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AlphOmega Elliott Waves 5.7

1. IP ral Soll ek s I Pann IFAM 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 15000 10000 Ali bo ME 5000 TRAD Ur ln n 2 ust September October November December 2003 February March April May June July August PS lt 2 406 H For ess 1 10 54 Fig 57 MetaStock Professional Chart2 Agilent Tech Inc 20 7000 Ele Edit View Insert Format Tools Window Help D c amp o oa F AlphOmega Highlighter 3 a fo amp 4 8 LZ ow We ESS sail a R S IER X AL VUA P HEEL liis E 50 22 0 A IE 21 9 2 I i 21 8 21 7 21 5 21 4 213 21 2 21 1 21 0 20 9 20 8 20 7 20 6 20 5 20 4 20 3 20 2 30000 aih EMEN ive hilo al l 25000 unm 7 15000 20000 10000 RT MERIT a 5000 mulni MUTT lagi ibid a a EE EL x10 August 4 5 6 7 8 E 4 2 For ess Fl 2003 08 08 10 20 262 739 6 11 03 Fig 58 The indicators such as the Trendline and the AlphOmega Highlighter are displaying properly The expert does not display LC and clearly monitors the cycles displayed in the
2. ale 20 Siri e M 25 o WIEN mEM m 25 27 Trend Lines and Other INAICAtOLS sirasi ae E 27 CHAPIN m e c ere 32 ETT 32 Incidence of a cycle over a smaller 33 FOS Versus FOFCer taste Dens bet bie b MM misuse imde M E AE UE 35 iau ibn id aded us 37 uelle E 37 Special EX OIOl ANON TK 38 AJNA ISX 0 OVATIONS mc EE 38 VAN 45 AlphOmega Pitchfork Scan and AlohOmega Pitchfork Medians 45 Cnaplet E E ai Danni M 50 crc NC e 50 Pio Geta ees 55 Chapter EN 56 ES 56 Special Display for Special Situation eee 63 H 63 Interpretation of the Expert 64 More on Interpretation of 67 T Tuus oet 70 Three Ways to Use Elliott Waves
3. sse eene 70 Step by step Elliott WAVES deci sete tete a 71 Chapter 76 Special Fate HS tasti acq L qucd teu a Sd 76 GOMGIUIS I OND mee 81 82 d gra 85 Complete list of experts explorations indicators systems and templates 108 RUES 1 Trade dise ed ees cea 111 PRUNES Mg G 112 114
4. AlphOmega Impulses 21 GT by Wave A very useful exploration to find the rate of success of previous impulses by wave number The column 1 provides the percentage of success of profitable trades over total trades The next column shows the actual number of profitable trades in the whole number part and the total number of impulses trades in the decimal part When sensitivity is undefined or a wave number N A is displayed A higher percentage when analysed will yield more undefined securities as many have not gone through a full cycle or don t have enough data for an accurate wave count The second screenshot is a different sensitivity so we can compare which yields the best results Note that wave 1 is known to be less profitable not because it is wave 1 but because the system attributes a 1 to all waves that do not fit 2 to C There is more data available to evaluate a wave 2 and even more for a 3 and so on so forth Wave 3 and C 6 in the exploration as it does not display letters in the columns are usually better in terms of reliability It is good practice to check this kind of exploration before entering a trade with an unfamiliar security 48 AlphOmega Impulses 21 by Wave Explored 10 73 2004 i i Results Rejects Exploration Ticker Sr Woo 0 0000 0 0000 0 0000 0 0000 6 2500 0 0000 0 0000 0 0000 0 0000 0 0015 0 0010 0 0002 0 0006 1 0
5. DAS AlphOmeg AlphOmeg AG PTF FRAMA 40 Patte nix E0 18 0 175 17 5 4 gt 17 0 17 0 A 16 5 16 5 2 16 0 16 0 15 5 15 5 ET ZEIT 145 14 5 L 140 14 0 13 5 73 13 5 9 13 0 13 0 EE 125 12 5 120 30 12 0 11 5 11 5 11 0 11 0 111257711 10 5 10 0 10 0 9 5 9 5 85 85 8 0 8 0 rd 1 1 T j i 7 5 AD 0 53997 VA Ner rien 5 50 Was JA o SUM LT 1 z U mr v v 5 H m Colored Volume 0 ox 15000 15000 10000 10000 5000 5000 cio ce i i 1 February March April May June July August September October November December 2006 February March April May June l gt pD 00 4 gt 46 Interbank Fx v Tiai P NM amp amp CU D Roco Bed Gb We We Y Fig 75 79 The Gartley Fig 76 The Gartley is well known in the world of technical analysis it is a more reliable pattern when it is close to the specified ratios The degree of precision is important so when we set the error margin with the indicator values like 1096 are too high The value that the user inputs is added or subtracted from the ratio so that 618 becomes 518 if we use 10 The default is 10 as most patterns have a fair degree of flexibility For the same reason the explorations work from 10 and yet the nu
6. _ 100 wi n ul ill T wp LAT AR NP mill bake Uff UT Ibi ull eg m tl if LT T TE IEEE EET TT 50 mtm pr STORS Peak Trough Duration 35 Wave Time Projection Demand Index 34 Bar Color Coding EK 33 bullish extended t nd Red bearish extended trend 32 Black undetermined trend 1 1 2 gt 31 o 9m cycle Auto Trendline 2155 cycle 30 RT E 1 Ds hr ad 118 i E AER il 2B 1 ios M i e 1 24 for 144 55 and 13 days Signal bar confit irming 23 the end of the previous 02 wave 21 oe ii Momentum gon Momentum Index Dynamic Momentum index DMI 20000 RSI Trerndline 15000 5B days Relative Strenght Index RSI i ll T ND ueni Vi Hall vt il illi He April June July August September October November Hecember 10000 2003 _ i De ve ee TEST May Fig 4 Template AlphOmega Simple This screenshot is your basic Elliott wave screen with this set Arrows point to all the indicators that are included in the template The Expert is producing the wave count labels you see for eac
7. Q Its 3 5 3 0 1 25 20 AO T All Sens and L These indicators are triggers used by the Expert and although they provide a price value they would not provide information that is not shown elsewhere to the user You can select the data array for the waves to align your indicator to the expert used These indicators do not appear in the indicator quick list and are not intended for plotting AO Swing Lines This indicator will plot the zigzag of three different sensitivities your choice based on either or 1 0 AO ZZ all4 looks very similar in its way of displaying the four selected sensitivities The main difference is that you can input the starting lowest sensitivity and it will compute the next three automatically With Swing Lines you input the three different sensitivities in either percent or points 104 AO Trailing Stop This indicator plots the trailing stop for the specified sensitivity and delay for the ratchet action iii i 2 4 0 3 5 3 0 25 2 0 AO Triangle lt This indicator plots triangles based on sensitivity and direction of triangle this is an expanding 45 5 TSI This indicator is based on the moving average of variations of a moving average It provides an interesting alternate entry or exit point Crossovers of lines or of specific levels are the normal signals The parameters are data array periods for base average periods for av
8. Elliott Waves 21 Explored 11 14 2004 Bull in sexo een 13 6100 5 B31l 15 4600 15 2900 11 3600 3 5500 4 6300 12 7900 18 8000 Bear In 0 0300 16 6500 9510 14 1900 12 8000 19 0500 2 0900 6 1500 11 0000 17 5000 14 500 Sb Print Save List After opening the exploration report the securities are sorted by either symbols or name our next step will be to sort them by the type of signal we need so if you prefer long trades you sort the Bull Brs column Elliott Waves 71 Explored 11 14 2004 Results Rejects Exploration Brs Bear b URS 6 0689 6 0576 6 0521 6 0516 6 0512 6 0469 6 0456 6 0426 6 0425 6 0415 0 0792 0 0702 0 0595 0 0596 0 0523 0 0523 0 0532 D 04 77 0 0495 0 047 0 0442 Bull Stp 11 1200 26 5500 51 9400 23 5200 59 5900 41 9100 11 0000 28 9900 13 1000 20 5100 B ear 12 0000 3 8182 51 1000 24 0600 32 0000 44 1800 11 6200 26 4500 12 6000 19 5000 Klose Bull In 17 6000 3 5455 29 7 r00 53 6900 25 9000 35 6400 44 0500 13 6000 30 5000 13 8500 Bear In 10 7800 Orre 25 9500 44 BU 21 5900 30 0000 38 2200 10 8000 26 1000 12 3500 71 3 When the results are available we open the report and sort the Bars column in descending order We click twice because the first time we get a sort by ascending order We are looking for the most recent occurrences of
9. L il I S NEL nl m Tl June July August September October November December 2002 Bene March June T 28 gt t4 00 4786 9 Mij ee amp Hj ev tj ew me nme ns Y lt No Vendor IM For Help press F1 04 15 2002 104 022 1 14 08 NUM Fig 51a 53 Summary AU Elliott Waves Normal 71 Simulation Date 2003 06 13 14 03 15 Agilent Tech Inc 695 Daily Bars 1999 11 18 Through 2003 06 13 1303 Days Performance Performance Indices Profit a Buy amp Hald Index 383 30 5 Perfarmance 72 55 75 Profit Loss Index 71 26 4 Annualized Performance 20 32 9 amp 6 Reward Risk Index 69 47 Buy amp Hold Prafit t 2561 l Buy amp Hold Performance 25 61 Accounting Buy amp Hold Annualized Performance 7 17 5 Initial Equity 10000 00 Trade Profit 6939 56 Trade Summary Trade Loss 7945 69 Total Trades 17 Commissions 1276 50 Trade Efficiency 15 36 Interest Credited 1342 69 Average Protit GQverage Loss 2 10 Interest Charged 0 00 Final Equity 17255 39 Profitable Trades Open Positions 1883 00 Total 10 Long 5 Account Variation Short 5 Highest Account Balance 17948 44 Lawest Account Balance 3204 35 Average Profit 583 96 Highest Portfolio Value 8291 25 Highest Profit 2392 53 Highest Open Drawdown 3189 71 Lowest Profit 273 07 Highest Closed Drawdown 2634 99 Most Consecutive Account Events U
