Elliott Wave Channeling and Parametric Model of an Ideal Trend

23 нояб. 2019 г.

Channeling is the single most important technique that you must know in trading.

Channeling:
- can be used 100% of the time in all market conditions for both impulses and corrections. Price always travels in a channel until it breaks
- there's never a single channel - there are always multiple nested channels and by breaking/bouncing off of their boundaries price travels between channels
- the game is always to short/long main channel boundaries in a range or play breakouts
- lets you know where exactly where the trend breaks and new trend or correction begins regardless of wave structure
- helps with identifying the optimal hierarchy of nested waves, which waves are continuation of other waves, eliminates almost all of the wave count related guesswork.
- breaking of a smaller channel can signal a break of a larger one well in advance - use as confirmation

On a chart there are 3 channels: blue, green, red.

Using channeling with Elliott Waves:
- blue (base) channel connects 012 points/wicks and tells you where wave 3 ends (blue dot intersecting the channel boundary), otherwise this is not wave 3
- green channel connects 123 points/wicks and tells you where wave 4 ends (green dot intersecting the channel boundary)
- red channel connects 234 points/wicks and tells you where wave 5 ends (red dot intersecting the channel boundary)
- use fib price and time wave relationships to calculate price and time based wave targets

The same method can be used in general regardless of wave structure - you must always connect 3 last pivots and draw a channel (2 in one dir, 1 in the opposite dir).
Continue drawing new channels with each new pivot - soon you will get an idea of how price travels and why it bounces at certain points - boundaries of prev channels.
- In a bull market you wait for any 3 waves down and buy. In a bear market you wait for any 3 waves up and sell. Waves can have multiple subwaves inside - you don't need to worry about that. Keep an eye on the main channel boundaries only. 1 wave = 1 channel - makes it easy to count them. Smaller channels appear inside larger ones - these are your nested subwaves.
- If the main trend direction is unknown - don't trade or trade the range inside the channel with only small positions.
- you can also use Modified Schiff Pitchfork with stddev warning lines - it's basically a channel with side sub channels
- the last wave of a move (wave 5, C, Y, E) can end near the channel's median line or at its boundary, overshoot or undershoot it. At some times it's best to exit, other times - to enter at this points.
- when wave 4 ends inside a channel, doesn't break it - buy, don't sell.
- when wave 4 is near the middle line of the channel - this is just the first leg of the correction
- breaking the channel only tells you that the current wave has likely ended. It can break out, correct and reverse, get back into the channel and continue the trend
- breaking the channel doesn't necessarily mean end of a particular wave, it can be the first leg of a correction that has already started inside the channel from the last pivot or even 1 pivot back
- use pitchfork warning lines (stddev), breaking a series of channels (starting from smaller and cascading to larger one), breaking the last known trend pivot and high volume to confirm trend change.


Also watch these videos:
Must see - channeling elliott wave impulses, using price time fib relationships
youtube.com/watch?v=grgpOdVjemE
youtube.com/watch?v=YnNSIuwp0O0

the mechanics of WXY double zigzag and combo corrections
youtube.com/watch?v=mCWOFHlZpRQ

triangles and exp flats
youtube.com/watch?v=_3t7dnCbP-Y

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Parametric Model of an Ideal Trend

1) slope:

wave 1 slope = 71 degrees
wave 3 slope < wave 1 slope
wave 5 slope < wave 1 slope

2) price:

wave 2 = 50% of wave 1
wave 3 = 1.618 of wave 1
wave 4 = 38.2% of wave 3
wave 5 = 100% of wave 1
wave 4 splits waves 0-5 at 38.2%

3) time:

wave 2 time = 100% of wave 1 time
wave 3 time = 1.618 of wave 1 time
wave 4 time = 1.618 of wave 1 time
wave 5 time = 100% of wave 1 time

wave 3 end time is usually 100% or 161.8% wave 1 time or 61.8%, 100, 161.8% or 261.8% of wave 1 + 2 time
wave 4 end time = at least 100% of wave 2 time or 100%, 161.8% or 261.8% of wave 3 time or 61.8% or 100% of wave 1-3 time
wave 3 end time is also 38.2%, 50 or 61.8% of the entire wave 0-5 impulse cycle time
usually either fib price or fib time is respected in waves 1-4 - whichever comes first, you can have a series of boxes for certain price-time combinations as targets.
in an extended wave 5 both price and time fib relationships are usually respected, other waves may not respect both time/price

4) volume

wave 3 has the highest volume

5) divergence

wave 5 has divergence on RSI, EWO

6) structure

waves 1,3,5 - 5-wave impulses
wave 2 = zigzag
wave 4 = triangle or flat

if end of wave 3 vol bar >= subwave 3 volume bar i.e. volume increases => wave 5 will be extended, otherwise wave 5 will be normal short wave, not extended
either end of wave 3 bar (followed by a normal wave 5) or end of extended wave 5 bar have the biggest volume in the whole move

in an extended wave 5
- wave 5 end can be 61.8, 100%, 161.8% of wave 0-3 => wave 5 end can be projected
- subwave 4 divides the whole wave 0-5 move:
at 38.2%,50% (61.8% only for normal wave 5) => wave 5 end can be projected
in normal wave 5
- wave 5 end can be 61.8, 100% of wave 0-3
- subwave 4 divides the whole wave 0-5 move: 78.6% or 61.8% or 50% of entire wave 0-5 impulse cycle price/height (78.6 up from wave 0)

P. S. This is the Way