Why are corrective patterns relevant?
Because this way, we can define a clear idea between "a structure is ready to think about breakouts" or "the structure is not finished yet to think about a breakout." This concept was developed by Ralph Nelson Elliott, the father of the Wave Principle. He defined that corrective movements (sideways situation) can take 4 different shapes, ZIG-ZAG / IRREGULARS / FLAT / TRIANGLES. The first 3 are composed of 3 Waves ABC, and Triangles are composed of 5 waves ABCDE.
Today we will not explain the specific characteristics of each of them, but we will get an idea of Triangles. Remember that there is this concept of "What theory tells us" (a perfect triangle) VS "What the market shows us" (5 waves, where you say, Ok... I think this is a triangle). So why would you wait for this kind of mystic shape? Because this is showing us that the accumulation or distribution process is getting tighter or compressed. We confirm that by observing 3 clear supply/demand bounces in the full pattern, which is a clear confirmation of the relevant levels where the change in equilibrium is happening.
ok, nice theory... I want the relevant levels for you.
Well, so as we explained before, we are waiting for AT LEAST an "ABCDE" Pattern, and we think we need to observe "E" for that. We expect to see a reversal movement in the 2 minor resistance levels we have drawn. The expected target for E is the lower trendline of the triangle or at least the price hitting 600. With that situation happening, we will be ready to set pending orders above "B" (above the 2 minor resistance levels) and a first target on the FIBO EXTENSION (If you are a position trader, then we would go for the 2nd fibo extension at 1400). Our stop levels always are below the whole structure.
What happens if nothing of what you are saying here happens?
Then we don't trade; that simple. We only are interested in executing setups where we can see something several days in advance, and our filters are fulfilled. The risk we will be using on a setup like this is 1% to 2% of our Trading Capital. and if everything goes as expected, the duration of a setup like this can go between 200 to 300 days.
Thanks for reading, guys!
Because this way, we can define a clear idea between "a structure is ready to think about breakouts" or "the structure is not finished yet to think about a breakout." This concept was developed by Ralph Nelson Elliott, the father of the Wave Principle. He defined that corrective movements (sideways situation) can take 4 different shapes, ZIG-ZAG / IRREGULARS / FLAT / TRIANGLES. The first 3 are composed of 3 Waves ABC, and Triangles are composed of 5 waves ABCDE.
Today we will not explain the specific characteristics of each of them, but we will get an idea of Triangles. Remember that there is this concept of "What theory tells us" (a perfect triangle) VS "What the market shows us" (5 waves, where you say, Ok... I think this is a triangle). So why would you wait for this kind of mystic shape? Because this is showing us that the accumulation or distribution process is getting tighter or compressed. We confirm that by observing 3 clear supply/demand bounces in the full pattern, which is a clear confirmation of the relevant levels where the change in equilibrium is happening.
ok, nice theory... I want the relevant levels for you.
Well, so as we explained before, we are waiting for AT LEAST an "ABCDE" Pattern, and we think we need to observe "E" for that. We expect to see a reversal movement in the 2 minor resistance levels we have drawn. The expected target for E is the lower trendline of the triangle or at least the price hitting 600. With that situation happening, we will be ready to set pending orders above "B" (above the 2 minor resistance levels) and a first target on the FIBO EXTENSION (If you are a position trader, then we would go for the 2nd fibo extension at 1400). Our stop levels always are below the whole structure.
What happens if nothing of what you are saying here happens?
Then we don't trade; that simple. We only are interested in executing setups where we can see something several days in advance, and our filters are fulfilled. The risk we will be using on a setup like this is 1% to 2% of our Trading Capital. and if everything goes as expected, the duration of a setup like this can go between 200 to 300 days.
Thanks for reading, guys!