10. M T Cy IN pr EI 2 P AlphOmeg AD 0 34349 nix E KANI b 50 m 40 Colored Volume 0 15000 15000 10000 10000 5000 4 Hx 10 Aug Sep Nov Dec 2005 Feb Apr May Jun Jul Aug Nov Dec 2006 Feb Mar Apr May 7 _ il D t4o00 4 H v Trade 7 8 44 m oe oo me ne n DISH Interbank FX vj MI Y ii NUM Fig 73 78 On the previous chart we can appreciate the potential benefits of trading such a pattern Let s not forget that we give up a certain price retracement before we detect and confirm such pattern Here the trade off is 1396 of the price value of the trough The Crab Fig 74 The Crab like the Butterfly has a longer last leg it should be much longer It exposes the trader a bit more as the trend is very strong and we take a counter trend position MetaStock Professional Wind River Systems Inc 9 68000 WIND i File Edit View Insert Format Tools Window Help Bx Os SR RE o M Iran v MAY I STORS AO0P amp TD Wave Dix oT a AAAA EL Ih LA J A 150 sf ur Ned PC e dabat N ATTI esae High v j
11. i Agr E Peak amp Trough Normal Trigger on 2 0 5 1 0 Fig 13 Only trigger colors are shown on in this chart Looking at the figure 13 you will observe that bars take on a different color from time to time These colors have a meaning that will flag you the important bars First let us look at the bar signal for the trigger of the wave The trigger as mentioned above is the point where the wave indicator acknowledges that the previous wave has ended and the next one is underway In other words the peak or trough is not dynamic anymore it is set to activate the trigger the data array selected must make a peak or a trough and retrace a percentage called the sensitivity The trigger codes are e 8 sensitivity called fast is coloured cyan e 13 sensitivity is coloured magenta e 21 sensitivity is coloured dark cyan e 34 sensitivity is coloured dark magenta 16 Many other patterns are available with the expert all you have to do is to check the box in the Highlights tab to enable or disable them An exaggerated use of these will only confuse the interpretation of the chart When several bars take on coloration we are looking at a trend developing Depending on the version you have the blue color is used for a bullish trend while the red means a bearish trend gray is used for consolidation patterns and orange for failing wave 4 Nomenclature Used Throughout the experts color and style codes have been u
12. 709220 81 Buy amp Hold Performance 70 92 95 Accounting Buy amp Hold Annualized Performance 23 26 lh Initial Equity 1000000 00 Trade Profit 578910 20 Trade Summary Trade Loss 179889 24 Total Trades 8 Commissions 185601 89 Trade Efficiency 19 98 Interest Credited 127676 99 Average Profit Average Loss 1 93 Interest Charged 0 00 Final Equity 1526697 95 Profitable Trades Open Positions 0 00 Total Long Account Variation Short Highest Account Balance 3422402 65 Fig 50 To bring everything back in perspective with this system know that if we are in a 2196 order of sensitivity it means that the price must move up or down by at least 2196 and then it must change direction and move again at least 21 For example this means that if the price goes up 5296 we will know a trough has formed when it crosses the 2196 increase in price We will then know a peak has formed when it goes down by at least 21 In summary of the 5296 upward move you will take in profit on 10 of the price since it will take 21 going up to know to go in and another 2196 to go down to get out All our systems are based on the Elliott methodology described earlier There is no attempt to use a different type of indicator to accelerate the trade signals The reason for this is to show the naked use of Elliott where it will give the best results and where it will not perform As users we have our own predilection for familiar indicators that we can combine
13. AlphOmega Elliott Impulses 21 DF AlphOmega Elliott Waves EO Signal AlphOmega Impulses GT AlphOmega Impulses 13 GT by Wave AlphOmega Impulses 21 GT by Wave AlphOmega L3 1 AlphOmega Normal 1 AlphOmega Pitchfork Medians AlphOmega Pitchfork Scan AlphOmega RSI Trend Violation AlphOmega Signal Scan and L AlphOmega Trendline Violation AlphOmega Vidya AlphOmega Wave Points 3 AO Bat AO Butterfly AO Crab AO Elliott Waves AO Elliott Waves AO Elliott Waves AO Elliott Waves 896 and L1 1396 and L2 2196 and L3 3496 and L4 CUm Umm Aam Experts AlphOmega Elliott Waves 196 Swing AlphOmega Elliott Waves Futures AlphOmega Elliott Waves GSe AlphOmega Elliott Waves HV AlphOmega Elliott Waves Impulse Signals AlphOmega Elliott Waves LV AlphOmega Elliott Waves NV AlphOmega Elliott Waves Points Templates AlphOmega Aget AlohOmega Elliott Waves 8 13 21 34 AlphOmega Elliott Waves Swing AlphOmega GSen AlphOmega Simple AlphOmega Vidya AlphOmega Wolf AO Auto Timeframe R amp S Aget Aget Futures AOi Simple AO Elliott Waves Impulse Signal 3 AO EW T1 AO EW T2 AO Gartley AO RSI Divergence AO Triangle Exploration AO TSI AO Wolf Five n perf AO Wolf Wave Norm AOi Elliott Waves 1 Swing AOi Elliott Waves 1 with DMA exit Elliott Waves fast 1 AOi Elliott Waves Impulses normal 3 Elliott Waves normal 396 AOi Elliott Waves slow 5 AOi E
14. Other Type of Failure Consolidating triangular or trading range patterns are also important to consider they are very difficult to trade For this reason they are identified with the expert by coloring the bars differently We will see switches from ascending to descending patterns in the middle of a pattern called wave failure To understand and to trade these patterns properly is a very difficult task since when we see the signs the pattern is almost complete The wolf wave pattern is among these difficult patterns but yields itself better to the trade Because this trade pattern can be detected fairly rapidly we have indicators in the Expert Advisor and The Explorer to help you spot it Here is an illustration of the pattern 10 Wolf Wave is a sequence of two failed waves forming a triangle with base BD and as the apex more or less Once the price moves from point D it must touch or penetrate line AC and then bounce towards extended line AD The price projection is located on that line right above the crossing of extended lines AC and BD This pattern is rare and unreliable so be sure to place appropriate stops Line AD Wave 1 P now Point B P Price Failed p Projection Wave3 Point D b J Line AC s Nc a AAS N TM aee id P Projection 7 Qu z i I e LN d T Wave 2 Wave 3 Line BD P d FT d now E M Point C Point A Time Fig 9 The time projection is usually not as accurate as t
15. language A list of the available indicators will appear when we use the Function button in the programming of indicators systems experts or explorations All the AlphOmega variables that can be used are labelled with the company name or abbreviation AO so we can recognize them through the list Indicators that have names like PW2 or TW or IDf or the likes should not be used as they refer to formulas that do not return a usable variable To understand what the variables refer to is of prime importance to generate code that is meaningful to us The most important variable in Elliott Waves is the ID variable It is different from IDf that is a formula name The ID variable is the wave number as identified in the formula The sensitivity involved is indicated in the name of the formula such as f for the IDf that corresponds to 8 Trig is another important variable because it tells you when the wave is recognized by MetaStock It is the threshold price that must be crossed before the wave takes a name The general purpose of these tools is to entice people in building their own trading system using Elliott Waves as a building block At the end of this document is a list of the variables you can use and a short description Exploration E ditor AlphU mega Ew System This system enters on Waves 1 3 5 and C as long as the trend does not reverse and after 1999 It filters out securities with an actual price bel
