Elliott Wave tutorial - link to free tutorial with examples and simplified explanations

There's a good, free Elliott Wave tutorial at http://www.elliottwave.com/tutorial/Default.aspx - you just set up a free membership login (and ignore their subscription sales pitches unless you've got the dough to throw and the willpower to avoid relying on their EW counts when they're wrong - which is the whole point of educating yourself so you aren't at the mercy of relying on misguided or biased counts).

You can even just bookmark and reserve it for reading up on certain topics as they piqué your curiosity.

Tony's Objective Elliott Wave counts differently so be careful to avoid mixing or confusing them. But for free general background info, this is a nice resource.

It's somewhat simplified, but that's what you want for a tutorial. And there's enough information that you can get a good understanding about Elliott Wave theory and how it works.

Using Fibonacci and other price-pattern numbers for different trading timeframes and styles

Here are some comments to help readers, especially newer readers, better understand how we use Fibonacci and other number levels for trading purposes. Using my VIX level of 24.78 as the example for today, we know that the VIX already touched it in late June and rebounded higher. But - there are times when price continues back to test a Fibonacci level again; this may happen when another price pattern is at work, or a longer-term trend is still at work. I've seen some situations where price will barely touch the Fibonacci number and be done with it, going into a trend reversal. I've seen others where price actually overshoots the Fibonacci level by a little or even a fair amount. One example happened in March, when the Dow Transports overshot my Fibonacci target quite a bit, before finally giving a trigger day and going into a reversal back upward again. (You can find those posts using the "Transports" label at my main UnbiasedTrading blogspot, see links at right.) Another example happened more recently, as I was posting frequently with US Treasury bonds and notes, giving the symmetry target and tracking as they sank into that target. In that case, it didn't take as long for Treasury notes and bonds to give a trigger day up and then have a very healthy rally.

So I go ahead and make a lot of "noise" about the numbers I see as the bigger picture important levels, to help people get ready and watch for potential reversals around those numbers. Normally, if price chooses to overshoot one of these numbers and spend at least one entire day beyond the level, and then have a trigger day* and reverse back across the line, that really is it. Once there's been an overshoot like that, then I typically see more resonating around the number as a clue that it's not going to reverse. Yet again - if you go back and look at my posts about the Yen, it certainly took a while there, but probably because that 111.49 pivot level is an extremely long-term, big picture number on the yearly charts! My 24.78 number for the VIX is on the monthly charts, not as long term.

*What's a trigger bar? It can only occur after price has moved to or if necessary beyond the target price level. Then, the next bar - whether on hourly charts, or daily bar charts - must be watched to see whether or not it closes above the high (or low, as the case may be) of the prior day. You can have better confidence that it's a trigger bar if you see good volumes accompanying that trigger bar day.

A trigger bar is never a complete reversal pattern, it's only the first thing to look for. It depends on your trading time frame and style whether you operate with a trigger bar, or wait for a complete reversal pattern to set up. For example, with UNG, we recently had looked for the target level of $12.00, and we got it. The next day, price moved above. It was a trigger bar but only for aggressive traders. On the hourly bars, price ended up returning to and closing at $12.20, thereby shaking the faith of those who were buying at $12.00. The following day it rebounded again. If you are a swing trader, then it is also perfectly valid to say that UNG still has not yet completed a full reversal pattern. You can be waiting for price to push yet higher - $14, anyone? - then do a pullback, and only then look for another trigger bar day up to buy with more confidence that the downtrend may really have reversed and start turning UNG into an uptrending ETF. (This has a lot to do with why I keep repeating that UNG must remain above $12.20, and certainly above $12.00. And why I've remarked that I want to see better buying volumes.)

People trading cash accounts - what I might refer to as the "KI$$" accounts I started discussing over the weekend - know that it can kill your trading account to try going into a position too soon, only to find it isn't valid, or is just premature. Example being today - if you already agreed with me that 24.78 being tested again today could turn both VXX upward and the equities indices downward (along with $COMPQ having got to my $1912 Fibonacci level), then you may have been trading it. And if you are a daytrader then you could have done so profitably, if you then TMAR'd (Take Money and Run) after two intraday legs down. But if a cash account (KI$$ account) trader, then you must stick with classic swing trade rules, including to look for a trigger bar.

