Elliott wave manual v2

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My strategy is built around the Elliott Wave Theory: That’s a near-century-old and proven strategy developed by the great Ralph Nelson Elliott "R.N." as he was called, began his career as an accountant and before his big discovery he published two books: Tea Room & Cafeteria Management and The Future of Latin America After his visit to Central America he contracted an illness that forced him to retire from accounting He decided to spend the rest of his life studying the stock market He started by analyzing huge amounts of market data He examined 75 years of historical data from the DOW Index – from yearly Images down to half-hour fluctuations His discovery was amazing He managed to crack the market code without modern-day technology! You need to keep in mind that back then you needed to print charts by hand, and you didn’t have access to any piece of code that could analyze the market So everything R.N Elliott did was manual! In all of the charts he analyzed there were certain patterns that repeated themselves and those same patterns repeated on a larger scale also Today we know these patterns as “Elliott Waves.” In 1946 Elliott published his final work, Nature’s Law – The Secret of the Universe, where he explained how the market works Image www.elliottwavedna.com Nicola Delic Elliott Wave DNA Elliott discovered that the market only has two phases that repeat, and you can see them on every single timeframe and in every single instrument You can view a good illustration of these phases in Image The first phase is called the Motive Phase This is the part of the cycle that moves in the direction of the larger trend You will notice on Image that there are five waves labeled with numbers from through The second phase is called the Corrective Phase This part of the cycle represents pullbacks that happen in the market Within the corrective phase we find just three waves; labeled with letters A, B, and C We know that the patterns repeat and repeat, so they link to each other and build the same pattern on the larger scale The image below depicts an example of this Image Now to understand this better, imagine that Image is a move found on the minute chart and that Image represents the movements of the pair on the 15 minute chart We can advance now to see how these patterns would look on the largest scale www.elliottwavedna.com Nicola Delic Elliott Wave DNA Image In Image we can see that we have many waves, however all need only to be counted from to and from A to C True, you’ll need to learn a few patterns and rules along the way, but I promise it’s not that complicated at all Let’s move to covering the first phase in the Elliott Wave Theory, The Motive Phase www.elliottwavedna.com Nicola Delic Elliott Wave DNA Motive Phase The Motive Phase is the first group of patterns we need to learn in our quest to build a perfect trading strategy In this group we have just four different patterns to learn and most of the patterns a have few things in common Each pattern from this group will have a five-wave structure, and you can always spot them as they move in the direction of the larger trend To make it easy, we are going to label each wave from this group with numbers from through 5, just like on Image Since the market is never going to move in just one direction, we are going to see waves 1, and in the direction of the larger trend and waves and in the opposite direction This is going to be same for all patterns in the Motive Phase group For each of the patterns we only need to learn three rules The rules are going to be the same for most of them, and we will cover this part shortly One thing is certain, after the end of the Motive Pattern the market is going to start a Corrective Phase So after we finish this group you are going to know exactly when the trend is going to change Image We will separate the four patterns from left to right in Image above (Impulsive Waves, Extended Waves, Leading Diagonals, and Ending Diagonals respectively) into three groups: Impulsive Extended Diagonals www.elliottwavedna.com Nicola Delic Elliott Wave DNA Impulsive Waves (5-3-5-3-5) The Impulsive Wave is the first of the four patterns we need to learn and understand Impulsive Waves have a simple five-wave structure that develops in the direction of the larger trend Just as with other Motive Patterns, we are going to use numbers from through to label Impulsive Patterns on the chart After each Impulsive Pattern completes, we are going to see some form of correction, so expect a move to then start in the opposite direction! Image From the five-wave structure we have inside of the Impulsive Wave, waves 1, 3, and are trend waves and move in the direction of the larger trend Waves and are corrective and represent short-term pullbacks in the larger trend For each leg of the Impulsive Wave we will have the exact number of sub-waves