16. sd ar lt pa qr de Esset EL EE FP February March April June August September October November t O0 478 In this example we can see that there is no room for a price move as the price target is already reached 5 We check the other cycles to see if a more powerful wave is propelling or killing our wave If the projection less the entry price commission give us the yield we are looking for I look for 2196 we mark the security on our list of candidates Our goal is not to have the longest list so we discard anything that is doubtful or less performant We can print the chart if needed Closing this chart we go to the next one We repeat the same me Yo 34 619 AlphOmeg f Y process until we have exhausted the opened charts If we have charts left from the report of The Explorer we go back to The Explorer and do the same process as in step 3 opening the other charts Redo step 4 and add the candidates to the list the chosen securities To assist in the selection just open the Expert commentary While the information available is limited it is accurate and helpful Do not rely solely on the Expert as the patterns that can be analysed are scant and belong to the most commonly seen The Expert will only give us a flavour of what is basic technical analysis As time goes by we
17. 21 26 25 24 2 P Hir MI Lii LULI 10000 25 Alec ah Wa WA REA Whiting E Eas a Wed silii ou dM E August September Movember IDecember 12002 February March Abril Fig 12 June July AUC Please note that all indicators templates experts systems or explorations only use peak of high and trough of low to change this default set up you must go to the code However you can change individually the few indicators where the dialog box gives you the option between C and H amp L Moving Averages Trend Lines and Other Indicators In the price window are three exponential moving averages the red line uses the closing price of 13 days while the dark yellow line uses the closing price of 55 days and the red line is at 144 days These three lines called EMA reflect the trend for the short term at 13 days to the long term at 144 days Exponential moving averages tell you the trend of different cycles The crossover of trend lines is the most significant signal in technical analysis In addition to these lines there are two horizontal red dotted lines the top line is at the last peak of the normal 21 sensitivity while the bottom line is at the last trough of the same Do not mistake these lines to be support and resistance lines even if they are very close to that They are significant in that they indicate the point that has to be crossed by the n
18. Let s look at Fig 66 Fig 66 The first indication we get that wave 4 may be wrong is when the price goes into wave 1 territory and then below the trough of wave 2 Since it retraces below wave 2 it is labelled wave 1 in red The next move is also puzzling as the price moves above the peak of gray 3 The expert reacts by labelling this segment as a green 1 since it matches no other definition To have two waves 1 in succession tells us the pattern is failing and we should interpret the wave count differently Hence the correct interpretation is that the two waves 1 cancel each other and the gray wave 3 is ignored The consequence is that the deploying wave should be a green wave 3 To continue with interpretations let s have a look at the next chart 68 Fig 67 This last example is an indirect warning that something is foul in the wave count from AlphOmega We have in the ellipse a succession of x and 5 waves for the largest sensitivity there should be only one extension What is happening is caused by the fixed percentage used in the filter It is obviously off by a few points during this period of high volatility and the threshold for retracement is crossed repeatedly In the other sensitivities this situation is corrected by checking with the next higher sensitivity and waiting for it to resolve our count It cannot be done with the largest unless we delay the initial signals by referring to a higher filter such as 55 We went halfw
19. Plotting too many lines will distort your whole chart because the delta between the lines is quite steep as can be seen below y E px dd ds 2 90 2 u B 0 96 AO Gann Cycles from Date P This indicator will plot the Cycles from a specified date and for a selected sensitivity There are two types 1 30 and 2 45 Like most cycle indicators it must be set to display as a histogram without scale in the price pane lii is p NT jet d i il i thy AO Gann Eights Price This indicator will show the price levels in eights from the last peak or trough of specified sensitivity The lines start at the input date The scale must be matched to the price scale to display properly 15 977 Gann Eights Time and T This indicator will show the time projections in eights from the last peak or trough on price for specified sensitivity The interpretation for the time projections is the same as mentioned previously when the gray bars touch the red lines it is a potential trend reversal Like most time indicators in the price pane it must be set to display as a histogram without scale The T being in the duration time pane must be tied to the duration scale hiia 1 i FRI S Lo UH ai Noe J ihl 2003 O February AO Gann Fan at Date Will plot a Gann fan from the date specified for the selected se
20. as the wave 5 target has been reached and the price crosses below the blue displaced moving average DMA So far the price has not really moved into the wave 5 target area but it has been beyond the peak of wave 3 It is also below the displaced moving average These two factors are pointing to a very short wave 5 and a sell short stop should be placed at the 3 50 level If price continues up the trade will not take place but if it moves down the trade will be triggered 18 VAM TW AERA VAS ASUNT BU PLA aba alb a HELE Eu d al F LIU n t bring Q A uw 1 S B rr t t 4 y D X Li ilt vend Ji 2 FT 5 1 Fy E ii 2 0 V at ur TIN pE r s X ai mer j at F b 3 95 24 i TGA II sch AC WOW y March April May June July August september Octaber November December 2003 February 100 0 This template is used to get a similar analytical power as in Advanced Get The dark cyan parallel lines the channels for wave 5 The Elliott oscillator has two additional lines in black that show the accumulation of bull and bear power The thick red line at the 5 70 level is the W5 target When a wave 4 unfolds instead of the current 5 the indicator AO TRC plots the acceptable retracement indicating a strong probability of a wave 5 Th
21. 10 9 8 B 5 4 i 3 5 1 per i aa 1 1 3 2 02 d 4 2 4 Squares This indicator will plot Gann squares from the date of the peak or trough of specified sensitivity There are quite a few adjusting parameters to display the type of Gann squares you like To use this indicator you should read about the Gann gegroey er mathematics behind are simple but the applicatign is fay more complex Feeling your way by testing ide the satisfaction of discovering relationships betwe n price and Gann geometry Note thaeGalanatway lowest historical low to build up the projections 7 5 Month Day Time Bar in Format mmddhh mrm 10100 T 7 0 Highest Square T 6 5 6 0 55 NofSqrt 92 18upto5 1 5 zi 4 0 z 3 5 ial 1 Here 1 iB 4 3 0 4 6 pM 25 x 2 20 j i x 1 5 3 ES aU 1 0 en 24 100 AO Gann Swing This indicator will plot the Gann swings using two successive days of higher highs or lower lows There is no sensitivity adjustment only the possibility of starting from High or Low default or Close Although unusual this zigzag works very well in slightly trending markets It is not Elliott swings so don t look for impulse or corrective waves there is no nesting in this kind of waves there are absolute unless you change the number of successive highs or lows required AO Gann Weekly RS This indicator will display the latest weekly support or resistance as
22. 2100 20033 C1l Inputi Honth Day Time Barin format mmddhh mm 1UL100 0 123124 59 10100700 bars BareSince Cl MonthTt 1000 0FfDay0fMenthi 10 U Hourl 109 AND C2zY amp 8art myvol MPi cmv lumi myo ov umi Vie Smallest value largest value default value Fig 24 In the example above we have the parameters for 2 variables that require a user input C2 and C1 The key word for an input parameter is Input Then we have three values that drive how the dialog box will request the information The first 2 control the range within with the user can enter his value all outside value will produce an error message to the user the 3 value is the default value that appears in the dialog box when prompting the user AOP Midas Properties Color Style Horizontal Lines Formula Parameters Year in format yyy Month Day T ime Bar in format mmddhh mm 10100 Fig 25 This is a view of the dialog box produced by the above code We see the 2003 that is our default value beside the text we chose to prompt the user It is as easy as described so next year we can change the default value to 2004 instead of 2003 This process for editing formulas applies to experts explorations systems and indicators Templates are merely a collection of expert indicators an
