October 22, 2021

Trading strategy based on the teachings of Bill Williams and Robert Prekter on the Elliott Wave Theory

24 min read

With this post I am starting a strategy review, which I collected on the basis of those wave motion tools, which are offered to us by two above-mentioned authors.

I want to warn you right away, what I share this material for educational purposes only. Using this strategy does not guarantee profit, and if you decide to use it for personal trading, they must understand, that you do it at your own peril and risk.

Back to the material, described by me earlier, I want to say, what in my personal opinion, Williams has developed an effective trend reversal tool in technical analysis, named by him «five bullets», and also perfectly describes the trading algorithm and money management. In the same time, Prekter delved into the study of wave structure, which should be taken into account in the process of interpreting graphs.

I will describe the obtained quintessence of two methods during the study of several impulse waves and corrections, which I took as an example, talking about tools along the way, who chose to analyze them. so, go!

Zero point determination

Williams and Prekter agree, that the study of any waves begins with determining their starting or zero point. To do this, we need to learn how to determine the completion of corrections.

At the first stage, it is necessary to at least roughly identify the structure of previous wave pulses and corrections.

Probable Zero Point Shown On BTCUSD Hourly Chart, marked with a blue oval. In the process of visual evaluation of previous candles, we see, that the latest bearish trend is very similar to a simple zigzag correction, and the bullish one preceding it is a classic five-wave sequence with an elongated third wave.

Then, to accurately identify the zero point, we use «five bullets» Williams. Briefly recall them:

  • Candle, which forms an extreme, located in the target area.
  • Divergence is present on the MFI. You can also focus on indirect signals – overbought or oversold.
  • A fractal forms at an extreme point.
  • One or more trailing bars (Market Facilitation Index indicator – MFI from Bill Williams).
  • A change in momentum is recorded on the MACD indicator. In a bull market, there is a transformation from upward to downward, but on a bear – vice versa, from downward to upward.

Since we are dealing with a three-wave sequence, not with the five-wave, where immediately after the completion of the third wave and up to the closure of the fifth, divergence is observed, then we will focus on the presence of overbought or oversold. And really, in the zone of local minimum (marked with a blue area on the MFI indicator – the lowest indicator on the chart above) oversold observed. She testifies, that the price has gone too far down and the bearish trend movement is running out of power.

The next marker is the presence of a fractal at the minimum point, marked with a blue down arrow. True, this signal can only be used as an indirect confirmation of the correct interpretation, since fractals appear on the chart often.

One of the three bars of the supposed extreme is a squat. It corresponds to the pink indicator Market Facilitation Index. Behind him is a withering bar (brown bar on the indicator – the second line on the chart below), telling us about, that the current value of assets no longer meets the expectations of most traders. He also sometimes appears on top of the Elliott Waves.

And finally, on the MACD indicator we see the simultaneous intersection of moving averages and the transition of the indicator from red to green, which is a signal to, that you should start trading on the bull side of the market.

Now check, are the candles in the target area. According to the theories of Williams and Prekter, in a simple correction, wave C should be 100–161,8% wavelength A, in rare cases – 61,8%. The graph shows, that the amplitude of wave C even slightly exceeds the value of 161,8%, what can be explained by, that she is elongated.

To verify the correct interpretation of the market structure, it will not hurt to verify the fulfillment of the kickback ratio, described by Robert Prekter. If we imagine the five-wave sequence as a single driving wave, then the next sharp rollback, represented in our case by a simple zigzag, should be 50–61,8% its length. And the really estimated correction completion point is between level 50% and 61,8%.

We can conclude, that the point in question is really the end of the correction zigzag.

First wave

The first wave in itself is very risky for using trend trading, since most often it is very volatile and there is a high risk of wave cancellation with the continued development of the old structure.

In this strategy, the role of the first wave boils down to, so that the trader can verify the emergence of a new five-wave sequence, rather than continuing to form a complex correction. Trade can only be carried out within a five-wave sequence of a smaller order, but I will talk about this a little later.

As you remember, any pulse can be represented as a five-wave sequence. It is this distinctive property that we will use to confirm our guesses. Wave (1), the green line marked on the graph is easily subdivided into five waves of a smaller order (marked with blue lines).

