Alan's Finance Blog

Video: The Versatility of the Wave Principle

Video: The Versatility of the Wave Principle
Timeless Trading Lesson

In the video below, EWI senior analyst and trading instructor Jeffrey Kennedy shows how the Wave Principle can help you identify a high-probability trade set up regardless of the direction of the larger trend.

This timeless educational video was taken from Jeffrey’s renowned Trader’s Classroom series and is being re-released because of its valuable lesson. If a few minutes isn’t enough,
get more FREE practical trading lessons from Jeffrey Kennedy in his latest eBook.

Raising The BAR: Bar Patterns & Trading Opportunities

How a 3-in-1 formation in cotton “triggered” the January selloff
April 17, 2010

By Nico Isaac

For Elliott Wave International’s chief commodity analyst Jeffrey Kennedy, the single most important thing for a trader to have is STYLE– and no, we’re not talking business casual versus sporty chic. Trading “style,” as in any of the following: top/bottom picker, strictly technical, cyclical, or pattern watcher.

Jeffrey himself is (and always has been) a “trend” trader, meaning: he uses the Wave Principle as his primary tool, with a few secondary means of select technical studies. Such as: Bar Patterns. And Jeffrey counts one bar pattern in particular as his favorite: the 3-in-1.

Here’s the gist: The 3-in-1 bar pattern occurs when the price range of the fourth bar (named, the “set-up” bar) engulfs the highs and lows of the last three bars. When prices penetrate above the high — or — below the low of the set-up bar, it often signals the resumption of the larger trend. Where this breach occurs is called the “trigger bar.” On this, the following diagram offers a clear illustration:

Now, how about a real world example of the 3-1 formation in the recent history of a major commodity market? Well, that’s where the picture below comes in. It’s a close-up of Cotton from the February 5, 2010 Daily Futures Junctures.

As you can see, a classic 3-in-1 bar pattern emerged in Cotton at the very start of the New Year. Within a few day the trigger bar closed below the low of the set-up bar, signaling the market’s return to the downside. Immediately after, cotton prices plunged in a powerful selloff to four-month lows.

February arrived, and with it the end of cotton’s decline. In the same chart you can see how Jeffrey used the Wave Principle to calculate a potential downside target for the market at 66.33. This area marked the point where Wave (5) equaled wave (1), a reliable for impulse patterns. Since then a winning streak in cotton has carried prices to new contract highs.

This example shows the power of a fully-equipped technical analysis “toolbox.” By using the Wave Principle with Bar Patterns, one has a solid, objective chance of anticipating the trend in volatile markets.

And in a 15-page report titled “How To Use Bar Patterns To Spot Trade Set-ups,” Jeffrey Kennedy identifies the top SIX Bar Patterns included in his personal repertoire. They are Double Inside Days, Arrows, Popguns, 3-in-1, Reverse 3-in-1, and Outside-Inside Reversal.

In this comprehensive collection, Jeffrey provides each pattern with a definition, illustrations of its form, lessons on its application and how to incorporate it into Elliott wave analysis, historical examples of its occurrence in major commodity markets, and ultimately — compelling proof of how it identified swift and sizable moves.

Best of all is, you can read the entire, 15-page report today at absolutely no cost. You read that right. The limited “How To Use Bar Patterns To Spot Trade Setups” is available with any free, Club EWI membership.

Blaming “Market Manipulators” For Losses is a Huge Obstacle to Success

To win, you must accept the fact that losses are part of the game.

In 1984, Elliott Wave International’s founder and president Robert Prechter won the U.S. Trading Championship, setting a new all-time profit record of 444.4% in a monitored real-money options account in 4 months. In the average 4-month contest, over 75% of contestants, mostly professionals, fail to report profits.

In November 1986, in his monthly Elliott Wave Theorist Prechter published a Special Report titled, “What A Trader Really Needs To Be Successful” and gave 5 important tips to would-be market speculators. You can read them now, free (details below) — but here’s Bob’s fourth point:

4. Accept the Fact that Losses Are Part of the Game.

There are many denials of reality which automatically disqualify millions of people from joining the ranks of successful speculators. For instance, to moan that “pools,” “manipulators,” “insiders,” “they,” “the big boys” or “program trading” (known today as “high-frequency trading” — Ed.) are to blame for one’s losses is a common fault. Anyone who utters such a conviction is doomed before he starts. But my observation, after eleven years “in the business,” is that the biggest obstacle to successful speculation is the failure merely even to recognize and accept the simple fact that losses are part of the game, and that they must be accommodated.