23. 99 47 BO 4 1800 4 0800 23923 51630493 41000 NGEN Open Chart 12 0500 14 7000 21 9917 5522 6704 14 7000 NANO 35 6800 374100 1 9902 10889781250 36 7300 gt 000 Set 12 6900 130000 24429 7232 6709 13 0300 NSTK 340000 42100 06176 12293939719 34 1900 NCF l 324500 390900 42190 195910605 373300 NCC 335500 338700 09535 147032451 333500 NOI 16 6700 161000 34193 63741 8594 16 1000 NSM 227000 195900 137004 7080 433 19 5900 NLS 149000 150300 1 5541 6105 9946 14 9500 Symbol AMENE Buy Sell Vendor Vendor Fig 48e Below is a template created for this exploration and the expert NANO is displayed on the chart Be cautious about the arrows as they appear only when the next bar is deploying As soon as the price has moved to the level that confirms the signal it is issued 47 z Chart2 Nanometrics Incorporated 14 7000 NANO SEE oT VAN OA ASL TTT SAT BR TNL TTT LT EULER LLL NTT Sel i iry Mas m it PY s pU x ki D M SE hy 5d t Buy adi d th mh uy uu Buy FN j Th TIN M NAc EC th th SO TT MINI LES SESSEL 5 March June August September October November gt 3D E
24. AO Wave 4 Failing All Sens L This binary indicator will flag a wave 4 that retraces in the price zone of wave 1 This is not against an Elliott rule but rather uncommon and often the prelude to a wave failure The wave 4 turns into an impulse of opposite direction from the previous trend AO Wave Performance Monitor Similar to AlohOmega Rate of Impulse it computes the percent progress against the past peak or trough after you input the sensitivity It does not have a variable and can only be used for display purposes If the function is undefined it will display O AO Wave Price Projection All Sens and L These indicators are automatic price projection displaying the projection for the latest wave detected They do not work backwards They call their variables from other indicators so that if you use these variables being second hand your system will be very slow These projections are more detailed than the AlphOmega Highlighter but do not factor in the rule of alternance and similarity hence the lack of discrimination in the projections presented AO Wave Three Rule All Sens and L This particular indicator is used internally by the expert to flag a wave three that is shorter than the wave one It triggers a light gray display for waves 3 and 4 A different version is used in explorations and systems as these modules do not allow as much formula space AO Wave Time Projection All Sens and L They are the same as Wave P
25. Agilent Tech Inc 23 3700 SEE 7 23 0300 23 3900 23 0300 23 3700 0 42000 muni xi AO Timeframe MA for monthly for 55 periods AO Auto Timeframe for monthly weekly and daily with assorted number of periods m Yo 34 519 AlphOmeg AD Ellio 0 29795 of x Li Ip pb Depp qe prise go pepe pe qo De T 4 Dn e b D Ts ps p D Te Do po bso be bi tebe DE Ts Ets February March April June July August September October November i 4 The difference between the two versions is the option to display only one moving average versus all for the Auto version The use of averages or support and resistance of a different timeframe than the current chart is to assist finding strong support or resistance that could not be seen otherwise as they are computed with only a portion of the available data For example the monthly support and resistance uses the highest high and the lowest low of the previous month the monthly moving average uses the closing price of last month and that of the previous and so on so forth for the selected number of periods then it links these values by filling the gap of one moving average to the next using the exponential or simple curve This method is used to provide a continuous value to something that change value only at the end of the month thus displaying a horizontal line for the month and an almost vertical line to the next point The crossing by the price of the
26. BE g AO Elliot Oscillator Movember 2003 February March April May June July August September Move 4 gt ED tf oc0 4 H Fig 69 AO P amp T Duration and L This indicator plots the bars since the peak or the trough for the sensitivity you have entered Bar graph gives a better feel for this indicator and allows time projections by placing horizontal lines at the proper scale When the bars touch a line a reversal could take place It has a sensitivity input to be matched to the wave sensitivity you trade 85 AO 1 This indicator plots a line across your graph at the latest peak high and the latest trough low You can input the sensitivity of the wave You can also select either Fibonacci retracement 382 5 and 618 or extension 1 382 1 5 and 1 618 to gauge the price progression This is a very versatile tool and the options are accessed by a right click on In the chart below Fig 70 you can see the Fibonacci retracement levels since we are looking at a wave 2 Fig 70 AO STORSI This indicator is a combination of the RSI Relative Strength Indicator and the Stochastic You must input the number of periods for the RSI the number of look back periods and the slowing periods to get smoother data If you don t know just rely on the defaults which will be used automatically There is no variable to be called but the whole indicator can be used in a formula It comes in two styles AlohOmega and DT tha
27. Bullish Waves 3 5 and C Remember that 6 stand for wave C This means that the bar count is between 1 and 5 for a large sensitivity and less on small sensitivity such as 8 Clicking to highlight the first security that has a bull wave of the desired type we spot a second security holding down the Ctrl button and clicking on the security so all the selected ones are highlighted and so on so forth until we have a good selection Not too many because our computer will crash charts are resources hungry Press on the Open Chart button and wait until the charts open To study our charts we will need to close The Explorer by first closing the report and then the program 4 Looking at our screen we see the last one we selected We check first the wave pattern to make sure it is what we want and then look at the Price Projection looking at the middle projections or grouped projections never at the extremes because they represent mostly extensions or very conservative estimation based on a corrective wave One way of pinpointing the most probable one is to look at a cluster of lines Keeping in mind that we want enough price movement to make a profit even after the wave end is confirmed E Chart2 Agilent Tech Inc 73 3700 m xm zm
28. System Tester of MetaStock 8 0 simplifies this kind of back testing EW System Explored 2002 01 26 Fig 35 This is a screen shot of i Boo CONTACTS as8 4158 370000 3 1358416 performed in an 1800FLOWERS COM 28400044 31 0000 21 0000 284 0004 e 3COM 518 5494 470000 20 0000 51 8549 ee 3D LABS 4 KIDS ENTERTAIN 724 SOLUTIONS 724 SOLUTIONS 02 4644 872 7666 1296 2986 101 6178 199 CENTS STORES 275 2316 250 3760 45 0000 43 0000 46 0000 41 0000 32 0000 23 0000 19 0000 27 0000 18 0000 14 0000 12 0000 9 0000 87 2757 660 2465 129 6299 10 1618 275232 250376 can design such explorations by using the indicators provided with the set The programming is demanding and the testing must be thorough to avoid signals we could not possibly pick in time sult ECCE IST e the back testing for trading purposes Please note that many explorations like Fig 35 will display two different pieces of information where the label will read ID Bars and the column will show 5 7015 for example The integer part is the wave number while the decimal part is the number of bars since the signal trigger so in this case a forming wave 5 that is 15 bars old This enables the display of more than 6 pieces of information for a single exploration Another way of displaying more information is using a minus sign on the col