Look at the VXX chart, upper right. You will see that tomorrow could possibly become a trigger bar if VXX does not make a new low, and if it closes above today's high. Or, if VXX digs a bit lower tomorrow - and believe me, it is possible for VIX and VXX to spend the entire day under the level that is equivalent to 24.78 VIX - then the earliest day that might become a trigger bar, would be Thursday.

Using the classic indicators on that VXX chart, you see that StochRSI is "oversold" but as long as it's down, it's down. MACD has turned down again, but over a period of a few weeks is showing positive divergence - not a guarantee but suggestive. And, Slow Stochastics looks ready to curl back up again but hasn't yet. A bit lower would actually touch a possible trendline. The pace of decline has slowed as shown by the smaller intraday range of the price bars in recent days. Also significant, volumes have been increasing. At this point it only suggests possible capitulation. Obviously, swing traders will want to see increased volumes on UP days, showing increased buying that's coincident with a trigger buy day, and good volumes later on follow-through upward days.

This is why people often talk about needing to see follow-through. It really is important.

So, those who are daytraders or nimble traders with margin accounts have the kind of flexibility to test numbers and levels, which obviously is a speculative game. For solid trading, investment positions, and swing trading with "normal" cash accounts, you need to know and use solid trading techniques like these, when you are evaluating the types of Fibonacci numbers and other price levels that I point out here.

Typically we have a pretty good track record, such as the examples I gave above. Then, there is the VIX level of 33.81, which I was sure would be significant. Turns out it was not, althoughit afforded good daytrading opportunities for nimble players. The VIX price resonated around it too long, showing that it wasn't going to provide support for a reversal. That's why we were clued in that under 33.81, the VIX was probably going to test 24.78. Which finally it did, and here we are again.

So - just wanted to provide these comments, especially for newer readers who may not already grasp how to work with these numbers I've been talking about today and recently. Do I still believe that VIX 24.78 and $COMPQ 1912 are important? Absolutely, just as I still believe SPX 961 is important. Just because VIX weakened and equities strengthened this afternoon, doesn't mean that we won't see a reversal play out from these numbers. It just means that we need to let these markets take another day or two to show us whether we get more than the little intraday setback we've seen, from these levels.

Normally, I cannot write separate comments for people with cash accounts vs. those who are daytrading or margin trading. So know your limitations, your time parameters, and your style ... and filter my comments accordingly for what works for you. When you see me make a remark such as, "depending on your time frame and style," you'll have to realize and remember - I'm referring to the points I've made above. Make peace with your trading time frame and style. If you are a KI$$ / cash account or slow-moving swing trader (people who dabble during the lunch hour at their day jobs - you've gotta know who you are), then you must keep it slow, and wait for the trigger days, the indicator-confirming days, the volume-confirming days.

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If you want to see how the above examples all actually played out with postings and how we tracked those items, you can go to my main UnbiasedTrading blogspot and my UBTNB3 blogspot (use links at right) and click on the labels associated with them. For example, for UNG, click the "Natural Gas" label, because UNG is an exchange-traded fund (ETF) that tracks the natural gas price.

"KI$$" is an idea I posted about last weekend at my main UnbiasedTrading blogspot. It's for:
Keeping
It
Simple for
Swing, Slow and caSh accounts

so the abbreviation would be "KISS" except that I like calling it "KI$$"! I don't know if I will be able logistically to track a separate KI$$ portfolio,but as I post about sectors and ETFs, etc., I will be making a greater effort to point out when something might be approached a specific way for those with "KI$$ accounts".

How to use the ChartsEdge daily and weekly forecasts - additional information from ChartsEdge

Mike Korell at ChartsEdge has issued another discussion about how to use the ChartsEdge forecasts. I've provided in previous posts here the information on the daily and weekly cycles forecasts (you can find them using the "Chartsedge charts" label in the labels list). This time, he talks about how he ties it all together - the ChartsEdge daily maps, the weekly forecasts, and the swing trade focus. You can see that discussion posted today at Chartsedge Daily Market Maps; and, it's quoted in below:

A comment from today’s discussion

Posted: July 6th, 2009
Author: Mike Korell

Filed under: One-Day Market Map Comments to ChartsEdge »

How does it all tie together?
I use a combination of techniques in the material. Here’s the list:

The weekly chart - This chart is strictly mathematical. It uses recurring patterns identified in market prices over time.

