Increasing Your Trading Success

I wrote this several weeks ago and I really think it needs to be repeated:

I want to take a moment to address a concern a number of people have had about being able to trade this market in a confident manner.  I know it has not at all been easy, and no one ever said trading is easy, but I want to make several points to be able to assist you in doing so and hopefully increasing your trading success.

First, we must ALWAYS remember that we are likely within a Grand Super Cycle 4^th wave.  Since 4^th waves do not have any shape or pattern that MUST play out, and is considered the most variable of all 5 waves, this clearly makes trading within this larger degree 4^th wave exceedingly difficult.  In fact, the wave up that we have experienced since the March 2009 low will likely be the most complex wave within this 4^th wave pattern, as there is always one very complex wave within a 4^th wave.

Second, you must determine the type of trader you are.  Are you a very short term/day trader, are you an intermediate trader (days to weeks), or are you a very long term trader (weeks to months)?  It took me some time to learn what type of trader I was, but it is worth it for you to make that distinction, as it will likely lead to less stress in your trading.  But with so many different types of traders in the room, I am unable to appropriately guide everyone exactly according to their trading proclivities, so I give you blue boxes within a larger pattern perspective, and allow you to make your own personal choices on how to trade it.

For example, if you are a long term trader, and you followed my analysis back in June, you would have bought the 1270 region with a target of the 1420-1440 region, as I know many did from the emails I have received about that set up. 

Currently, if are following my analysis in suggesting that we still have much higher targets to see in the market, then you would have stopped out when the recent uptrend broke support in the 1420 region, and then bought back an initial position when we hit the first lower blue box in the 1340ES region, with a stop just below the bottom of the box at 1327.  This could have been an initial position for the bigger trade to the upside. 

For those that have been day trading these moves, there have been multiple sets ups every week for you to take advantage, especially when you are trading off the Fib levels we provide.

The traders who are probably having toughest time with this market are the intermediate traders.  For these traders, the market, especially since June, has not offered as many really good trading opportunities as it has for the other types of traders due to the larger up/down/corrective nature of even the rallies.  For example, even within the June rallies, all wave structures occurred as sets of 3’s, and all trading felt like it was very choppy, even though we were able to identify the twists and turns better than most.  So, while our blue boxes during the rally since June provided both topping and pullback targets very accurately, it was not what I would consider easy trading due to the overall pattern.

But, fear not.  Based upon almost all counts I can come up with, we are setting up for a nice 5 wave impulsive conclusion to this larger wave structure from the 2009 March low.  Under almost every wave count I can come up with, the last move into new highs must be a 5 wave event.  This means that we will need to see a 5 wave structure that adheres to Fibonacci Pinball almost to the penny.  For those that have been with us for a while, you know what that means as it relates to the high level accuracy we are able to attain in predicting and trading.

However, I do want to caution you.  While I did say under “almost every wave count” as it relates to this final rally to new highs, there is the “possibility” that we wind up with an ending diagonal, which, again, is more likely to be completed in waves of 3.   That is the one way it will make this last wave much more challenging.  But, I will say that while it will make it more challenging and it may take us a little longer to identify it as the final wave higher, about 40% of the way through the pattern it will provide us with high probability trades for the next 40-50% of the pattern, which should relate to a minimum of 100-150 points of trading to the upside in a safe manner.  And, this would likely be the worst case scenario.

But one thing that such a pattern would set up would be the highest probability short trade you may take in your trading career near the conclusion of this pattern. So, like with every pattern, there is both good and bad associated with it.  

Another suggestion that I have offered to many of our members is that one need not always trade the index.  When we have 3 potential counts on an ES chart, I do not consider that a tradable chart from anything other than a day trading perspective.  Therefore, my suggestion would be to focus on other charts rather than the ES.  In fact, there are many chart patterns being presented on the site all the time with much better pattern potential which you may choose from.  So, remember, you DO NOT have to be trading the index all the time.  You are best off picking and choosing when to trade the index charts, and should be focusing on other charts as well.

So, ultimately, what I would suggest to everyone is to determine the type of trader that best fits your personality and risk appetite, and trade the wave degree that fits that trader profile.  Additionally, if the chart offers too many options – meaning 3 or more – then that is not a chart to trade.  PERIOD!!  Rather, when we have a primary count, with a single alternative, that is the type of trade many would want to follow.  And, it seems we are now moving into that perspective on our ES charts right now.

And, as always, if you have a question, please do not hesitate to put it out into the forum, as I can GUARANTEE you that others would have the same question (assuming, of course, the question has not been answered in our “Getting Started on Elliottwavetrader” section). 

We have all types of traders in our room, from novices through professional traders, who are actually EXTREMELY impressive.  So, PLEASE do not be intimidated by the professional traders, as they have all shown a true willingness to help the novices among us.  So, PLEASE make sure you post your questions, as I am sure that others would have the exact same question, and it may even prompt the more experienced traders into seeing something that they did not see before.  Having hundreds of eyes looking at the same pattern and providing input and asking questions always forces analysts and traders into developing a much tighter trading strategy.  So, EVERYONE’s input is HIGHLY valued here!!  “A rising tide raises all ships.”