29. ZZ to see Zig Zag from high to low opecial Exploration Have you ever entered a trade based on the signal that your favorite exploration gave to find out that the last bar on your chart is not yesterday but the day before yesterday That yesterday was a tremendous rally and today is the correction Even the best quote providers have their lapses and no matter how keen you are at updating your database errors will find their way in The only way to catch such an error is to look for it by comparing the last date in to the date that should be in as MetaStock does not have a current system date function you must provide it AlphOmega uses an indicator variable to screen securities that were not updated in the last download The use of this variable is coded to one exploration but could be added to any The requirement to use this variable is a daily update of AO GDate so that when the explorer is scanning it finds the correct last date to be validated The importance of accurate data is key to the trader and since you will spend time scanning your database the selected candidates should have the most current information You do not want to enter a trade one or more days after the rest of the market Here is a screenshot of it AlphOmeega Elliott Impulses 71 Explored 7003 11 27 Results Rejects Exploration Security Mame Long Longs HUL RUC Inspect ABAXIS 30004 0 0000 01014 028 ABB LTD ADR 50084 00000 0
30. a 2196 filter The percent filter relates to the minimum retracement from a peak or trough top or bottom expressed as the price change over the initial price price at the peak or trough A picture is worth a thousand words Fig 6 Now this is a lot better in terms of number of swings From this point on we will switch from a bar to a candlesticks presentation why might you say Because the open and close are hard to tell when the bars are squeezed together moreover the candlesticks patterns will be easier to see How can we use these waves to trade It is quite obvious that if we enter at the trough and sell at the peak we will do very well If everything was that simple alas look at the last bar can you tell it is the bottom or trough Of course no you can t tell and nor can 1 We need to wait for the price to start going up before we know we had a bottom This means that we need to allow for some slippage at both ends and already we can assume that some waves will not be big enough to leave us with a gain Is there a way to know from the start if the wave will be strong This is where Elliott comes to help us by differentiating impulses from corrections and additionally giving us patterns that repeat frequently during trends In Figure 3 we saw that a cycle was made of 8 waves wave 1 to wave C all the odd numbers are impulses hence 1 3 5 a and c while all the even numbers are corrections so 2 4 and b Most of you already concluded t
31. because the emphasis was put on symbols and highlights should be reserved to situations that you will monitor on an on and off basis Make sure that you turn on the feature you want to see by checking the box beside the feature name Turn them off by removing the checkmark just click on it You don t need the password to do this Fig 55 is a screenshot of the Highlights tab within the expert By checking the appropriate box we can personalize the display We can change the color of individual highlights We must be careful that we do not overload our chart with colors They are good signals as long as we can remember their significance Certain highlights names come in different sensitivities that are indicated as 896 f 13 m 21 n and 3496 s or fast moderate normal and slow Note that the order in which the highlights are listed is important the wave signals should always have precedence over other indicators If two highlights are activated during the same bar only the first one in the list will be displayed The highlights are very important for intraday trading Their signal is generated as the bar meets the conditions set It is the first warning we receive and it can make the difference between profit and loss or anticipating and reacting A tool that is equivalent to highlights is the expert alert that is also triggered at a bar meeting the conditions set The use of both should greatly enhance our day trading Failing Wave 4 3
32. become so proficient that we can skip this step Now look at our list and we need to select the best candidate not two or three just one We will need three rounds to do that First to help us in our selection we have indicators such as the RSI the Stochastic and Momentum and the ones we see at the bottom of our AlphOmega template screen Use them If the RSI is high over 70 it means the stock is overbought RSI can never pickup a top it just means the stock could be overbought But if we have a choice between an overbought and one between 50 and 70 we go for the lower RSI as long as it is not heading down Next look at the Elliott Oscillator it has to be above 0 not negative The higher the better Then look at volume if there is no volume increase in the past days at the onset of the wave there is nothing to sustain the price movement and eventually all will crumble So we need a little volume increase This should weed out quite a few candidates Ellio 0 29795 ip 20000 15000 10000 e M jm o n fa os A NN Ny ii Hr 5000 Lr T LLLA 1 x 10 AO P amp TD Wave nix 1 N LAS as 200 ehe eee bee rTP PP PRT PPP 1 Perr Pee fw be ee eee be eee A very important indicator is the Demand Index the thick red line above in the second figure The Demand In
33. c should begin soon orc Fig 33a The second chart shows the devastating reality the pattern is extremely bearish There will not be a c wave this pattern is a bearish impulse that will take us below the trough at wave 3 at 1 30 The possible support level for 3496 is at 0 75 Could we have seen this before There was a slim indication that something was cooking the previous 3496 impulse was wrong in that wave 3 was the shortest This is not acceptable in Elliott Waves It leaves us with two alternatives first the wave 3 is incomplete and the wave 4 is a temporary correction that will be followed by the end of the real wave 3 second the wave 3 is in fact a wave c and the bearish correcting pattern will end there This later alternative will be followed by a consolidation period that could exit either way up or down conclude saying check all triggers before jumping in or B This was wave a of an abc correction at the 21 ii sensitivity The pattern is now extremely bearish T iii TM UM M d EE GREEN 5 put se 2 ij Possible termination level for wave 5 at 34 sensitivity Fig 33b TIP The AlphOmega Elliott Waves Expert is providing you with a general commentary of the patterns detected on the active chart It will display the wave patterns for each sensitivity and when a new wave is confirmed for any sensitivity Please note that the wave count disclosed in the comm
34. date look back periods and acceleration factor Shown below is the ratchet at 34 note it does not disappear after a violation so it must be removed when no longer needed Exit where price is crossing the ATR line AO Auto Fib Fan This indicator will plot the Fibonacci fan price levels for the previous peak or trough of specified sensitivity It is automatic so when the wave of the selected sensitivity is over and confirmed it will switch direction thus always providing a Fibonacci fan at 38 296 50 and 61 8 of the slope iii i 2 4 0 th 35 i 1 4 a 3 0 2 0 AO Auto Fib Time P This indicator will plot the Fibonacci Cycles based on the previous peak or trough specified sensitivity on the price window Again the 38 2 50 61 8 and 100 ratios are used This indicator is intended for The Cycle refers to the large amplitude as indicated by the arrows g Gd en um 15 a Man ERE 10 petas o 2 4 05 hi 10000 I efe zai IA dL W ANT Ten Hi Wa WAAL 5000 SUI TN i Hinmaamni il ITI S 7 THAT ulta Ente 88 the price pane and should be displayed as a histogram using no scale so it floats freely AO Auto Gann Angles This indicator plots automatically the Gann angles for the specified sensitivity Here we selected the 3496 sensitivity and where the lines reach zero they become flat to avoid displaying
