ok. I think I can follow the counting. How does it relate to entry and exit decisions?
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NEW Anyone Counting Price?
- Thread starter fireflyx
- Start date
Quote from kiwi_trader:
ok. I think I can follow the counting. How does it relate to entry and exit decisions?
I think I understand your question...
The basic assumption is that, after a count has played out in a certain direction, another (high, low, or connecting structure) will follow in the opposite direction. Since most trends turn soon after the last wave breaches the last counted point, anywhere in that area is usually a satisfactory entry level. In fact, many movements turn on a dime.
I consider structures of 3 and 5 waves to be connecting movements - movements that connect high sequences to high or low to low or low to high. Most of the 5 wave structures Elliott observed were actually 7 wave. This is the fundamental structure for high scale movement in the market.
However, since any of the high sequences, 6 point (7 wave), 8, 10, and 12 point can extend to become low counts of 14, 18, or 22, my strategy is to stick with trading the more extended sequences. Mainly the 18 and 22 pt.
Hope I read you right...
rgds,
fx
fireflyx, can I try and simplify the concept of your system to get an understanding? Using YM does it mean that after any move of 22 points down you can buy and after any move of 22 points up you can sell?
And obviously that must mean that a 22 move must occur in one direction before you can count 22 in the opposite direction?
And obviously that must mean that a 22 move must occur in one direction before you can count 22 in the opposite direction?
All the mention of high, low, and connecting structures may start to sound a bit confusing, but here's the thing...
PERSPECTIVE in the market is everything. At some scale ALL MOVEMENTS CONFORM TO THE LOW COUNT SEQUENCES. The high counts are simply manifestations of low sequences playing out at lower (unobserved) scales.
Therefore, all a trader needs to do is play around with his chart duration and/or candle periodicity until he see's a movement that is clearly beyond 12 points. Then count it to its terminal.
Considering related charts helps a lot. For instance, if you're trading the Dow, keep an eye on the related movement in the Nasdaq and S&P as well. The indices will more or less turn together, and each one may be sporting a different form of low count. How is this helpful?
If the count in the Dow is 14 but in the Nasdaq and S&P it's 22, then you know that the Dow will not extend to an 18 point count since the others are already at a terminal of the most extended sequence possible.
Comparing related instruments lends insight that is otherwise not possible to achieve.
Hope this clarifies rather than confuses...
fx
PERSPECTIVE in the market is everything. At some scale ALL MOVEMENTS CONFORM TO THE LOW COUNT SEQUENCES. The high counts are simply manifestations of low sequences playing out at lower (unobserved) scales.
Therefore, all a trader needs to do is play around with his chart duration and/or candle periodicity until he see's a movement that is clearly beyond 12 points. Then count it to its terminal.
Considering related charts helps a lot. For instance, if you're trading the Dow, keep an eye on the related movement in the Nasdaq and S&P as well. The indices will more or less turn together, and each one may be sporting a different form of low count. How is this helpful?
If the count in the Dow is 14 but in the Nasdaq and S&P it's 22, then you know that the Dow will not extend to an 18 point count since the others are already at a terminal of the most extended sequence possible.
Comparing related instruments lends insight that is otherwise not possible to achieve.
Hope this clarifies rather than confuses...
fx
Quote from Champion:
fireflyx, can I try and simplify the concept of your system to get an understanding? Using YM does it mean that after any move of 22 points down you can buy and after any move of 22 points up you can sell?
And obviously that must mean that a 22 move must occur in one direction before you can count 22 in the opposite direction?
Well, 22 points IS the most extended count I am aware of, therefore it is the safest to trade. But the 18 point count also pops up with great frequency...
It isn't quite as simple as continual trading of 22 point counts in oscillating directions...
...I've just posted some info above that will probably help...
...as mentioned PERSPECTIVE comes into play... How can I state this as simply as possible... ummm...
The market moves by relatively few degrees of freedom. Bascially just the low count sequences. It repeats these sequences over and over - but here's the catch - it does it at varying time and wave scales.
Try zooming in on what you think is a 5 or 3 or 7 wave movement sometime. At some scale it will appear as a low sequence, 14, 18, or 22. The low sequences are inherently more accurate than the others, because they are more extended and detailed.
There is also a trick to determining the validity of any count. I will cover that in another post.
rgds,
fx
fireflyx, thanks for your answer.
