This webpage is about a practical application of the wave principle trading.
On 2 November 2015, we have identified an Elliott wave high probability
trade setup on or near the fifty percent Fibonacci retracement level of
the first part of a correction (that is underway).
View chart below
Image = "weekly chart of the British Pound/Australian Dollar (GBPAUD)
currency pair that is showing five Elliott waves (wave one to five) plus a
portion of a corrective wave that is underway. Also a blue line that is
highlighting the fifty per cent Fibonacci retracement of the first wave of
To avoid common trading mistakes, we quickly adopted a top-down trading
method. In this instance, we used the weekly chart as the trading setup time
but opted for the fifteen-minute chart for both signals and entry. Note that
technical traders often use three different time frames when they are applying
the multiple time frames trading method.
A trading signal is about knowing if bearish or bullish orders are activated or
filled. However, before one can sell, the price ought to start weakening. The
opposite is also true if one wants to enter a bullish trade. In other words,
the trade entry is about timing the trade when the price-action is confirming
On the fifteen minute chart, the signal was clear as we noted that bearish
orders are littered along the blue rising trend line.
View the fifteen-minute chart below
Image = "fifteen-minute chart of the British Pound/Australian Dollar (GBPAUD)
Watch the video
Title: How to day trade on the fifteen minute chart using
the wave principle
Description: A day trader is day trading the GBPAUD
currency pair by combining the wave principle, top down
trading and fifty per cent Fibonacci retracement like a
It essential to understand that the Elliott wave principle allowed us to count
five waves on the weekly chart and to identify the first part of a correction
that was underway. We then use the Fibonacci tools to highlight the fifty per
cent Fibonacci level (of the first part of the correction). We were aware that
few high impact economic news were due as we checked Forexfactory website.
We controlled the risk by setting a steady stop loss at 21693 as soon as our
limit sell order was filled at 21663.
Wave principle strategies
The wave priciple procedure was simple and clear:
1/ the British Pound Australian Dollar currency pair was at a fundamental
level on the weekly chart,
2/ that primary level was the fifty percent Fibonacci retracement of the
first part of a corrective wave,
3/ the trending phase of the bullish Elliott Wave cycle ended, it became
clear that most bullish traders will sell together with new bearish traders
for a while at least,
4/ we did not want to be the first sellers,
5/ we waited for big market players to start selling,
6/ we noticed their bearish activities along the blue line on the
7/ the price exhibited the first lower high on the 15M chart,
8/ we carefully placed a limit sell order at 21663 after analyzing
the candlestick patterns.
Note that we have combined the wave principle with the following:
a/ economic news
b/ Fibonacci retracement and
View the power of the wave principle
The fifteen-minute chart below illustrates what has happened.
Image = "A blue backgroud image with the words: the wave principle"
|Elliott wave explained|