35. for Applied Fibonacci As explained earlier there are four orders of sensitivity or cycles All these sensitivities are nested so the smaller order starts counting from one at the beginning of a next higher order There is one exception which is when there has been a wave 5 it is usually followed by an ABC or ABCDE correction that spans the next order of sensitivity From version 5 7 the price projection takes in account a wave 3 shorter than wave 1 and followed by an extension of the 3 In this case the projection includes the combination of the 2 parts of wave 3 These flawed waves 3 are displayed in gray on your chart For all price and time projection indicators that are used in the AlphOmega Simple template there are corresponding indicators to be used in the AOi Simple template Actually the indicators are not template dependant they could be used wherever we see fit The templates are synchronized to a main sensitivity and anyone can change it or make a new one for a different sensitivity TIP There is a configurable tool bar from MetaStock amp where you can cast your most useful templates The AlphOmega Simple template should be made the default template if you use regularly Elliott Waves For those who trade intraday there is a template Simple that will provide proper settings and expert Please note that the two experts overlap on the fast wave sensitivity of 8 This has been done to provide continuity between the intraday pictur
36. in a system and test Our product is not an automatic profit making system The risk of loosing money is still very real no matter what technique we use We should use the system that will ride the waves we are interested in trading If we are a long term trader we go for high percentage sensitivity if we are a day trader we use an intraday system All intraday indicators systems are preceded with an i in the sensitivity description Running a test before making a trade decision will enable us to make sure the security behaves well with the selected sensitivity TIP Let me repeat a way of using the system tester to double check your analysis of a security Run the test using the optimizer function Open the result file and check which value gave the best return i e the highest profit or the lowest loss Then look at the chart using The Expert Advisor wave sensitivity that is the closest to the value you just identified This takes in account the current volatility of the security as well as the historical one You can observe whether this is a new pattern or if it is a recurring one It can also indicate that you should not trade such unpredictable security if the return was made on one big transaction instead of several small positive ones Common sense is always your best counsellor and if you can t understand what is going on with the price then you should pass 51 Enhanced System Tester Test View Simulation 178 Options 4 Pri
37. lines for Fibonacci and Gann Cycles Simplification of date input using the yyyymmdd format There is an improvement of the exploration for Wolf Wave with its corresponding indicator and in the expert Most of these changes take advantage of the extra space allowed in formulas by the latest version of MetaStock 8 0 If you did not migrate to the 8 0 version you will not be able to use this revision MetaStock has changed the way the files are saved so that you can read old version but the new version cannot be read by 7 2 or before This is very unfortunate and this issue occurs for the third time in a row with Equis will maintain both version alive but obviously it would be foolish not to take the enhancements of the latest for the benefit of users Helease 4 3 Comments Completed the integration of recognizing a small wave 3 and other erratic patterns and adjusted the price and time projections accordingly Created symbols to account for a converging triangle with letters c d and e Introduced continuity between the Low Volatility Expert and the Elliott Waves 6 0 Expert The addition of overlapping sensitivity provides an anchor point from one screen to the other This version will display more accurately in high volatility periods A thorough cleanup has been performed in the indicators systems explorations and experts Only those related to the use of Elliott Waves have been kept For those who would prefer to keep them just send a note Hele
38. lowest percentage is the smallest wave pattern and the highest percentage is the largest wave pattern When we get too many waves or signals we move to a higher percentage of sensitivity and the reverse when we don t get enough waves or signals we move to a lower percentage of sensitivity Triggers A trigger is the bar where the price has retraced the set percentage of sensitivity or more From that point a wave is confirmed and it will end when the price crosses a trigger in the opposite direction Triggers are confirmation signals and can be used as entry or exit signals This is the slowest but the most reliable signal we will get from the system in Elliott Waves as far as waves are concerned Other signals like trend lines and moving averages are not wave specific There are faster signals that are wave specific such as the price and time projections Elliott oscillator when adjusted for the wave sensitivity monitored and AO Trig that will give you the price to be reached for a confirmation Trigger is the most important concept in this set of Elliott wave s tools The chosen method to display this important signal is the expert highlights that colors the elected bar with a user specified color We did not use a symbol like for the wave labels because it would conflict with some of the smaller wave labels a 5 0 aso 144 days dis Teu rA 4 0 DET 1 Moderate Trigger 4 d M Ite J Lam a 35 a 222774
39. make yourself a template for the semi log scale so that when required you just open it Another alternative is to right click on the scale and select semi log If you move to another security without changing back the scale the previous security will open in semi log for the next session while the next one in this session will open with normal scale For this reason we opted to stay with the normal scale while we are aware that the semi logarithmic is preferable While we could add a template it would be difficult to manage the number of icons you want to display as well as how many you can remember So you have the option and it is easy to do Indicators Using Date amp Time Input All the indicators requiring date input have been standardized to accept the date and time in the following format First the year 2003 Second the month so March as 3 Third the day of the month as 01 to 31 so 09 Fourth the hour as 09 If not applicable you must fill with 00 Fifth the minutes as 30 Note the decimal point before the minutes If not applicable do not fill Es Fig 14 Although it is not standard this simple way of entering the date and time will allow you to use the dates in calculations where you need to compare which is the biggest or the smallest when should a display begin and many more applications MetaStock as we all know does not provide date functions other than separate indicators for Year Month and Day of Month wh
40. move It means closer monitoring of our trades and a good discipline to stick to the original plan and dump the trade when it heads the wrong way even if we believe it will come back on stream Incidence of a cycle over a smaller one sometimes you will see a pattern where it seems for example that a correction is taking place for the 1396 sensitivity You will be tempted to estimate the reversal point to jump in the next 13 impulse Before you do that check that the previous impulse was only a confirmed 13 in other words not an unconfirmed 2196 that has not yet retraced enough It is good practise to know all the triggers that could become confirmed by the end of the correction Let s say the price was 10 at the foot of a bullish impulse it climbs to 14 to then drop to 12 14 At this point you have a confirmed 1396 impulse wave because the price has retraced a bit more than 1396 from 14 In fact it could move sideways for a time so you would believe that another impulse of 1396 is building up then the price could drop again by 2 triggering a confirmation of a 2196 wave for the previous impulse This correction is not finished yet and you are in a trade that is counter trend Our first assumption was wrong we should have seen that a 4 impulse is 4096 of the initial price hence there are two sensitivities above our 13 the 2196 and the 3496 that have not been as ended In such a case you should wait for the price to climb above the peak of t
