Trading with Price ,Pattern and Time
by, 11th-June-2015 at 05:13 AM (2455 Views)
Trading using Price ,Pattern and Time analysis
Over my years of study and trading I have been using the combination of price , pattern and time analysis in my medium to long term trading and have been successful so far. I will see if I can explain.
A traders number one job is to reduce risk, which is why we combine price, pattern and time in our analysis. When all three areas confirm at the same point on a chart the probability of a move increases dramatically and reduces risk accordingly. Using all three methods of analysis also reduces the risk of getting caught in false moves, which is common problem many traders struggle with. So combining price , pattern and time ensures that we can enter or exit a stock at the earliest possible time with the lowest possible risk.
The market will not turn in price until the time is right. Time enables us to identify, with the highest probability, days in the future where the market is likely to turn in price. This allows us to be proactive in our trading as we are using a leading indicator, although most traders are reactive because they use lagging indicators.
Generally the price of a stock will turn within 3 days of a time range projection.
Take a look at the chart I put up on the WOW to see what happens at the time points.
Remember time does not indicate the direction of the move, instead it tells us the most likely points where the market will change direction.
Methods such as Trend theory and Elliot wave tell us the direction of the market.
Once time indicates the most likely points where a change in price will occur, we use price analysis to tell us where a change in trend will take place. On the charts we use we mark the time projection with a vertical line and then combine this with the price levels using a horizontal line. If the price of the stock hits a significant price level,I make up price tables to tell me this.
This now alerts us to the fact that there is a high probability that the market will turn. For example, if price hits a 50% level and time hits a 100% level, then we have time and price lining up.
Once time and price agree, we use pattern analysis to confirm the trend is changing as this alerts us to the emotions of the buyers and sellers in the market. This allows us to fine tune our entry and exit position as pattern is simply confirming what price and time have already alerted us too. It ensures that we trade on confirmation rather than speculation.
Patterns will generally present themselves in the form of reversal signals such as candlesticks or bar chart reversals or larger patterns like double tops and double bottoms.
Elliott wave can also alert us to a possible change in trend. When pattern confirms what price and time has alerted us too, we can enter and exit a trade with confidence knowing that there is a high probability of that move continuing in the direction we are predicting.
If you take a look at WOW thread I think page 24 I said back then that if we could not hold $31 than we were likely to continue to $26 was likely this was based on Elliot wave understanding that we had started a corrective ABC pattern which usually retraces up to 262 % which if you look at the latest chart I have put up above , shows we are there now and it is also lining up with the time projection 125% , so time and price are lining up now we need to see a reversal of some type and to breakthrough the down trend line and I usually wait until the daily ,weekly and monthly Gann swings are up before looking to trade.
I still have to work out how likely the move up will be (when this happens) as it still might move sideways from here.Just because of the negativity on the stock and it would be just starting a wave 1 which is the beginning of the next cycle.
A wave 3 is the safest and most profitable wave to trade on.
I also put up charts on the CBA thread and also below which was marked up with Elliott wave and I had mentioned on the chart to get in on a Dow theory entry around $83.92 and I took this on 30 June 14 and another entry middle of December at $85 I was looking for it to get to $100 as that is where my price tables showed me was the most likely place it would run too just short at $96 and I got a signal to get out at $94 and as you know we are back down at $80 now but I am looking to get back in but wave 4 has not completed yet but when it does we could get the 5th wave to run up 50% to 75% which will bring it to around $100 to $108 so we will see.
I find Elliot wave a very useful tool to get an idea as to where a stock is now and where it is likely to run to of course EW is a subjective tool to use that is why we use other forms of analysis to help form a more informed decision.
A site that I found useful and eventually became a client to learn my trading skills is below ,some new to trading may find it useful....
Aussie Stock Forums Message
Total Trackbacks 0