The daily chart - This chart is created using a radio-frequency receiver tuned to the frequency of our planet’s heartbeat… the Schumann Resonance.

The Swing Indicator - This is the most difficult to explain. The concepts I have learned in creating the daily charts offered clues to the fact that the Schumann Resonance is heavily affected by the solar wind. This stream of particles is ‘directed’ in part by the position of the Earth in relation to the other planetary bodies in our celestial neighborhood. When these align in certain ways, the RF level is changed. The best way to locate these relationships is to pull out the old Zodiac and Ephemeris. I get to put on my wizard hat and use science nearly as old as recorded history.

How can RF cause me to want to buy or sell a stock. It may be in my genes… here’s a few paragraphs that may offer some insight. http://www.dnafrequencies.com/about.shtml

Using stop loss orders

Stop loss orders can make all the difference for avoiding losses, and for locking in profits. One of the trickiest aspects is where to place the stop. There are some good ideas about that in this article, Two Points Relevant to Trade Execution by Brett Steenbarger at his TraderFeed blogspot.

Normally you place a stop loss order on a position you've entered into. Early in the trade, you use it to automatically stop out to prevent a big loss. (It is FINE to accept a small loss - the point is not to allow it to turn into a BIG loss. Remember, it's much worse to accept a BIG LOSS, than to admit you were wrong. It's okay to be wrong! All traders are wrong some of the time. What separates winners from losers, is that winners are willing to stop out and take a loss before it becomes an anchor and a bigger loss.)

Later, when a trade starts to prove that it is "working," i.e., the position is going as you hoped, the question becomes when to take profits? That's one of the points that Brett talks about in the article cited above. It's a very good idea to know ahead of time, what is your target? Then take at least partial profits when price gets to that point. DON'T get greedy at that point and decide to hope for more - you can easily lose it all! So, at least take partial profits. If you keep part of your position, move your stop at least to the breakeven point, so you won't lose money if price goes back to where you entered.

My late trading mentor had a little acronym: TMAR! It means, Take the Money And Run!

It's great advice!

Personal note about Friday 5/8

I'll be out at a golf event all day tomorrow - will not be posting.

Here's wishing you a great day tomorrow, no matter where you will be or what you'll be doing!

Reversal patterns - patterns, triggers, and relationship with Fibonacci and other techniques

Reversal patterns are chart patterns that signal a turn, or reversal, in trend. They can display on a short-term basis such as intraday, on a longer swing basis such as on the hourly bar and/or daily bar charts, and even on big-picture charts for the long term such as weekly and/or monthly bar charts.

Reversal patterns are more likely to be strong or robust when coupled with other indicators, such as a Fibonacci level or a trendline test. Such asa the 33.81 level in VIX I've been discussing recently.

This post will describe a few different types of reversal patterns. One is based on Elliott Wave, with the idea that trend movements express as 5-wave counts and counter-trends as 3-wave counts. Therefore, if we see a movement in one direction that expressed in 5 waves, we think it is most likely in the direction of the trend. So if we think the trend is reversing, we'd be looking for a 5-wave movement in the reverse direction. To confirm a trend reversal, we'd look for a 3-wave movement pullback (i.e., coming back against what we think is the new trend direction). And then, we'd look for a movement to initiate once again in the new direction. That would be considered a trigger, and we'd place a stop-loss protection at the top (or bottom, as the case may be) of the pullback.

Another is called a trap door. Here's an example in the VIX chart (below). I marked in red the line that VIX must remain above for the signal to remain valid. In blue (middle line) is the trigger line. The top, green line that I added is where momentum should pick up, because that will make the higher high that other traders will use as an entry signal or confirmation, either to enter the trade or to add more if they already came in on the blue line.



Another is called a 1-2-3 trend reversal. -- place holder, will add more on this at a later time.

Another is called a triangle trap. -- place holder, will add more on this at a later time.