41. negative values that would compress the rest of the chart or A or B e ii 2 2 4 1 2 1 1 A ipm iv I aU Feo at an nec TL cot Hae 2 a i 1 2 i 2 d t To visualize the starting point and the accuracy you can superpose Gann Angles from Equis over AlphOmega Here is an example or A or B 4 I 3 ii 1 2 poe iv 4 DER 1 1 _ 02 or 1 Note that the useless information is automatically discarded that is only the angles containing the pattern are displayed Once the pattern moves out of the Equis middle projection it becomes another pattern 89 AO Auto Cycles This indicator plots the Gann Cycles for the specified sensitivity on the price window There is a selection of angle set 30 or 457 it drives the o ther angles to be displayed As the previous one set alike the display The Gann Cycle refers the large amplitude az indicated by the arrows 4 0 1 0 0 5 10000 5000 M MEDIE tlU mm mber jOctber November December _ 2003 Februay March AO Auto Gann Fan This indicator displays the Gann angles based on the trend for the selected sensitivity It needs 90 three swing points the origin is the oldest point and the angles divide the distance between the other two points dividing in eights Only the most conservative angles are shown no more than
42. short Unless you set up your system to accept more than one trade per bar you will miss signals and the results will be wrong AlphOmega systems use a common signal for in and out so be careful on how you use them The systems are not optimized for a market or price range other than the sensitivity base so if a high sensitivity is used on a non volatile market like indices there will be no trade The reverse is also true for you will get too many trades A new system test AlghOmega Elliott Impulses 21 has been introduced This system will give a signal for all impulses as soon as the price retracement is attained It will exit in correction moves The signals between The Explorer and the Enhanced System Tester do not always match as they are two different modules and the space allowed for formulas differs to overcome this problem the formulas were moved in the Indicator Builder and are accessed from the two modules yielding the same results The drawback is minimal in the tester as it measures in milliseconds of execution it is more noticeable in the exploration For this reason the change is limited to the new exploration AlphOmega Elliott Impulses 21 DF and this system test A complete summary is proposed on the next page Fig 52 All system tests will produce these reports and it is worth our time to scrutinize them before we blow our horn about a trading system Optimization should never be used to evaluate 52 the tradi
43. that are available so you will know if there are four or five projections available and what wave are measured For example if you see W19 it refers to wave 1 to price movement The sum of all but keeping in mind the direction of the move measured AO Time Projection W2 AO Time Projection W3 AO Time Projection W4 AO Time Projection W5 and AO Time Projection WC These indicators are similar to the Price Projection above They work the same way with the same inputs What they will plot is a solid line at the number of bars the wave is expected to end Used against the bar chart of bars since the wave started it will suit your needs to know when You can select the data array for the waves to align your indicator to the expert used AO TW2 All AO TW3 Sens AO TW4 All Sens AO TW5 All Sens All Sens and L for all These indicators are the wave definitions for time projections They are similar to the PW series above and provide information on time duration to other indicators The variables are T1 and represent time projection that can be used like the price projection above The W1 are expressed in bar move instead of price AO Vertical Line Used to display a vertical line on the chart Plot as no scale and as a histogram in Price window Useful to point to a particular bar on the chart like an entry date or the extremes of a cycle it will plot for the date you will input 83
44. the price is between the 2 solid lines when it penetrates the dark red or it is always close to the dotted dark red it has lost too much momentum to stay with the trade The bars until the trigger shows are not meaningful we can discount them When we apply this indicator all the lines are identical in color and style to sort them out we should assign colors and style similar to the above picture To do this select with the cursor the first straight section of a line that is the furthest away from the price use the dotted style and dark red for the color Then pick the next straight section closer to the price select dotted style and dark green for color Within the same wave pick the line that is closest to the one we just set make it dark red and select a thicker line set Finally we complete with the last line to make it dark green and thicker 7 There are indicators that are similar to those used by Advanced Get such as XTL Ag which will indicate trend extension in the expert under the Highlights tab AO PTI that provides a probability of a wave 4 to be followed by wave 5 AO 4 TRC that displays limits for the retracement of a wave 4 All are on a template named AlphOmega Aget The template AOi Aget is similar but with the corresponding intra day indicators What is special with those 2 templates is that they are set to trade Tom Joseph T1 and T2 setups as detailed in the annex at the end of this book The indicators are named partially
45. things are falling apart this trek is in a real market where only perceptions drive the price So we need to adjust to changing conditions and how they affect our analysis and wave counting Throughout this book we will use real market examples and we will avoid textbook examples because we will seldom meet them in real life Back to patterns what kind of patterns will we see in the market Typically patterns are sorted between impulse zigzags flats triangles diagonals extensions and truncations Except for the first two most of these patterns occur during corrections The basic Elliott cycle is made of two patterns the impulse for the first 5 waves and a zigzag for the last 3 waves As we will endeavour trading impulses we will brush rapidly over them an impulse usually follows a correction hence the need to recognize them As the impulse pattern is the one we have discussed since the start we will go to the next one Zigzags The zigzag is made of 2 impulse waves separated by a corrective wave and the whole pattern takes the price further in the direction of the trend Flats Flats are like a zigzag but do not really move the price further in the direction of the trend After the first wave the correction will retrace most of the wave and the third wave will just get back to the level of the first wave Triangles Triangles are made of 5 waves where each wave is smaller than the preceding There are many types of triangles as
46. to the chart We do this by either changing template using AlphOmega Simple or by clicking on the Expert Advisor selecting the NV or HV expert click on attach and close the expert dialog box Another possibility that the sensitivity is not great enough if we are trading say futures or commodities then we would have another option that is to call the expert designed for that type of trading This expert is extremely sensitive it will detect waves using a sensitivity of 0 396 one of 0 696 one of 1 and the last one being 1 6 We could also use it on intra day securities that have relatively low volatility because as mentioned above it does not care where it is used only the percentage of change in price matters If you find that when using a template it takes longer to display properly your chart you can switch to an Expert that uses fewer calculations to refresh the screen AlphOmega Elliott Waves Impulse Signals is such an expert It will only display entry and exit arrows no wave count After reviewing a chart with the template expert you can change the expert to lighten the calculation workload of your chart See the example below Fig 11a 14 Tuam Du EP sa e rs TP J i EEI coa EET TETTE 49 48 47 4b 45 44 43 42 41 40 39 38 af 3B 35 34 33 32 31 30 24 20
47. to the latest price bar in the active chart It is a part of the AlphOmega templates These commentaries are not a substitute for due diligence on the selected security but provide basic information for the specific pattern being detected If no special pattern is detected you will nevertheless read about the common indicators such as RSI and RMI or STORSI The waves for all related sensitivities will be posted For special patterns such as Inside Day Narrow Range or a new wave being confirmed we will see an appropriate commentary disclosing the pattern and its meaning These will appear only when the conditions are met It is possible to see the commentary for an older bar by moving to the left the commentary pointer upside down black triangle There are eight Experts we can use The first one is the normal volatility for normal stocks and is loaded when we call the AlphOmega Simple template If the security we are watching is of low volatility indices or intraday quotes we will select the low volatility Expert that is loaded normally with the AlphOmega iSimple template With this later template we will have the adapted indicators Usually i indicators that will monitor properly the prices When volatility picks up we can switch back to the normal volatility one To provide some continuity between the two Experts a common cycle is monitored so we can find the same wave numbers from one Expert to the other with that sensitivity The highest sensiti