you can spot on the smaller timeframes Inside waves 1, 3, and we are going to see smaller Motive Patterns (another five-wave structure) and in waves and we are going to see smaller corrections (another three-wave structure) Look at Image above to get a better understanding of how that would look on a chart Now to be sure that you are labeling Impulsive Waves correctly, you need to remember and check three simple rules Impulsive Wave Rules    Rule #1 - Wave never falls below the starting point of Wave Rule #2 - Wave is often the longest wave, but never the shortest of the waves 1-3-5 Wave can be shorter than wave or wave 5, but can’t be shorter than both Rule #3 - Wave can’t enter Wave territory www.elliottwavedna.com Nicola Delic Elliott Wave DNA Tip: You are usually going to see Impulsive Wave patterns in the direction of the larger trend, and you can check for wave after you see some strong and sharp movements, but to be sure you are on the right track make sure all three rules are in place : Image 6: Impulsive Wave Example in a Bullish Trend On the daily chart of the GBP/USD pair we can observe a strong upward movement from 1.5607 towards 1.9138 This move has our five-wave structure and appears as an Impulsive Pattern The main three rules were all respected, and wave (2w) held above the start of wave Wave (3w) is not the shortest wave (In fact, wave is the longest wave here.) and wave held above wave territory Image 7: Impulsive Wave Example in a Bearish Trend www.elliottwavedna.com Nicola Delic Elliott Wave DNA The main trend on this EUR/USD chart in Image is down, and again we see the fivewave structure from the high at 1.1317 towards 1.1199 Again, we are going to check the rules: wave held below the start of wave 1, wave is the strongest wave, and wave held below the territory of wave Now look at these two examples again and see what market did after wave completed! The market pulled back in what looks like corrective patterns Until we cover corrections I want you just to watch for the corrective patterns against the trend after we complete the Motive Phase www.elliottwavedna.com Nicola Delic Elliott Wave DNA Extended Waves (5-3-5-3-5-3-5-3-5) Usually one of the Motive Waves (1-3-5) would extend further into another five-wave pattern At this point, instead of only five waves, we can expect with additional moves to have a total nine-wave structure This type of movement in the market we call Extended Waves Image Extended Waves appear due to high volatility in the market and you can expect to see extended waves frequently on your charts especially in the Forex and Stock markets You need to remember that only one wave from waves 1, 3, and can become extended, so don’t try to label two or all three waves as extension Usually wave has the best chance to become extended Every leg of the Extended Waves have the exact number of sub-waves you can spot on the smaller timeframes Within waves 1, and 5, we are going to see a smaller Motive Pattern (another five-wave structure) and within waves and 4, we are going to see smaller corrections (a three-wave structure) On completion of the nine-wave structure we would have a complete Motive Pattern, so we can then expect a pullback that will take the shape of a correction (three wave structure) Extended Wave Rules  Rule #1 - Wave never falls below the starting point of wave  Rule #2 - Wave is often the longest wave, but never the shortest of the waves 1-3, and Wave can be shorter than wave or wave 5, but can’t be shorter than both  Rule #3 - Wave can’t enter wave territory www.elliottwavedna.com Nicola Delic Elliott Wave DNA Since in Extended wave patterns you have waves, and you now have two Motive Patterns, you would need to check the three rules above in the main wave and inside wave of the extension Tip: The strongest volatility in the market occurs after important fundamental events Usually after important news we’ll see strong spikes in the market and this is when you can expect to see extended waves : Image 9: Extended Wave Example in a Bullish Trend On this daily chart of SILVER we can see a strong upward trend with a Motive pattern On closer inspection we can see that we have sub-waves in total, so after checking all the rules, we determined an extended wave and labeled these waves from i to v www.elliottwavedna.com 10 Nicola Delic Elliott Wave DNA Aggressive Trading Style Aggressive Trading is designed for people who want action every single day It’s a much faster style Everyone has a different style and so might suit some traders better In aggressive trading you can expect to take to trades per day, but don’t forget to limit yourself somewhat Once you are satisfied with your profit for the day just move away from your trading desk and other tasks (The point is to not end up handing all your gains back over to your broker!) Best Waves to Trade? From the Motive phase we are only going to trade waves and From the