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Trading rules

Trading rules. The market does not owe me a thing. I’m lucky to be able to trade it and will take what I can get. Anticipate entries – reacting to market is death. If you think there is easy money in the market – you are the easy money.

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Trading rules

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  1. Trading rules • The market does not owe me a thing. I’m lucky to be able to trade it and will take what I can get. • Anticipate entries – reacting to market is death. • If you think there is easy money in the market – you are the easy money. • Formal education will make you a living. Self education will make you rich • Have the courage to take massive profits when available, but strive for singles. • Work tirelessly to decrease your average stop loss size. • Do not trade F.Y.E – for your entertainment. • Expect to make 70% of your profits during 30% of the time • If you wantsa to be here for the good times, you gotsa to be here all the times (CME). • PLAN YOUR TRADE – TRADE YOUR PLAN.

  2. Paul Tudor Jones Video • Trades with a plan • Reads the tape / reads the crowd • Does extensive research on charts / correlations • Gets advice from professionals around him • Trades with passion • Was bullish with major size, though he was longer term bearish

  3. Learn To Trade Trading Analysis Class #1 Plan Your Trade, Trade Your Plan The Elliott 5 Wave Motive Pattern Today we’ll reveal how to identify the basic 5-wave Elliott Wave pattern, and trade ideology behind it. We will begin at 7:00 PM ET – You will hear no sound until we start

  4. Class #1 Outline Motive vs Corrective Waves The impulsive 5-Wave pattern Trader psychology within the Wave count Rules of the 5-wave motive pattern A-B-C correction basics Fractal wave counts Wave labels Motive Wave Variations Extensions Ending & leading diagonals

  5. Recommended reading : Elliott Wave Principle by A.J. Frost & Robert Prechter

  6. Basic 5-Wave Pattern 5 3 Wave 5 Wave 4 Wave 3 1 4 Wave 2 Wave 1 2

  7. Motive vs. Corrective Motive Corrective

  8. Motive Wave Variations Impulse Impulse Extension Diagonal Triangles

  9. Corrective Wave Variations

  10. The 5-Wave Pattern • Wave 3 • - Strong, deliberate, and extended price action • Fundamentals increasingly better • - Investor confidence greatly improved 5 3 Wave 5 Wave 4 • Wave 1 • - Fundamentals poor • - Investors fully, bearish • expecting new lows • Heavy short selling Wave 3 1 4 • Wave 2 • Investors fully bearish, certain of new lows • - Heavily retraces W.1 • - Fundamentals horrible, doom and gloom • Volumes light, as sellers dry up Wave 2 Wave 1 2

  11. The 5-Wave Pattern • Wave 5 • - Investors extremely optimistic • Fundamentals return, but often not to W.3 levels • Price momentum less than W.3 5 3 Wave 5 Wave 4 Wave 3 1 4 • Wave 4 • Fundamentals temporarily peak, then pullback • Often shallow, yet prolonged consolidation Wave 2 Wave 1 2

  12. Basic 5-Wave Pattern Rules of the 5-Wave Pattern 5 3 5 3 Wave 2 can NOT retrace to the beginning (or beyond) of Wave 1. 1 4 1 Wave 4 can NOT touch Wave 2. Wave 3 is often the longest, but it is never the shortest. 4 2 2

  13. Label The Trend Waves

  14. Trend Wave V

  15. 3 Wave A-B-C Corrective Pattern B Wave A Wave B Wave C A C

  16. Complete 8 Wave Pattern 5 Wave A – Investors remain bullish, convinced of an easy buying opportunity. B 3 Wave 5 Wave A Wave 4 Wave B Wave C 1 4 Wave 3 A Wave B – Bullish investors are convinced the market is moving to new highs. Wave 2 C Wave 1 Wave C – Investors highly discouraged, stops below Wave B lows are triggered. 2

  17. Label The Corrective Waves

  18. A-B-C Correction

  19. Corrective Waves Corrective waves posses a 3-Wave (ABC) structure that retraces a % of a prior move Corrective waves trend in the opposite direction as the wave of 1 larger degree. b a Labeled with letters. c Waves 2 – 4 – B are corrective waves. 2 – 4 - B

