As we are considering the much larger timeframe of this NZDUSD pair, TradingView @iefan posted a potential Wolfe Wave on that thread.
Following is the Wolfe Wave chart, which he correctly constructed:
A slight modification is made using the internal geometric requirements of the "Geo", which yield a very similar geometry, but the rules of engagement ("ROE") call for higher probability targets that what is originally defined in the Wolfe Wave, namely the "Off-Set Rule" - See following chart illustrating the basic internal constrictions:
In its most basic internal construction rule, the Geo prefers the following conditions:
1 - In essence, the "Geo" PREFERS that the 1-2 Leg defines Point-1 retrospectively using the cd segment which terminates at Point-2 to define Point-1 via the use of the reciprocal ab = cd symmetry;
2 - It also prefers that the 2-3 Leg be an Elliott Wave Triple-ZigZag ("TZZ");
3 - It also looks for a simple zig-zag of the 3-4 Leg
In terms of defining Point-5, there are three possibilities:
1 - Point-5 exists along the 1-3 Line;
2 - Point-5-prime (5') exists along transposition of the 2-4 Line originating at Point-3;
and
3 - Point-5-second(5'') exists along transposition of the 2-4 Line originating at Point-1.
Above construction is important, as it leads the the HIGH-PROBABILITY target definition of the rule defines as "Off-Set Rule", which suggests that:
1 - If price rallies from Point-5, it will have a high probability of attaining the 1-4 Line (this is the basic Wolfe Wave rule)
2 - If price rallies from Point-5', it will have the high probability of attaining the price level corresponding to Point-4
and
3 - if price rallies from Point5'', it will have the high probability of attaining the price level corresponding to Point-3.
In terms of entry, the following rules address a grading level of aggressiveness, namely:
1 - An aggressive entry would allow the trader to enter at the moment price validates Point-5';
2 - A standard entry would allow the trader to enter at the NEXT candle-open, following the crossing AND closing across the 1-3 Line;
and
3 - A conservative entry would allow the trader to enter at the NEXT candle-open, following the crossing AND closing across the price level of Point-3
OVERALL, the pair remains bullish. This smaller interval is worth consulting, as it looks at a finer granular level. IF and once price arrives at the target, we would shift our attention to that larger scaled set up.
Thank you @iefan for suggesting this great find at this smaller timeframe.
Best,
David Alcindor Predictive Analysis & Forecasting Durango, Colorado - USA
First of all, let me say that I trade in larger timeframes, typically H4 and at times daily.
As I have discussed before, the level of surveillance over the charts is based on a factor of 4, starting by the 4-Hour timeframe, which is what I consider a "synthetic" market of retail and institutional mix. In other words, most of the smaller capitalized players would tend to spend their times at the M15 to H1 level, simply because the extent of stop-losses are measured in fractions of pips when compared to the much greater exposures if you placed a stop-loss in a H4 or daily chart.
As I place a trade, say at the H4 level, I will always tend to look at the smaller timeframes as well, where the finer granular details allow me to calibrate what I intend to trade in the larger level.
For practical purposes, I have used a factor of FOUR to consider which timeframes to follow, such that:
1 - M15 timeframe is the next level down I would consider for a calibration of a M15 x 4 = M60, or H1 timeframe;
2 - H1 timeframe is the next level down I would consider for a calibration of a H1 x 4 = H4 timeframe;
3 - H4 timeframe is the next level down I would consider for a calibration of a H4 x 4 = H16 timeframe, for which I simply use the DAILY (H16 is 2/3 of a calendar day, enough to cover 2-3 currency market hours when other market respond to majors);
4 - DAILY timeframe is the next level down I would consider for a calibration of a DAILY x 4 = WEEKLY, which is a rarely tradable level;
5 - WEEKLY x 4 = MONTHLY, which is simply not tradable to my risk tolerance.
In truth, even from the DAILY, I would tend to push the calibration of a DAILY=level trade down to H1, and perhaps M15 (which leads to a lot of probable interim scenario that may appear to contradict such a larger timeframe, which is why I would recommend more junior traders to stick to one order of calibration (i.e.: from H1 to M14, or from H4 to H1, or from DAILY to H4)
Now, what I consider is the following DAILY chart, in which I placed a long position:
As you may recall, I announced a "Watch" at 0.67888 on June 26th, which corresponds to my entry level.
