Placing trades and set a stop loss using Elliott wave.
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In this video I explain how to place trades and set a stop loss using Elliott wave.
welcome back to module number five in the course entitled catching market tops and bottoms using elliott wave theory.
and in module 5 i'm going to talk about entering trades and placing stop losses using the rules and the guidelines of elliott wave theory.
So we're going to harness all the knowledge that we've gone through in the previous four videos, and if you haven't already checked out those videos you should go back and start at module number 1.
i'm gonna take that knowledge and we're going to put into practice on the chart to show you how you would pick entry point for your trades, be they long or short trades.
you will see how all the previous four modules come together to set up trading ideas for you .
I'm going to go through spotting reversals in the charts and how that plays out in the price action i'm going to go through confirming price action, this is price action on a short-term chart which confirms the larger count you have on a longer-term chart.
so if you have a longer-term chart which has a three wave rally and a correction and maybe and you think that's complete, how to use short-term charts to confirm if that structure is in fact complete.
Then we go into trade entry strategies so once you have spotted the reversal on the chart and you've got the confirming price action, then it's time to enter a trade.
I'm going to show you the strategies that I use to give me the least risk with the most potential reward, where that happens on the chart how you would confirm that happening in real time on the short-term chart.
And we're going to use the dollar/Yen example and last we're going to show you what reversal look like in real time, and how to use that information in your trading.
Without further ado let's get in there,
So here we have our wave 2 low off the bottom again in dollar/yen.
I'm going to label this and I'm going to bring you through it as an elliott wave trader would chart.
Ok so we have a five-wave structure up off the price low at 75.56.
So since then off that high we have a three-way decline to the low, i'm going to use ABC labeling this is just to keep it un-complicated,
In reality this was probably a wxy complex correction to the outside
but ABC will work for this purpose because it indicates a correction
now with the wave 'b correction like it said in the previous video
we can be expecting price to move down into the territory of the wave one at that one letter degree so
give us a price targets as between fifty percent 61.8 percent and into the price territory of wave 1 of one
so you can see that the correction made those waypoints very quickly
and wave A even push down right into the price charity of one's degree
now off that low the irst rally, would have given a false signal as we had a three-wave rally.
why do I know that this was a corrective
Firstly it's in three waves and formed wave B you would have known that in real time as this corrective rally
you would see three ways unfold and retracement of those internal highs happen pretty quickly
so you would have known that this was probably a wave B rise
and not rally we were expecting in wave 3
so we're looking for price to to come into the price territory of wave 1, of one lesser degree and
that's what happened
immediately you would be switching on your testing scenarios to
test the market to the upside
the most opportune time is off the wave b high.
so we have wave 1 and 2 complete
we have our elliott wave structure complete that means five waves up
and three waves down complete
and at once an elliott wave trader would notice that the structure is
coming to a completion
and that price is approaching the wave one price area at one less a degree
that would have definitely perked your interest
and you would have been looking to the upside again
you would see oversold levels at a higher low and you would have seen real declining
momentum to the downside
and that would be the point to start testing the market the upside
Now how do you go about testing the market the upside
well the first thing to look for is a completed pattern - and we've got the completed pattern
the second thing to look for would be declining Momentum's to the downside - we have our declining momentum to the downside
starting to look for intermittant spikes to the upside - and you can see here in wave B you have this kind of false signal to the upside which was retraced completely
and at the low here started to get spikes to the upside and higher lows in created off the wave B low.
here you will begin to get very interested in this price action
and it would be signaling to you, that this 1,2 structure was completed
your starting to move up into wave three
A strategy that I like to use for trade entry using elliott wave structures as my guide
Is placing your entry at the wave B high of one lesser degree
so so now we have our impulse structure set
we have our three wave decline
so what I'm going to do is get
in here to one lower degree again for trade entry purposes
so we're working with three degrees of trends here,
working with a blue label's large degree of trend
working with the red labels the internal structure of that larger degree
and now we're looking at price structure moving the next lower degree
looking at the next lower degree this impulsive move to the upside to give us a signal that the larger
structure has moved back into trend
let's get down here into this price structure and i'll tell you how I would go about placing a trade
here we are looking at the shorter-term price structure it's a
four-hour chart off the low in wave B
now at this point you not have known that was the end low
but you would have been looking for signals to 2 point you in that direction now what you'll
see off the low is a completed five wave structure again to the upside
and a corrective structure to the downside
so here is the labeling I would use on short-term chart
we've got one two three four five wave move to the upside
and this would be in a very powerful elliott
wave signal that the market is about to move back into trend
and again off that wave five high with there
we've moved to the downside and labeled with ABC
so the elliott wave trader would look to place a trade at the b-wave high of that trend change
so now we've got our impulsive move to the upside we have a corrected move to the downside
and here's our b wave high that came in at 78.37 but we know that if this is the corrective structure
and if price moves back up through that corrective structure it's likely moving back into trends again so this is a turn at 3 degrees of trend here.
what I would be doing as an elliott wave trader is placing an order at that wave b high and your stop
level would be at the wave A low,
or just below the way A low, so you see prices moving back up off the
way B low, price would trigger that order at the way b high
nd we would have a relatively tight stop to work off
once the once the price starts moving back into trend again
and we know that from the larger degree trend we're expecting a very powerful move in a wave three blue so
we know that if the our trade is triggered
price should move past that point pretty quickly
and what actually happened was the price did move past that point very quickly and with a trailing stop methodology
you just could have easily reduce your risk very quickly
and that's the essence of a low-risk elliott wave trade
working from a top-down scenario
figuring out your trend
figuring out where your corrective move has possibly completed
figuring out where your large degree trend is going to go in the future
and working from the top down to a shorter degree time frame to give you the best risk-reward trade entry scenario
in this 5 module course we've brought you through
defining the dominant trend.
we've talked about defining corrections
we've talked about to figure out the maturity of any particular trend
and we talked about making price projections and
we've talked about trade entry