  20. B A C Elliott Waves are Fractal 5 5 3 3 4 1 2 1 4 2

  21. 3 Degrees of the 5 Wave Pattern 1 .5 .3 5 5 3 3 1 4 2 4 .1 1 .4 5 3 2 1 4 2 .2

  22. Motive Waves 1 Motive waves posses a 5 wave structure that propels the market trend .5 .3 Motive waves are labeled with numbers. .4 .1 Waves 1,3,5, A & C are motive. Waves are motive when trending in the direction as the wave of 1 larger degree. .2

  23. Motive Waves 5 3 B 1 4 A C 2 Uptrend Downtrend

  24. Corrective Waves 1 Motive waves posses a 5 wave structure that impel the market. .5 .3 Motive waves are labeled with numbers. .4 .1 Waves 1,3,5, A & C are motive. Waves are motive when trending in the direction as the wave of 1 larger degree. .2

  25. Motive Waves 5 3 B 1 4 A C 2 Uptrend Downtrend

  26. 3 Degrees of a Trend 1 .5 .3 5 5 3 B 3 1 4 2 4 A .1 1 C 5 .4 B 3 3 Degrees Of Trend Largest: 1 Middle: .5 Smallest: 5 1 2 4 A C 2 .2

  27. 3 Degrees of a Trend 1 .5 .3 5 5 3 B 3 1 4 2 4 A .1 1 C 5 .4 B 3 3 Degrees Of Trend Largest: 1 Middle: .5 Smallest: 5 1 2 4 A C 2 .2

  28. 3 Degrees of a Trend 1 .5 .3 5 5 3 B 3 1 4 2 4 A .1 1 C 5 .4 B 3 3 Degrees Of Trend Largest: 1 Middle: .5 Smallest: 5 1 2 4 A C 2 .2

  29. 3 Degrees of a Trend 1 .5 .3 5 5 3 B 3 1 4 2 4 A .1 1 C 5 .4 B 3 3 Degrees Of Trend Largest: 1 Middle: .5 Smallest: 5 1 2 4 A C 2 .2

  30. Wave Label Table

  31. Drill Down The Table

  32. Drill Down The Table

  33. Drill Down The Table

  34. Drill Down The Table

  35. Let’s work UP the label table

  36. Count UP The Table

  37. Count UP The Table

  38. Count UP The Table

  39. Count UP The Table

  40. How To Label This?

  41. Motive Wave Variations Impulse Impulse Extension Diagonal Triangles

  42. Motive Wave Variations Impulse Extensions Elongated impulse with Exaggerated subdivisions. Wave 3 is always a impulse and usually extends. When extensions occur they occur only once in the impulsive count. W1,3 or 5

  43. Motive Wave Variations Impulse Extensions Wave 1, 3, or 5 can extend. If wave 3 extends, then wave 1 & 5 are often equal in size. **Very powerful relationship** Often mislabeled as a count of one larger degree.

  44. Crude Oil 5 of 5 Extension

  45. Motive Wave Variations Impulse Impulse Extension Diagonal Triangles

  46. .v .v .v .iii .iii .i .iii .iv .iv .i .v .ii .iii .iv .i .i .ii .iv .ii .ii Diagonal Triangles Motive, yet NOT impulsive Ending Diagonal Leading Diagonal

  47. Motive vs. Impulsive What’s the difference? .v .iii .i .iv .ii .v .iii .i Ending & Leading Diagonal Motive Wave Motive Impulsive Wave .iv Motive = 5 Wave Structure Motive Impulsive = 5 Wave Structure + Follows Impulsive Rules Tip : Wave 4 usually over laps into Wave 1 territory. .ii

  48. 1 (c) .v .v .iii .i (a) .iii .iv .ii .iv .i 2 (b) .ii Ending Diagonal Motive, yet not impulsive. Occurs at termination points of larger degree, exhaustive points. Common in W.5, sometimes C of A-B-C W.5 ends in a ‘throw-over’ break of the trend line of W1 & 3 Subdivides into 3-3-3-3-3

  49. FacebookEnding Diagonal?

  50. .v .iii .iv .i .v .iii .i .ii .iv .ii Leading Diagonal Subdivides into 5-3-5-3-5. 5-wave subdivisions convey continuation, unlike 3-wave subdivision of ending diagonals. Occurs in W1 of impulse, or WA or a Zig-Zag. Contains converging trend lines. Motive, yet not impulsive.

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