For those who know the codification of the Predictive/Forecasting Model I use, it goes as follows:
1 - Quantitative (numerical) targets (i.e.: TG-1, TG-2, ... TG-n) represent high probability of attainment - These are typically in YELLOW
whereas,
2 - Qualitative (nominal) targets (i.e.: TG-Hi, TG-Lo, as well as the more extremes TG-Hix and TG-Lox) are of vanishing probability from the less to the most extreme (i.e.: LO vs. Lox, or Hi vs. Hix). The color use for TG-Hi and TG-Lo is RED, whereas TG-Hix and TG-Lox is PURPLE.
A last set of target is a BLUE colored price level, which corresponds to a signal from the Model, which demands that a 4-fold move be considered if price were to not reverse at that panultimate level. In other words, if in a M15 chart price was not consolidating, and simply continued and not reacting to the BLUE "Watch" line, then I would have to abandon the analysis effected at the M15 and move on up to M15 x 4 = H1. The same would occur at H1 (moving to H1 x 4 = H4, and so on).
Also explained before is the significance of these targets:
1 - Quantitative targets will define a level from which price will RETRACE in the Fibonacci order that should not exceed 0.618. So, at say TG-1, price would be expected to RETRACE and not reverse, moving back to to at least 0.386, or retracing at least 38.6% of the recent swing, but not to exceed 61.8% - In the most aggressive or volatile market, expect this order to be stretched to 0.786.
2 - Qualitative targets will define a level from which price will REVERSE. This means that price will turn around and move beyond the origin of the swing, thus penetrating Fibonacci extensions, in the order of 1.131, 1.272, 1.313, 1.414, up to 1.618.
Okay, back to the current NZDUSD to answer two most recent queries:
Basically, here is what I see as a HIGH-PROBABILITY reversal to the UP-side:
Basically, what we are witnessing is a geometry (BLACK plots) within a larger geometry (BLUE plots), where the plots are the Wolfe Wave in BLACK in numbers 1, 2, 3, 4 and 5, inscribed within the larger "Geo" with its own plots 1, 2, 3, 4 and 5 in BLUE.
The BLUE geometry attained an extopic 5-second, or 5'' level when price was defining the Point-5 of the BLACK geometry.
Those who know the "OffSet Rule" of the Geo, this means that the HIGHEST PROBABILITY of attainment at this point is the price level corresponding to Point-3 of the Geo (BLUE).
Is this making sense so far?
David Alcindor
4xForecaster
⋅
ADDENDUM - Tech-Note:
Now, as far as setting up a stop-loss, my generic answer has to do with whether YOU have defined your own risk tolerance via a rule-based risk management - In other words, before you enter a trade, you should already have established how much you are willing to part of your assets, in terms of dollar amount, or preferably in terms of percentage of the trading tranche. Say that you ahve a $10,000 account, then consider trading only 5-10% of that account, and allow only each trade to lose 1-3% of that trade. In effect, you would be trading $1000 at most of the 10K account, and set a stop-loss that would tolerate only 1% loss, or $100 per trade, perhaps up to 3 trades, so that only $300 could be lost at any given time.
In terms of actual strategy to define a stop loss, you first have to determine the TIMEFRAME you need in order to minimize the loss.
Here is a strategy I recommend, based on simply Fibonacci extensions - I would use 1.414 as the MOST important level;
Let's look at the M60 chart, and consider the last swing, from points 4 and 5:
Now, if I ascribed a 1.414-Fib extension to that chart using these two points, I would obtain the following STOP-LOSS level:
Effectively, I would place a stop-loss BELOW the 1.414-Fib, being constantly aware of the SPREAD used by my trading institution. Hence, the SL would need to be at 1.414-Fib + spread + 5 pips (I use 5 pips by habit).
If you use the 1.414-Fib as your SL, you would be hit by the BID at this low level, so add an extra pip layer.
The significance of 1.414 is two-fold:
1 - Most aggressive markets will let more-junior traders wait for an entry at the 1.618, since it is the most widely awaited level of entry, and institutional traders have a sight of all of these orders.
2 - If price went to the 1.618 instead, I would let the market take me out and would give myself the time to assess whether it is likely to return back up to my initial position - If so, I would re-enter and place the SL at the 1.618-Fib + spread + 5 pips.
Perhaps you might start to understand why you have to predetermine which timeframe to trade, since this Fib-based strategy depends on an extent between the 100% mark and the 1414% mark of the Fibonacci scale (i.e.: 1.414 extension), and that this extent means different fears, losses and mindset whether it be applied at a M14 level or a DAILY level, both of which would confer a completely different amount to lose.