At the same time, intense rollback on subwoofer 2 can be confusing, suggesting, that the past correction is not over yet. However, it is still located above the starting point, that is, does not violate the rule of formation of impulsive formations. Moreover, there is a five-wave structure of wave 1 of a smaller order, marked with turquoise lines, as well as the lateral correction on the fourth following the suspicious rollback on the second half, which confirms the fulfillment of the pattern of alternation (one wave is sharp, next – flat). This allows us to conclude that, that we have a full five-wave structure, which by all indications corresponds to the first wave of a larger scale.

The next step will be to determine the point of completion of the first wave. For this we again use «five bullets» Williams, and also define proportional ratios of Prekter.

so, on the chart we see a fractal, on the Market Facilitation Index indicator – a squat bar in the area of ​​the supposed extreme point, next to which is a withering bar. Classic MFI shows divergence when approaching the fifth wave, marked with pink lines. The location of the indicator line in the center in the region of the mark 57,2 due to not too intense, stepped, growth, who is unable to create overbought. As for the MACD indicator, then here we can observe a slightly delayed likely transition of the histogram from the green to the red, as well as rounding of moving averages with the probable intersection of a long moving from top to bottom. All this together is a complex signal to, that the strength of the bull trend is exhausted.

To calculate the target zone, we use a smaller five-wave sequence, marked on the chart with blue lines. Williams believes, that the fifth wave should have a length of 61,8–100% total length of the third. However, due to the non-standard structure of the sequence, the estimated pivot point reaches 50%. In rare cases, it can still be a resistance level, on which a trend reversal occurs.

To further confirm the correctness of the judgments, we use the proportion, discovered by Robert Prector. According to her, the end of the fourth wave divides the sequence into the golden ratio. That is, the length of the entire sequence is 161,8% the distance from the beginning of the first to the end of the fourth wave.

On the chart we see, that the estimated pivot point is only slightly above 1,618. And that means that it is the peak point of the fifth wave and the first wave of the main formation.

Second wave

The second wave is already a logical pullback, which is inevitable after the completion of the first wave. Its formation is rarely accompanied by high volume, as sales pressure is dwindling at this point. It is on the second wave that sharp correctional movements most often occur.

At the stage of formation of the second wave, it is permissible to open a short – a short position, if you have experience with margin trading, since at the moment it is the safest in terms of risk management.

This is due to, in case, if the structure is broken anyway, and the second wave will be a continuation of the previous bearish structure, then you will be in the black from such a development, if not, and this is really the beginning of a new bullish structure, then you exit the signals of the completion of the second wave, which I will talk about below.

As I already said, at the beginning of the rollback, right after the top of the wave (1) according to Williams’ trade planning system, we make our first deal, according to the trading strategy – margin sale, and get into a short position. If during the trading process you are not able to constantly monitor the market, then take profit should be set between 50% and 61,8% first wavelengths. It is such a length of the second wave that is most often found in practice. If you want to play it safe, then the goal can be a point between 38,2% and 50% first wavelengths. However, in this case, the profit will be minimal. We fix loss fixing in case of an error in the calculations just above the expected peak of the first wave.

If such an opportunity is present, it is necessary to go to a smaller timeframe and in the process of wave formation to determine the type of correctional figure. We will determine the pivot point, studying the structure of the last correctional wave, as well as using the signals of five bullets.

The graph shows the second wave, which, upon closer inspection, has a five-wave structure. The blue circle marks the intended end point, and the green arrow – region, in which it was worth putting take profit (50–61,8% first wavelengths). As you see, the last candle just crossed the 0 mark,618. We will see, what indicators show.

At the assumed point of completion of wave 2, a downward fractal is observed. Two of the last three bars on the Market Facilitation Index are squats, and on the classic MFI there is convergence (pink lines). But MACD does not give a signal to turn. But in rare cases, when other indicators are triggered, and the last candle is in the target zone, it is permissible.

In his trading system, Williams recommends dividing the allowable deposit into 10 conventional parts, where 1 part is equal to the volume of one open position. In the process of forming the second wave, we opened one position, and to its completion, according to the analysis in the chart above, closed it and took profits

Third wave

At the beginning of the third wave, we are already pretty sure, that we are faced with a five-wave sequence, the first and second waves of which correspond to the structure and proportions, described in the theories of Williams and Prekter. Therefore, now we can open three positions at once, which will be equal to 30% deposit, especially, that the third wave in most cases is the most powerful and allows you to get a good profit, even if the trader missed the point of its beginning a little.

