Quote from jmonday:
I noticed that many trends contain either 2 or 3 sets of HH/HL or LL/LH before reversing or losing momentum. Anek suggests you wait until you confirm 2 HH/HL or LL/LH before the trend is established and you begin to look for a valid entry.
If you wait until then aren't you almost missing most of the current trend? And won't a reversal almost be more likely than a continuation of the current trend past 2 or 3 HH/HL or LL/LH?
Thanks in advance for the responses/insight...
-monday
This is something I struggled with early on as well, and although nothing will work 100% of the time, I have found that using LG channels, and also keeping an eye on the bigger picture will also help.
To better explain, I use an LG channel, and I adjust it often to make sure it always fits the price action. Assume prices have been in a long up trend, and suddenly they bounce off the higher channel and make a LH and a LL. When you see this, be prepared that you might see a good pull back. Prices will usually pull back at least to the center line of the LG channel, but if the up move has been a large one, you can probably expect prices to pull all the way back to the bottom of the LG channel.
Once prices bounce off the LG channel bottom, don't go long immediately, but wait for the first HL and if you get that, then go long, because sometimes, the market may start a new trend and simply continue lower.
The other thing to look for is to look at the bigger picture, and notice the bigger pivots. Even though you may be making LH's and LLs on your trading chart, if you look at the bigger picture, you may only be getting a temporary pull back on your trading chart, and no HH or HL may ever be made on the larger time frame. Once you learn what to look for, you can actually see this on your trading chart without having to go to the higher time frame.
So, if you trade the pull back, be aware that the major up trend could start back up at any time unless prices make a LH with the larger time frame pivots, and then a LL as well. Just reverse this for trading down trends.
If you read through enough of Anek's posts, you will hear him say several times that sometimes you bend the rules on the pivots and your entry points, but wait until you have enough screen time to recognize when it might be OK to do so. He basically says that for him, the entry rules are not set in stone, and that he actually leaves a lot to interpretation and screen time. That's where the channels and bigger pivots help me.
I included a chart so that you can get a visual example. Notice the bigger trend and pivots with the black lines... this trend is up. However, Also, notice the 5 wave pull back (the red line). The idea is to remember the bigger picture, and while you could probably trade the pull back, just be aware that as long as the bigger picture is still bullish, you could expect the pull back to end at some point and the bullish trend to start back up again. Notice where the pull back ended as well, right at the lower LG channel line, and if you had the LG channel on your chart, you would know to start looking for the pull back to end when it reached that level. The market will make equal distance moves, so understand that and watch for it.
I use PA to dictate my entries and exits, but I use these two tools to try and help determine where the turns will occur. Again, sometimes the channels don't hold, and sometimes, the prices will trade outside the channels, only to turn back and continue with the bigger trend. Normally, I will only trade a break out of the channel if a pivot forms outside of it. Say prices traded down and traded outside the LG chanel on an uptrend. I would wait on a pull back and a LH outside the channel, or for prices to be rejected by the channel first, then enter short. Always wait for confirmation... even if it means missing a good trade. Better safe than sorry is my motto.