Right?
David Alcindor
iefan
⋅
Hi David. May I ask a question about point 2 above. How do you assess whether price is likely to return to your initial position? Is it dependent on the degree of adverse excursion, a certain FE reached, a point 5' or 5" your predictive forecast model....I'm just trying to determine if there are any rule of thumb with which to manage such a situation. Kind regards iefan
4xForecaster
⋅
@iefan - I typically post objective data which traders can reproduce themselves. This means a mixed background Fibonacci levels, geometric plots and/or convergence of lines that make sense structurally. At the foreground, the Predictive/Forecasting Model remains the main "teller" against which I build a "technical narrative" using probable supportive tools, such as the ones standing in the background.
The Predictive/Forecasting Model tells me the direction, strength, as well as probability of extent, and upcoming future pivots (quantitative targets, such as TG-1, TG-2, ...) or upcoming tip-top or bottom-tip reversal in terms of qualitative targets, such as TG-Hi/Lo, TG-Hix/Lox, and finally a designated level at which the timeframe needs to be up'ed by a factor of four (i.e.: M15 to H1, or H1 to H4, ... etc.).
Hope this answers your question.
David Alcindor
4xForecaster
⋅
30 JUN 2015 - Additional lesson using Fibonacci to aid in the internal construction of the Geo and to define probable price ranges:
- Following is a cut/paste comment from the EURUSD thread, which is very appropriate here:
Here is a bit of a refinement, using the Geo's internal constructions:
1 - The 1-2 Leg is a reciprocal ab = cd symmetry, built retrospectively. So, first look for point-d and point-c, and project this line back to the next best-fit move, which becomes the a-b segment - The importance here is to go to the NEAREST spike that would represent Point-1 of the larger, developing geometry. If the 1-3 Line is below the total geometry, then the 1-3 Line has to slope DOWN, and therefore Point-1 has to be above Point-3 - The contrary is true for a geometry where the 1-3 Line is above, hence Point-1 would naturally have to be below Points-3 along a rising 1-3 Line, right?
2 - Then, project he 1-3 Line, mark ALL points, and look for the "Tunneling", which is a "natural" spacing in price 9best appreciated with candles, wherein price is seemingly allowed to pass through from Point-1 to Point-4 touch the least number of candle bodies, and at its best, would thread through from candle tip to candle tip. This is your 1-4 Line in the Wolfe Wave, also known as the Target Line. In the Wolfe Wave methodology, this is the "reason to be" of the Wolfe Wave, but in the "Geo", this line is shown to be weaker in terms of probability compared to the application of the Geo's Off-Set Rule.
3 - Use Fibonacci extensions between points 1-2, 2-3, and 3-4, and see whether any of the following values line up (i.e.: "Fibonacci clusters"):
1.131, 1.272, 1.313, 1.414 and 1.618.
Typically, the 1-2 Leg extension tends to express itself in the order of a 1.414 to 1.618, so I would use that one first, and measure up all other extensions in comparison.
If the clusters are close to one another, but not perfectly lined up, then use the range offered between the 1-2 and 3-4 extensions as a probable pivot range.
Kapish?
David Alcindor
vladsim
⋅
Hi David
Could you post the EURUSD chart here to illustrate your explanation.
A picture is worth a thousand words.
thank for the useful lesson.
4xForecaster
⋅
02 JUL 2015 - UPDATE:
From Twitter/LinkedIn:
----------
NZDUSD rallies from its 5'' position. Geo's OffSet Rule sees 0.67649 as HIGH Prob. target:
PS: Do not keep you eyes off of the real interest here, which is the DAILY timeframe. We are looking at this much finer granular level of resolution simply because there is room to move, seek and ride certain bullish geometries (as in this case), which is the purpose of looking into smaller timeframe and "calibrating" trades from a higher timeframe, as discussed before - Following is a "Tip-Top/Bottom-Tip Reversal" style entry using the Predictive/Forecasting Model:
D.
iefan
⋅
Hi David
Is it necessary to look at the Weekly time frame now to best determine what price is likely to do as we have made a new structure low? Are you expecting a rally from this point? Thank you and best regards Iefan
Yes, at this point, I would keep focused on the institutional level. This is a commodity-sensitive currency sensitive to the Asian theater of dairy and meat consumption. Gold is a remote influence as well, so as long as commodity prices remain under lid, NZDUSD is likely to succumb to the same sympathetic pains of these markets.