The next step after opening positions is to protect against extreme losses and set goals. The level of fixing losses and a reversal to enter a short position in the framework of this strategy, I determine just below the zero point. At the same time, the volume of the largest short position recommended by Williams should not exceed 5 parts or 50% your deposit.

This position is relevant only for the case, when the third wave breaks when the price goes below the zero point (the second wave minimum). In this case, then, what we took for a bullish impulse wave, actually a response to the ongoing downtrend. The principle of deposit management when dividing into 10 parts allows you to be the most flexible and stay in the short and long position at the same time. This situation is acceptable, when you get a reversal signal, but the past position has not yet reached the level of profit or loss.

Such mobility will minimize losses from erroneous positions and always follow the most relevant scenario. Only option, when it is recommended to completely exit the position, are cases, when you completely lose your landmark and are unable to determine your location in the market structure.

Trading at several levels

And now I’ll show a specific example, as, according to the Williams trading system, start making profit at the beginning of the first wave of the main sequence. As you remember, we divided it into five waves.

The first short position we open at the beginning of the sub 2, marked with a blue line on the graph. The level of opening a position is marked by a blue horizontal line. It closes either automatically, upon reaching target mark 50–61,8% (opposite the pink cross, located in zone 0,5-0,618), or upon reaching the target zone and occurrence «five bullets» (red horizontal line).

Further, on the first candle of the third subwoofer we open, as I said above, three long positions (turquoise horizontal line). To insure against possible errors at the violet line level, located just below the estimated bottom of the second wave, set five pending sell orders.

If prices go up, as in our example, at a lower level, we do not frequently open or close deals, waiting for the end of the fifth wave or wave (1) core level. How to predict the trend reversal point I described above. Moreover, further I will consider the fifth wave peak calculation technique, therefore, we will not dwell on this point in detail.

At the beginning of the second wave of the main sequence, we have three open long positions. Two of them must be closed for immediate profit (red horizontal line on the chart) and cancel pending orders. We leave the remaining long order in case, if the reversal still does not happen and the market continues to move up, what often happens with elongated first waves.

Trading on the third wave of the main level

Afterwards, on the wave (2) the main level, you can also open one short position in case of full confidence, that the rollback has nevertheless begun. However, in his multi-level strategy, Bill Williams is silent about this possibility, offering to open the following positions at the base of the wave (3).

so, this time on the first candle of the wave (3) we take profit in a short position and open five conventional parts (opening level on the chart – blue horizontal line). When, if the correction is not completed and we will see the second bottom, another position is acceptable, t.e. in total, at the beginning of the third wave we can have 6 parts open (60%) from deposit. When, if the correction does not stop, put the stop below the base of the first wave (pink horizontal line). At the same moment, we open 10 positions just below the zero point. Only a slight downward movement in a few percent is required, that they, together with the profit received from the just closed position from the beginning of the second wave more than covered the losses.

The next critical point is located there, where is the forming wave (3) reaches the amplitude of the first wave. Several options are possible at this stage:

If the market stops moving and rolls back beyond the top of the first wave down, then the best solution would be to sell existing long orders (red horizontal line on the chart). Also, if you have open conditional limit orders in the amount of 10 pieces at the stop level, they should be canceled. The next step is to open a short position six orders just below the top (below the red horizontal line), which was considered the peak of the wave (1). The logic in this situation is simple: we still don’t know, what exactly is happening in the market, but if buyers do not have enough opportunities to gain a foothold above a critical level, then there is a high probability of correction and possible breakdown of the structure. Hence, orders are subject to liquidation until the situation clears up, or opening shorts in case of bearish signals (see the proportions of the Prekter waves and the signal “5 bullets” from Williams).

If prices continue to go up and cross the 110 mark% from the top of the wave (1) (blue horizontal line on the chart), then our forecasts are more likely to be true and we are indeed in the third wave. Another confirmation of the formation of a true third wave, which Robert Prekter noticed, are high volumes. Especially their size is characteristic at the time of breakdown of key levels. If penetration occurs on growing volumes, it is a strong confirmation signal and vice versa.

If all signals indicate continued upward movement, then we are increasing the position at the blue line level, bringing their total amount to ten parts. It is at this point that you should enter the market to the maximum, since the second half of the third waves is usually characterized by the most aggressive price movement and at the same time contains the least risks. For insurance, it is also worth setting the level of partial fixation of a long position below the top of the first wave in the amount of 4 parts. In case of exit below the top 3 subwaves in the wave (1), we close the 6 remaining positions and open the shorts the same size with the aim at the base of the failed third wave.