Corrective waves the only tradable wave is wave C unless we are in a Zig-Zag correction Trade with the Trend? For aggressive trades you can ignore trading with the trend, but try to it only around 50% of the time So, for say 10 trades you could trade of them against the larger trend  Example #1 - You found waves on the AUD/USD that point higher on the 1H chart, and the 4H timeframe is showing a bullish trend The potential trade is valid  Example #2 - You found waves on the CAD/JPY that point higher on the 1H chart, and the 4H timeframe is bearish The potential trade is invalid Minimum Risk Reward? The minimum R:R that you want to trade is 1:2 (example 20 point stop vs 40 point target) Maximum Risk per Trade? For accounts below $10,000 - Risk 3-4% For accounts above $10,001 - Risk 2% Best Timeframe? For this type of trading the best timeframes are the 15 minute (15min) and 30 minute (30min) www.elliottwavedna.com 54 Nicola Delic Elliott Wave DNA How To Trade Impulsive Wave #3 Pre-Trade Requirements Wave needs to have smaller sub-waves that respect the rules of the motive phase Optional Requirement Between sub-waves and you should be able to see divergence on the RSI Aggressive Entry for Wave #3 For the entry point place two pending orders to BUY/SELL at the 50% and 61.8% Fibonacci retracement levels of Impulsive Wave Aggressive Stop for Wave #3 To decide the stop loss for both pending orders use the starting point of wave Image 61 Aggressive Exit for Wave #3 For the targets we are going to use the 100% and 161.8% extensions of wave projected from the end of wave Tips For Trading Wave  Move Stop to break even once target (100%) is reached  Check how many sub-waves you have in wave once you reach target  If you see waves close the entire trade www.elliottwavedna.com 55 Nicola Delic Elliott Wave DNA How To Trade Impulsive Wave #5 Pre-Trade Requirements Wave needs to have smaller sub-waves Wave needs to test the 161.8% extension level of wave Optional Requirement Between sub-waves and you should be able to see divergence on the RSI Aggressive Entry for Wave #5 For the entry point place two pending orders to BUY/SELL at the 23.6% and 38.2% Fibonacci retracement levels of Impulsive Wave Aggressive Stop for Wave #5 Place the stop loss for both pending orders at the 50.0% Fibonacci retracement level of Impulsive Wave Image 62 Aggressive Exit for Wave #5 For the targets use the inverse of 123.6% and 161.8% levels of wave Tips For Trading Wave Move Stop to break even once price breaks above the end of wave www.elliottwavedna.com 56 Nicola Delic Elliott Wave DNA How To Trade Corrective Wave C Pre-Trade Requirements Before Wave A we need to have a complete wave move Wave A needs to have smaller sub-waves Optional Requirement Between sub-waves and you should be able to see divergence on the RSI Aggressive Entry for Wave C For the entry point place two pending orders to BUY/SELL at the 50% and 61.8% Fibonacci retracement levels of Impulsive Wave B Aggressive Stop for Wave C For the stop loss for both pending orders use the starting point of wave A Tips For Trading Wave C Image 63 Move Stop to break even once price breaks above the end of wave A Aggressive Exit for Wave C For our trading targets use a 100% extension of wave A projected from the end of wave B www.elliottwavedna.com 57 Nicola Delic Elliott Wave DNA Trade Examples Example #1 - Aggressive Buy Trade GBP/JPY Image 64 After a wave move lower, the GBP/JPY pair had shown another smaller wave move and since we know that the only type of correction we can have in a wave move in wave A is the Zig-Zag, we trade wave C Due to the smaller timeframe used (less than a 1Hr) an aggressive approach is used  For entry points we are going to use the 50 & 61.8% levels of wave A  For the stop loss we are going to use the start of wave A  For the target we are going to use the 100% extension of wave A www.elliottwavedna.com 58 Nicola Delic Elliott Wave DNA Image 65 Example #2 - Aggressive Sell Trade USD/JPY Image 66 The USD/JPY traded for a few days in an upward trend On the chart above we can see that the movement was Corrective We had waves in total that look like a Zig-Zag After a strong, sharp drop lower we started to watch for a potential sell trade  For entry points we are going to use the 50% & 61.8% levels of wave  For the stop loss we are going to use the start of wave  For the targets we are going to use the 100% and 161.8% extensions of wave www.elliottwavedna.com 59 Nicola Delic Elliott Wave DNA Image 67 As you can see on the second chart, our target was reached, but we only filled at the pending 50% level (the 61.8% level never got tested) Example #3 - Aggressive Buy Trade EUR/NZD Image 68 A nice wave move down had developed on the EURNZD followed by a higher spike that looks impulsive So we have another Zig-Zag correction Despite the fact that we are on the 1Hr chart we want to trade wave C I would use an aggressive approach