On|#CADJPY #CAD #JPY #USD #Forex

4xQ'ers,

Here is a beautiful example of a Wolfe Waves pattern ("WW") completion in this Canadian:Japanese Forex pair.

We hope this stirred some interest within you to trade more advanced, and perhaps more reliable patterns.

While are student's most common complaints have been that pattern trading has not been able to grow their account, we recommend that they either abandon pattern trading all together, or simply re-analyze the behavior of some patterns, which we have found somewhat predictable, namely the Shark, the 5-0 and the Bat, as our top three pattern (even though we do not trade patterns any more, which is not to say that further pattern behavioral analysis is not worth doing - we believe it is).

Cheers,


David Alcindor | 4xQuad.com

- Link: http://on.fb.me/1iryi7F

==========================================================

There may be more to be found from my own studies, but they are the bulk of it.

MOST IMPORTANT, follow the following simple RULE:

1 -- ALWAYS trade the Wolfe Waves where
a -- The 1-3-5 Line points UP for an expected move DOWN,
and
b -- The 2-4 points UP, BUT converges towards the 1-3-5 Line

AND

2 -- ALWAYS trade the Wolfe Waves where:
a -- The 1-3-5 Line points DOWN for an expected move to the 1-4 Profit line UP
and
b -- The 2-4 Line points down, BUT converges towards the 1-3-5 Line.

You may come across some examples where I decided to go against this rule, and perhaps the trade did go its expected way towards validating its 1-4 Line ("Profit Line"), but to keep the probabilities on YOUR side, best is to stay true to this rule.

Now, see whether your chart has does ... :

snapshot


Taking a quick look at it, it seems that lines 1-3-5 and 2-4 would be going opposite directions, where the 1-3-5 Line would be pointing UP (thus building an expectation of a DOWN move IF and ONCE price completes Point 5 or Point 5'), ...

... HOWEVER, ...

IF you look at the 2-4 Line, it would be pointing DOWN, and not UP as it should be the strictest rules.

Is this making sense?

David Alcindor
Reply
nikokoev 4xForecaster
2 years ago
In first material you post in your dropbox Linda shows on page 2 exibit 15.2 where 1-4 line and 1-3-5 line never will cross (same in other charts in this material). In rules she just say that wave 4 must be higher from 1 for buy setup and oposite for sell. In second material you post is written that line must converges. For me is realy helpful to learn from you what is correct. Thank you very much!
+1 Reply
nikokoev nikokoev
2 years ago
Sorry David!
you write 2-4 line and 1-3-5 line. Sorry again!
+1 Reply
4xForecaster PRO nikokoev
2 years ago
@nikokoev - The rules I wrote are the guidelines I use to trade Wolfe Waves profitably, as it remains consistent and predictable (nothing is 100% probable in terms of prediction, but the rules kept me there).

David
+1 Reply
4xForecaster PRO 4xForecaster
2 years ago
@nikokoev - Here is a potential WW developing in e-Mini as I type this:

snapshot


David
+1 Reply
nikokoev 4xForecaster
2 years ago
Is it correct to count wave 4 at previous low? After that price will cross 2-4 line and model will be invllid or not?
Reply
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