When, if the development of the third wave goes according to plan, after opening 10 positions, our next goal is to determine the point of completion of the third wave, and consequently profit-taking places. A preliminary forecast is best built on Prekter’s proportions and patterns of alternation. In most cases, the third wavelength is 100–161,8% first wavelengths. Moreover, worth remembering, what if the first wave did not have an elongated structure, then the probability of lengthening the third increases. As you should remember from past articles, elongated wave tends to a length of 161,8% amplitudes of the first wave and sometimes overcomes this mark.

On the chart, the blue area marks the gap of 100–161,8% wavelengths (1).

In the process of formation of the third wave, its structure should be monitored. In our case, the alternation worked, and the third wave has an elongated structure (wavelength (3) significantly longer wavelength (1), its structure is easily divided into nine waves and the probable elongation corresponds to the pattern of alternation), marked on the chart with blue lines. At the same time, the end of the fifth wave is a critical point, in which you should decide to close the position.

In our case, there are several reasons to continue trading. First of all, by the end of the fifth wave, the mark of 100 has not yet been reached% first wavelengths. And since the first wave of the main formation was not elongated, then the third should at least match it in length, and in most cases exceed it.

Indicators give similar signals. MACD shows continued upward movement, the Market Facilitation Index is followed by a green squat bar, and after it a few fake, which indicates the ambiguity of the situation. Classic MFI does not give the expected strong divergence (the divergence of the pink lines on the graph is minimal), which is almost always present in the second phase of trend development.

All this gives us the opportunity to assume, that the development of the third wave of the main trend is not over yet. An indirect sign of this is the sluggish correction on the sixth subwoofer, indicating a significant strength of the bulls.

But at the point of the alleged completion of the ninth subwave or third wave of the main level, completely opposite signals arise. At this point, the price crossed the mark 1,618, which means it is located in the target zone, even if, that wave (3) is elongated.

MACD shows the transition from the green bullish zone to the red and the simultaneous intersection of moving averages. At the supposed peak, fractal is observed, as well as a crouching bar, by the candle to which another squatting bar has formed. Finally, classic MFI shows more pronounced divergence, as well as its line is in the overbought zone. All this is a powerful signal to, that the trend is really coming to an end.

When the third wave reaches level 1,618 and the presence of a signal of five bullets, Williams recommends closing seven out of ten available orders. In this case, the prerequisites for such a decision are built by analogy with the first wave. We take most of the potential profit, leaving three warrants in case, if the third wave is indeed elongated.

Fourth wave

On the fourth wave, we will not open positions. Instead, we use it to determine the ideal entry point on the longer upward wave that follows it.

Williams makes the amplitude of the fourth wave dependent on its structure. If the fourth wave can be divided into five subwaves, which becomes noticeable only with the formation of the fourth subwave, then we should expect a serious price movement down. At the same time, most three-wave corrections are flat or short zigzags, as in the example above, which do not take the price far down.

Prekter is guided by the rule of alternation, Whereby, heavy traffic on the second wave is replaced by lateral on the fourth. In our example, a sharp downward movement is indeed observed on the second wave, because of which the considered zigzag on the wave (4) is flattened, although it cannot be called flat.

Despite, that on the fourth wave, in accordance with this strategy, trade is not conducted, when, if you have open short positions, the stop level for them will be the starting point of the third wave. According to the rules, described as Williams, so and prekter, the fourth wave cannot cross the start level of the third. Otherwise, this is not a five-wave formation, but some other structure. Therefore, the only right decision is to exit the market.

Minimum requirements for wave 4 are considered fulfilled, when the histogram of the MACD 5 indicator/34 goes below the zero line. Its useful to note, that this condition is necessary, to talk about a trend reversal.

Next, a more obvious sign is the presence on the fourth wave of at least two fractals down, and the last of these is the alleged pivot point. It is at this point that we analyze the Market Facilitation Index. Here one or more of the three lowest bars should be a squat. In our case, two bars are pink, i.e. squats. The next bar – brown (fading), signaling that, that due to the continuing decline, participants lose interest in the market. And here is the classic MFI on short fourth waves, as we can see from our example, may not work.

To confirm the forecast, let us check if the fourth wavelength of the proportions derived by Robert Precker corresponds to the proportion 38,2–50% third amplitude.