here because we are trading against the trend www.elliottwavedna.com 60 Nicola Delic Elliott Wave DNA  For entry points we are going to use the 50% and 61.8% levels of wave A  For our stop loss we are going to use the start of wave A  For the target we are going to use a 100% extension of wave A Image 69 After a few hours our target was reached Example #4 - Conservative Buy Trade USD/MXN Image 70 www.elliottwavedna.com 61 Nicola Delic Elliott Wave DNA The USD/MXN had strong movement, and from the low we only had waves with wave obviously much, much stronger than wave We are going to use the wave pullback to enter a long position  For entry points we are going to use 23.6% of wave  For the stop loss we are going to use 50% of wave  For the target we are going to use the inverse 161.8% level of wave Image 71 Although the trade took some time to play out we didn’t have any problem along the way and we finally reached our target www.elliottwavedna.com 62 Nicola Delic Elliott Wave DNA Example #5 - Conservative Sell Trade AUD/USD Image 72 This AUD/USD chart had an interesting wave move higher that appears as a simple A-B-C After that we had a wave move downwards Now, even if you don’t know the larger count you can tell yourself that this is either the end of wave or wave A In both cases you are going to get a pullback that will be a good place to sell  For entry points we are going to use the 50% & 61.8% levels of wave  For our stop loss we are going to use the start of wave  For the target we are going to use the 100% extension of wave Image 73 Both targets were eventually reached and our stops held the entire duration of the trades www.elliottwavedna.com 63 Nicola Delic Elliott Wave DNA Example #6 - Conservative Buy Trade S&P500 Image 74 Here we see that the S&P larger trend is definitely up and after a nice amount of downward movement we finally see a decent wave move upward so, we are automatically going to start looking to go long (buy) after any corrections  For the entry point we are going to use the 50% level of wave A  For the stop loss we are going to use the start of wave A  For the target we are going to use the 100% extension of wave A Image 75 www.elliottwavedna.com 64 Nicola Delic Elliott Wave DNA In approximately two days our targets were reached and the market can be seen still heading higher Example #7 - Conservative Sell EUR/USD Image 76 The EUR/USD had been trading in a strong downward trend for a long time so ideally we are going to watch only for selling setups at any correction move (3-wave up in this case) After smaller waves within wave we can conclude that the previous correction is over, so we can start watching out for a pullback in wave as our entry point  For the entry point we are going to use the 50% level of wave  For our stop loss we are going to use the start of wave  For targets we are going to use the 100% and 161.8% extensions of wave www.elliottwavedna.com 65 Nicola Delic Elliott Wave DNA Image 77 On the second chart you can see that wave was a bit of a deeper pullback, but our stops held and in the end we managed to reach both targets Example #8 - Aggressive Sell Trade AUD/CHF Image 78 On this chart of the AUD/CHF pair we can see a really nice upward trend that already has a waves in the direction of the larger trend According to our strategy we know that we are going to next expect to see at least a wave movement in the opposite direction After waiting for the first leg to develop we watch for the B wave as our setup wave www.elliottwavedna.com 66 Nicola Delic Elliott Wave DNA  For entry points we are going to use the 50 & 61.8% levels of wave A  For the stop loss we are going to use the start of wave A  For the target we are going to use a 100% extension of wave A Image 79 In the second chart we can see that both of our entries were filled and we can also see that our target for the C wave was also reached quite quickly www.elliottwavedna.com 67 Nicola Delic Elliott Wave DNA Conclusion First of all, I would personally like to congratulate you on deciding to improve your trading with my assistance If you are reading this section that can only mean that you are one step closer to pushing your trading to the next level! Maybe it will take some time to practice all you learned from this manual and the DVDs, however nothing good ever comes overnight, so just keep practicing If there is something that isn’t clear just reach out to me, especially in the members’ area, and I will help you Before I leave you to start practicing… if you could me one small favor Every single day try to become a better trader Practice spotting the best setups in the market Practice trading by trading your setups Try to learn from your mistakes and, most importantly, believe in yourself! EVERY SINGLE DAY THE MARKET WILL GIVE YOU A FEW CLUES OF WHAT TO EXPECT NEXT YOUR JOB IS JUST TO FIND THOSE CLUES IN TIME! My Best Always! Nicola www.elliottwavedna.com 68