In terms of geometries, the large scales retain certain compliance to Fibonacci levels of contraction and expansion rate, such that the following chart might be of relevance, IF and only IF price regains buyancy:
First of all, let me say that I trade in larger timeframes, typically H4 and at times daily.
As I have discussed before, the level of surveillance over the charts is based on a factor of 4, starting by the 4-Hour timeframe, which is what I consider a "synthetic" market of retail and institutional mix. In other words, most of the smaller capitalized players would tend to spend their times at the M15 to H1 level, simply because the extent of stop-losses are measured in fractions of pips when compared to the much greater exposures if you placed a stop-loss in a H4 or daily chart.
As I place a trade, say at the H4 level, I will always tend to look at the smaller timeframes as well, where the finer granular details allow me to calibrate what I intend to trade in the larger level.
For practical purposes, I have used a factor of FOUR to consider which timeframes to follow, such that:
1 - M15 timeframe is the next level down I would consider for a calibration of a M15 x 4 = M60, or H1 timeframe;
2 - H1 timeframe is the next level down I would consider for a calibration of a H1 x 4 = H4 timeframe;
3 - H4 timeframe is the next level down I would consider for a calibration of a H4 x 4 = H16 timeframe, for which I simply use the DAILY (H16 is 2/3 of a calendar day, enough to cover 2-3 currency market hours when other market respond to majors);
4 - DAILY timeframe is the next level down I would consider for a calibration of a DAILY x 4 = WEEKLY, which is a rarely tradable level;
5 - WEEKLY x 4 = MONTHLY, which is simply not tradable to my risk tolerance.
In truth, even from the DAILY, I would tend to push the calibration of a DAILY=level trade down to H1, and perhaps M15 (which leads to a lot of probable interim scenario that may appear to contradict such a larger timeframe, which is why I would recommend more junior traders to stick to one order of calibration (i.e.: from H1 to M14, or from H4 to H1, or from DAILY to H4)
Now, what I consider is the following DAILY chart, in which I placed a long position:
As you may recall, I announced a "Watch" at 0.67888 on June 26th, which corresponds to my entry level.
For those who know the codification of the Predictive/Forecasting Model I use, it goes as follows:
1 - Quantitative (numerical) targets (i.e.: TG-1, TG-2, ... TG-n) represent high probability of attainment - These are typically in YELLOW
whereas,
2 - Qualitative (nominal) targets (i.e.: TG-Hi, TG-Lo, as well as the more extremes TG-Hix and TG-Lox) are of vanishing probability from the less to the most extreme (i.e.: LO vs. Lox, or Hi vs. Hix). The color use for TG-Hi and TG-Lo is RED, whereas TG-Hix and TG-Lox is PURPLE.
A last set of target is a BLUE colored price level, which corresponds to a signal from the Model, which demands that a 4-fold move be considered if price were to not reverse at that panultimate level. In other words, if in a M15 chart price was not consolidating, and simply continued and not reacting to the BLUE "Watch" line, then I would have to abandon the analysis effected at the M15 and move on up to M15 x 4 = H1. The same would occur at H1 (moving to H1 x 4 = H4, and so on).
Also explained before is the significance of these targets:
1 - Quantitative targets will define a level from which price will RETRACE in the Fibonacci order that should not exceed 0.618. So, at say TG-1, price would be expected to RETRACE and not reverse, moving back to to at least 0.386, or retracing at least 38.6% of the recent swing, but not to exceed 61.8% - In the most aggressive or volatile market, expect this order to be stretched to 0.786.
2 - Qualitative targets will define a level from which price will REVERSE. This means that price will turn around and move beyond the origin of the swing, thus penetrating Fibonacci extensions, in the order of 1.131, 1.272, 1.313, 1.414, up to 1.618.
Okay, back to the current NZDUSD to answer two most recent queries:
Basically, here is what I see as a HIGH-PROBABILITY reversal to the UP-side:
Basically, what we are witnessing is a geometry (BLACK plots) within a larger geometry (BLUE plots), where the plots are the Wolfe Wave in BLACK in numbers 1, 2, 3, 4 and 5, inscribed within the larger "Geo" with its own plots 1, 2, 3, 4 and 5 in BLUE.
The BLUE geometry attained an extopic 5-second, or 5'' level when price was defining the Point-5 of the BLACK geometry.
Those who know the "OffSet Rule" of the Geo, this means that the HIGHEST PROBABILITY of attainment at this point is the price level corresponding to Point-3 of the Geo (BLUE).
Is this making sense so far?
David Alcindor