Channels are another useful tool. On the fourth wave, they demonstrate not the highest forecasting accuracy. Nevertheless, channels can be used as an additional tool to confirm the pivot point.

To build the channel, we connected the vertices of the first and third waves with a yellow line, after which they drew a line parallel to her, touching the end point of the second wave. This gives us not only additional confidence in the truth of the assumptions, but also allows you to use this channel to predict the end of the fifth wave without any changes.

Fifth wave

Revealing the end of the fourth wave and, respectively, the beginning of the fifth, it’s time to decide on the number of open orders. Williams suggests navigating this decision depending on the ratio of the wave (3) to the wave (1). If the third wave is greater than the first in 1,618 or more times, then it is extended, which means, what’s the fifth wave, will be relatively short. These arguments are also confirmed by the Robert Prekter alternation rule. In this case, we add three more to the three orders that have remained since the third wave, getting a total of six.

If the wave (3) surpasses the first wave less, than 161,8% its lengths and the first wave has a standard structure, there is a high probability of an elongated fifth wave. therefore, according to this strategy, open five positions and together with the three saved we get a total of eight orders.

As we can see, the top of the third wave of the main formation is located in the red zone, surpassing the first wave more, than in 1,618 times, so we open three orders, receiving a total of six positions. In contrast to long positions, we will place 10 pending orders at the top of the first wave. When you open them, you will need to close long positions, since the used interpretation of the five-wave structure cannot be called true.

If the price crosses this border, the fundamental rule will be violated, according to which the minimum of the fourth wave should be higher than the peak of the first. In this case, we will not know for sure, what exactly is happening in the market. So the best way would be to open a sufficient number of short positions, to get profit with minimal downward movement, and be able to close long positions without loss.

Point, in which we are convinced, that the fifth wave really began, is 61,8% fourth wavelengths. If the market continues to recover above this mark, then the probability of a serious downward movement tends to zero. So we can forget about the stops and move on to the next task, to determine current goals.

We remember, that built on the tops of the first, the second and third waves the channel almost perfectly coincided with the end of the fourth wave. This means that it must show with high accuracy the probable region of the wave completion (5). The fact also contributes to this, that the third wave was elongated, accordingly fifth, probably, will have a standard view, which means throws (channel boundary breakthroughs) no expectation.

Now let’s try to determine the target area using the proportions. From Precker’s theory, we know, that the section from the beginning of the first to the end of the fourth wave with an elongated third wave is 61,8% general formation lengths. I placed the Fibonacci grid in this way, to level 0,618 corresponded to the minimum of the last candle of the wave (4). Respectively, in the vicinity of the unit should be the end of the fifth wave. As a goal, I chose a level just above 13,000 points, which corresponds to a conditional unit on the Fibonacci grid and falls into the gap, determined by visual assessment of the wave channel. For clarity, I marked the probable target with a horizontal pink line.

Check «five bullets» Williams is carried out when the price approaches the horizontal pink line.

It seems to be the ideal situation for a U-turn, but the indicators are inconsistent. Let’s start off with, that the upward fractal is smoothed (poorly expressed). And after him, instead of the expected intense downward movement, characteristic of large-scale wave corrections, we see some kind of lateral movement.

Other indicators add doubts. MACD is located in the green zone, and the Market Facilitation Index shows two fake blue indicators and one fading brown, what cannot be considered as a signal for a trend reversal. Classic MFI does not give any information. His schedule does not go overbought, and divergence cannot be verified due to the impossibility of accurately determining the wave structure (by the way, this is another sign, that the fifth wave has not yet reached its final point).

MACD at the time of the expected reversal moves from zero to negative. The intersection of blue and yellow moving averages is also observed. In the vicinity of the three candles, the Market Facilitation Index shows one fake blue and two purple squat bars, being a clear signal to the end of the wave. A subtle divergence is also forming on the classic MFI.

At the point of completion of the fifth wave, we sell all available positions and exit the market.

Correction Wave Trading

When trading on corrective waves, we follow the same logic, as during the formation of the five-wave sequence. Unless the zero point is much easier for us to determine, since it is the fifth wave completion point.

Wave a

As you remember from the last lesson, all the first wave we could observe the development of the correction or act more wisely and start trading on its waves. As part of our example, we will take the second path.

The end of the first subwave is confirmed by the presence of a fractal down, transition to the zero zone of the MACD indicator, as well as the presence of a squat bar before a U-turn on the Market Facilitation Index (I will notice, that the green bar appears already with growth and is a signal to move up).

