You are in Wave 4 retracing a portion of Wave 3.

Now you grab a Fibonacci retracement tool and drag it all the way along Wave 3.

You have 3 important numbers to look for: 38.2%, 50% and 61.8%.

A lot of you might say, "Well, it's wave 4, so it's gonna retrace 38.2% of Wave 3 most of the time".

Now if you buy on 38.2 where would your stop be?

Is this simple guideline enough for executing a trade?

It would be really nice to add to the probability that the turning point is 38.2% retracement of maybe add to the probability that it's NOT!

I've been studying W.D. Gann methods on price and time and borrowed the term squaring from his terminology. Of course the method I'm about to use here is not what Gann used.

I have noticed that Elliott waves obey Fibonacci relationships not only in price but also in time.

For instance if you find your Wave 5 is equal to 1.618 times your Wave 1, there's a high chance that the time it takes your Wave 5 to complete is either 1.618 of Wave 1 or 0.618 of Wave 1 (Depending on how impulsive your Wave 5 is).

I've chosen USDJPY from the previous week to illustrate this concept.

Here I'm using Fibonacci Time Relations on Wave 3 and 4 of the bullish move.

Wave 4 is starting to retrace Wave 3.

Here I use 2 tools: Fibonacci Retracement and Trend Based Fib Time.

For both I start from the start of Wave 3 and end it at the end of Wave 3.

Here's how I'm squaring Price and Time:

Wave 4 is going to retrace 38.2% of wave 3 both in price and time, so I mark the intersection of 38.2% both in time and price.

Wave 4 is going to retrace 50% of wave 3 both in price and time, so I mark the intersection of 50% both in time and price.

Wave 4 is going to retrace 61.8% of wave 3 both in price and time, so I mark the intersection of 61.8% both in time and price.

This way I have 3 tight zones which not only show potential reversal prices but also times.

This methods gives the analyst another advantage. Let's say the price bounces off 38.2% price retracement but now 38.2% time extension. The trader knows there is lower probability for this to be a valid reversal.

Now back to the USDJPY , you see how beautifully the price bounced off the 50% zone.

Wave 4 ended retracing Wave 3, 50% in time and price and the price and time squared perfectly.

1. Why aren't your time line projections symmetric? The .618 time projection should be the same distance from .5 as the .382 projection.

2. A perfect 50% price and 50% time target is just 1 single point, but you're using target boxes...how are you determining the length and width of your boxes?

Once again, great info, and great concept...thanks for sharing :)

Thank you for your comment.

1.When doing time calculations, as time bars are not quantitative like price movements we don't have actual 1.618 day or so.

So what the Fib Time tool is actually doing is rounding the bar counts to their nearest.

In this example the whole Wave 3 took 19 bars in a 4H chart. So its 1.5 time extension would be 28.5 bars which needs to be rounded. The trading view software has rounded it to 29 bars and that's the reason you're seeing asymmetry between 38.2 and 61.8. If we could place the 50% exactly 28.5 bars away from Wave 3 termination point this would be avoided ;)

2. It's just the basic concept in financial markets. We rarely see a bounce off the tick from a price line or time projection. That's just because too many parameters are in work and they might cause small deviations from the exact points. And I drew the boxes just to highlight the points. Had no other intentions in mind :)

If there's anything else we can discuss I would be happy.

Have a good one.