The perfect trading system does not exist. Expecting, or even hoping for, perfection is a guarantee of failure. Speculation is akin to batting in baseball. A player hitting .300 is good. A player hitting .400 is great. But even the great player fails to hit 60% of the time! He even strikes out often. But he still earns six figures a year, because although not perfect, he has approached the best that can be achieved. You don’t have to be perfect to win in the markets, either; you “merely” have to be better than almost everybody else, and that’s hard enough.

Practically speaking, you must include an objective money management system when formulating your trading method in the first place. There are many ways to do it. Some methods use stops. If stops are impractical (such as with options), you may decide to risk only small amounts of total capital at a time. After all is said and done, learning to handle losses will be your greatest triumph.

The last on my list is [the point] I have never heard mentioned before. …

Keep reading this free Special Report titled, “What A Trader Really Needs To Be Successful” now — all you need to do is create a free Club EWI profile.

Forex Smart Start Profit Strategies

(This post contains your access instructions
to a ‘closed-door’ Forex group coaching
training session on Wednesday.)

Over the past year, one of the top Forex educators has
quietly coached a handful of regular folks just like you on how
to become what he calls “Independent Master Forex Traders”.

His goal is to take average, ordinary traders who are among the
90% that consistently LOSE…

-and turn them into independently-thinking, precision trading
MACHINES that are among the 10%… the 5%… or even the top 1%
of Forex traders on the planet.

But here’s the problem for most people: 1-on-1 coaching can be
downright EXPENSIVE, like $15,000… $20,000… or MORE.

That’s just not realistic for most people.

HOWEVER… what if you could be a “fly on the wall”, listening
in to a private, closed-door Forex coaching training session,
picking up the “tried & true” profit strategies the “elite” hold
close to their vest…

Well, that’s what’s happening on Wednesday, March 3rd.

This 35+ year market veteran is giving you a sneak peek inside
his “trading vault” on a brand new, complimentary training
session he calls:

>>> Forex Smart Start Profit Strategies <<<

He yanked his most popular Forex tips & techniques straight out
of his high-end coaching program, and he’ll be revealing them
all you to on Wednesday.

You’ll learn the top 4 instant tweaks you can make TODAY to
protect & grow your Forex portfolio FOREVER, including:

* How the crummy economy & chaotic world events create MASSIVE
amounts of profit potential in the Forex markets (including at
least 5,604 potential pips in just the past few months using
these specialized techniques)…

* How to dramatically reduce your “time in the trenches” trading
Forex by spending only 20 minutes a day. These 2 discoveries
make it all possible…

* How to reduce your risk in a trade to ZERO with this simple
profit-taking trick (HINT: it’s the complete opposite of how
most traders think about going after a profit)…

* How to automatically get an edge over other traders by
entering the market at these high-probability “sweet spots”…

* The telltale signs a market “hurricane” is about to hit, & how
to protect your portfolio by avoiding these dangerous & risky
market conditions…

* The simple, time-saving, step-by-step mechanics of placing a
trade using real broker-provided trading software…

…and much, much more…

The information in this training session is so critical, that
it’s being held 3 different times on Wednesday, March 3rd in
order to fit your schedule:

* 12:00pm Eastern (New York Time)
* 4:00pm Eastern (New York Time)
* 9:00pm Eastern (New York Time)

WARNING: Each session can only accommodate a limited number of
attendees, so to reserve your place, make sure you register here
right away:

http://www.forextrainingmaterial.com/y/?i=773362&u=1&l=f85

Good Trading!

p.s. I don’t think I’m supposed to tell you this, but I found
out that if you attend any one of the 3 training sessions on
Wednesday, you’ll get a chance to download some additional
complimentary training videos & ‘action manuals’ torn straight
from the presenter’s high-end coaching program.

Pick your time & grab your spot here:

http://www.forextrainingmaterial.com/y/?i=773362&u=1&l=f85

(if you see a blank page, that means the registrations are full)