Using 18 points on YM what happens if you get an extended upmove of maybe 50 points without 18 in the opposite direction?
If you have sold after 18 points, what do I do next? I am looking at a loss? Do I put it done to an incorrect perspective?
Have I put that scenario correctly? Or should I be adding something else?
I'm just putting it simplistically to understand what the usual snags are.
Using 18 points on YM what happens if you get an extended upmove of maybe 50 points without 18 in the opposite direction?
If you have sold after 18 points, what do I do next? I am looking at a loss? Do I put it done to an incorrect perspective?
Have I put that scenario correctly? Or should I be adding something else?
I'm just putting it simplistically to understand what the usual snags are.
Quote from CharlesTrader:
I do count waves, but primarily the 3 Price Pulse Waves as coined by Tony Plummer (Initial swing wave - retest - continuation or impulse wave). It is interesting the way you have subdivided the larger waves into a 22 point count.
Charles
Charles,
I looked at your graphic. It's an interesting strategy that I think should work rather well.
Part of my theory of movement is that the low sequences tend to extend over 3 larger waves. It's more than a theory really, it happens all the time.
If you take 2 movements of 3 large waves and throw a connecting movement in the middle (such as the 3 wave labelled A, B, C in your graphic) you end up with a 7 wave structure. A very fundamental structure to price movement. In fact, I would call it THE structure. No other is as prevalent.
Rgds,
fx
Quote from Champion:
fireflyx, thanks for your answer.
Using 18 points on YM what happens if you get an extended upmove of maybe 50 points without 18 in the opposite direction?
If you have sold after 18 points, what do I do next? I am looking at a loss? Do I put it done to an incorrect perspective?
Have I put that scenario correctly? Or should I be adding something else?
I'm just putting it simplistically to understand what the usual snags are.
No problem.
If I am understanding your first series of questions correctly, you are asking 'if I count 18 points in an uptrend and go short, what happens if I don't get an 18 point downtrend to follow?'
Well, if your count is structurally sound using the principle of "significance" (which I will attempt to explain shortly) your count should result in some sort of downward move. Since price movement at any scale in the market will always fill the (counting) requirements of the the higher scales (the bubble up theory), your theoretical 18 point count would exist within the counting context of the higher scale.
I've attached a chart to illustrate. The area marked in red (when zoomed in on) is an 18 point count. But it's context is wave 3 of the bull market in the S&P - the 2003 movement.
A trader should expect his low count to be contained within a high count at slightly higher wave scales. A 6 point movement is the minimal expectation. 8 point high counts are also very frequent.
So in this developing high count you have all these low sequence structures building on them from the ground up.
Continuing on the theme of the graphic, let's say you shorted above the first terminal dot based on the 18 pt. low count. Now you're not expecting a really large movement down, since this is just wave 4, not the end of movement at this scale. But you still need to pinpoint the low terminal of this 4th wave. This would require zooming in on this wave and counting another low sequence down. Where this terminates wave 5 will ensue at the higher scale.
The perfect perspective for this zooming turns out to be a weekly chart showing 1 year of data. I will attach this chart directly below in a new post.
The count is a very clear 14 point downcount within a 7 wave high sequence. (If you continue to zoom in on this by switching form weekly to daily, a couple of low sequences will appear - a 14 pt. over 3 large waves, then a connecting movement (called a scale shift), then an 18 pt. over another 3 larger waves to complete the whole). Basically, when there is a satisfaction that a noticable high count structure is ending and a specific low count can be seen to comprise it, you are near a terminal.
ON SIGNIFICANCE
You'll notice in the graphic attached to this post that there are some gray rectangles around some of the events (waves). These are events that were discounted because their vertical measurement was less than the least of the counted events. IOW, they are below the "significance threshold." Though they are visable they belong to a count from another (lower) scale.
The market creates its own meaning (assigning a signficance to each event) using vertical height. (A pair of dividers is an essential analytical tool). This is the reason for increased volatility - price is creating meaning at a higher scale...
In this way the market weaves its fabric of events to create a larger picture. Just like individual threads combining to form a piece of clothing. Some fibers are microscopic, others are larger, but they all fit together...
Anyway, you probably should not worry about discounting for now. If you choose a good perspective (or point of observation) for your analysis you will seldom need to discount many events or employ a threshold.
Dang, I hope this isn't too much too quick... But all of you who have posted seem to be catching on extremely quick (that's good to see...).
Rgds,
fx