At the beginning of the second subwave we understand, that we have at least a three-wave sequence and we are waiting, when the second wave reaches a level between 50–61,8% first wavelengths. We also pay attention to the testimony «five bullets».

In our case, a reversal occurs at a level slightly below 50% the length of the first subwave. The need for closing a position is indicated by two ascending fractals following each other, transition to the zero zone MACD, as well as a crouching bar on the Market Facilitation Index (marked with blue ovals).

At the beginning of the third wave we sell at the level of a turquoise horizontal line, setting a stop just above the fifth wave of the pulse sequence (Red line). Since the rollbacks in our example are small, then all trading will be concentrated around the newly opened position.

On the fourth wave we understand, that we observe the formation of a five-wave sequence. To determine the goal, we use the Prekter relation, according to which the end of the fourth wave is 61,8% total length of the sequence. Using channels in this case will be impractical due to irregular formation.

By the way, since the U-turn starts with the five-wave cycle, then in general we will expect the formation of a zigzag correction of a larger order.

As soon as the price approaches the target area, check «five bullets». Bar, marked with a blue circle, forms a downward fractal. Following him, the price goes up sharply. MACD indicator goes from red to green, and his moving averages intersect. On the Market Facilitation Index, in the vicinity of three candles, we see a crouching (pink) bar, and subsequent growth is a green bar, what is the signal for its continuation. MFI is located in the oversold zone. It is safe to say, that wave A ends.

At the end of the wave, we do not take profits, waiting for the continuation of the downward movement after the correction on the wave B. To get profit on correction, we open two long positions (turquoise horizontal line). The new target zone will be the gap between 38,2–50% wavelength A (Fibonacci green zone). New stop – estimated end point of wave A (Red line).

When the price approaches the target area, check «five bullets». And immediately see the absence of an upward fractal, MACD in the green zone, signaling continued upward movement, and MFI – in equilibrium. And only the Market Facilitation Index shows a squat (pink) and fading (brown) bars. However, his signal alone is not enough to, to talk about the completion of the wave.

In addition to the presence of prices in the target area, we have a fractal, MACD transition from green to red and the intersection of its moving averages, as well as crouching (pink) bar. We can conclude about the end of wave B and take profits from the previously opened two long positions.

Next wave C, according to the principle of alternation, most likely will have the character of the third wave of the pulse sequence, that is, it will have a larger amplitude compared to wave A, and possibly an expanded structure. Therefore, in its beginning we will open three more short positions (turquoise line) and together with the rest we get a total of four. And as a counterbalance in case of an error at the top of the fifth wave, set seven pending orders (pink line) in the opposite direction.

First point, which we will perceive as the likely completion of wave C, marked on the graph with a blue oval. At this point, a full fifth wave has formed, and wave C itself crossed mark 1,618 (it is in this proportion that the waves A and C are often related to each other).

And really, on the, supposedly, at the peak of wave C, a downward fractal is observed, crouching (pink) bar on the Market Facilitation Index indicator. Moreover, MFI is in the oversold zone, what usually happens in the last stages of a downward movement.

The only inconsistencies are: expectation of an elongated wave C, as well as the MACD indicator in the red zone, even though he seeks a transition to green. Therefore, we will close three of the four available positions. The rest is useful to us in case, if the downward movement continues.

As it turned out, later we knowingly left one short position open. Wave C nevertheless continued its development, turning into a full elongated nine-wave formation, which comes to its end already at level 2,618 (marked with a blue oval). Worth noting, so large correction waves are rare.

Regarding indicators, then the exact same picture develops here, as in the fifth subwoofer: there is a fractal, protracted transition of MACD from red to zero, two squat bars and the MFI moves into the oversold zone. All this indicates, that the candle under test is the point of completion of the corrective zigzag. Therefore, we close the remaining position and expect the formation of the following wave structures.

That’s all. Strategy ready. In practice, I also use the projection of candles and the differential arrows of Thomas DeMark. In combination, an excellent forecast is obtained with high accuracy of execution and high-quality risk management with clear entry and exit points. A good example of such a forecast is here: “Top Dow Jones Promotions: sell or buy?”

Nevertheless, for all hot heads I want to remind, that trading is always associated with the risk of losing all invested funds and no strategy guarantees 100% result. The material I publish is for educational purposes only and is not financial advice. You make all trading decisions on your own and at your own risk.