48. various triangular patterns They are also part of what we call corrective patterns Below are a few examples Dropping 4 Flat n5 Fig 61 There are many more such as contracting or symmetrical expanding and diagonal The main thing is that the trend resumes after the completion of the pattern The numbers will never appear as in the sketch above for the simple reason that these patterns do not respect the rules we have set in the expert With the knowledge provided we can follow the formation of the triangle and position ourselves accordingly to ride the exit trend As mentioned earlier the AO Triangle indicator will detect triangles that have reached at least point 4 Trade either the 5 wave or the breakout of the triangle Triangles AlphOmega has its own triangle pattern indicators Based on the Elliott Waves methodology it will detect converging or diverging triangles of various sensitivities display the whole triangle at its fourth peak or trough Coupled with these indicators is a twin that will display a triangle from the date we select if the date matches the fourth point of a triangular pattern Converging triangles are named as such because the two lines peak to peak and trough to trough are going to cross at some point in the future To trade such patterns involves more skill than trending patterns the triangle pattern usually takes place during a consolidation period Because the lines are getting clos
49. we will see only dots if the start bar is the last one on the chart as bars are added the lines will lengthen and display normally In the top inner window we can see the Wave Time Projection 21 for wave iii This indicator requires more explanations as it deals with bars that will appear in the future and MetaStock will only display bars for which it has price data To overcome this problem we have reversed the time scale on the price window the time runs from left to right each period adding a bar on the right side In the inner window for time top of the screen for each period we display a vertical bar that grows higher from one bar to the other the height of the bar represents the total number of bars since the start of the wave here the wave at 2196 sensitivity Doing this reversal allows us to display projections at the height corresponding to the different bar numbers we expect the wave to possibly end See chart below 21 Scale to the right shows 55 BVA the total 50 VM aA on 40 30 Horizontal 25 NAT lines show 20 T_T possible 15 Fe reversal at f Mull MU eS 5 e f IN Cumulative number of bars since start of wave Fig 19 Generally time projections are less accurate than price projections so when the two agree the price is close to a price projection line an
50. well as the zigzag for the selected sensitivity The red line is the resistance or support while the green line is the zigzag or A e m 1 li 2 i gt iv A F T Oars med I ag en ee id oe rele on Se 2 2 1 3 a 1 2 i eS __ 101 Gap Resistance This indicator will plot the resistance level based on the latest gap The concept is that until a gap is filled it is likely to be a resistance or a support Depending on the type of gap some will close rapidly while others will take a long time Exhaustion gaps always close fast while runaway gaps tend to remain open longer I WD h n E oo i Fr j AO GDate This indicator will store the current date information to be used by The Explorer This information must be entered daily by the user This global variable cannot be used for intraday only for end of day databases The indicator does not appear in the Indicator Display list the update is through the Indicator Builder list AO GSe This indicator will store the edited sensitivity to be used by The Expert Advisor and The Explorer This information must be entered by the user This global variable can be used for intraday or end of day databases The indicator appears in the Indicator Display list the update must be through the Indicator Builder list AO HiLo Chan
51. window In addition you can pick a type 1 Expanded Fib 2 Phi Fib and 3 Fibonacci This indicator must be set as a histogram without a scale in the price pane 04 2 WI f NES fi 2003 February March 95 Fib Time at Date T This indicator will plot the Fibonacci time projection for a selected sensitivity and from a specified date on the time window You can pick the style as the previous but it is applied to the duration pane on the bars representing time When the gray bars touch the red lines you have a possible reversal Time projections are not as accurate and do not rank over price projections Per a oS A ma AE 227 al LH TT ET ET SEE i Sensitivity ii fear in format yvey 2003 MontheD ay Time Bar in format rirmaddbhh rmm 10700 Input units per bar 1 Input maximum bars per unit 16 dr dk gt d d Display U all ar 1 ta 3 AO Gann Eights Angles This indicator will plot the Gann angles from a specified date and sensitivity splitting in eights the difference between the last peak and trough AO Gann Angles uses a traditional approach with days and units The input parameters can be seen above It is possible to plot any combination of units per bar and bars per unit This refers to the geometrical representation of the Gann angles Some combinations are more important the 1X16 1X8 and 1X4 are among them
52. you in selecting the right price projection indicator for your target assessment The trend indicator and the corner indicator will provide the same information as the normal volatility expert The symbols used are more explicit and they provide sensitivity level The symbols are Long entry L21 Long exit x21 Short entry S21 Short exit c21 The 21 refers to the sensitivity level 2196 and it varies according to the symbols you have selected 61 The expert AlohOmega Elliott Waves 1 Swing is another quick trading expert and the use is rather simple It is based on a 196 price retracement which is a very sensitive level The screenshot shows a displaced moving average that could be used to exit a trade although it is not the way the expert swings It will enter and exit trades based on 196 Elliott impulse waves Chart Aastrom Bi Biosciences Inc 1 16670 ASTM SEE Ps ACA palate WA ae Sat LEITET PALL Titi PRSE T LIE EG I LET EFE LB EE E eA Sell Sell Aw 79 i ty m Seu pir i i Phi i J Buy ag Buy 1 Tt Buy di dial CNM VAN TUA OS A EH nnd iibri nid Ern pe m DEELLLLLALLLLLLLLLLLLLLLELELZZG 5 March April June August September October November e SD 400 EH Fig 58c Note that the arrows appear one bar later than shown The expert AlphOmega Elliott W
53. 016 0 0000 0 0005 0 0006 0 0019 61 9045 46 1539 bB BBB 16 6667 62 5000 0 0000 20 9714 50 0000 H A 37 0370 13 0021 6 0013 2 0005 1 0006 10 0016 0 0000 2 0007 4 0006 10 0027 100 0000 0 0000 100 0000 0 0000 66 666 0 0000 0 0000 fo 0000 MA 75 0000 4 0004 0 0000 1 0001 0 0001 2 0005 0 0000 0 0000 3 0004 3 0004 ABN AMEX ABI CE Me ACH LEND ACD AACE ACE ACE C ALTL 0 0000 0 0000 0 0000 0 0000 0 0000 BuySell ye Close Vendor Vendor Symbol DIIM Fig 48g 1 impulses 13 by Wave Explored 10 73 2004 Results Rejects Exploration wl WSR WB wb WEGA 2 Bar 0 0000 0 0000 0 0000 0 0000 0 0000 0 0000 0 0000 0 0000 3 0769 1 0035 0 0022 0 0019 0 0014 0 0025 0 0094 0 0009 0 0065 0 0014 2 0065 50 0000 55 5217 65 5172 42 1053 54 1667 44 6505 37 5000 43 4711 40 2439 66 666 25 0050 13 0023 19 0029 2 0019 13 0024 21 0047 3 0006 33 0076 12 0018 33 0082 6 0009 B3 3333 100 0000 0 0000 66 666 B3 3333 B3 3333 100 0000 50 9909 0 0000 79 3339 5 0006 3 0003 0 0003 2 0005 5 0006 5 0006 2 0002 0 0000 11 0015 1 0002 Ticker 1 AMES AEP Symbol DIM BuySell ye Close Vendor Vendor gt Fig 48h Chapter 9 oystems A word of caution about systems This feature is there to help us
54. 3200 vendor Vendor v Fig 48b AlphOmega Pitchfork Medians Explored 10 05 7004 Results E ejects ploration Median li OE 52686 30692 r d 3293 4 2320 16 6837 20 9999 6 2954 1 1322 Pr 590 Symbol EDMS BuySell Vendor lt No Vendor Fig 48c AlphOmega wave Points 3 This exploration provides entry signals for waves measured in points retracement rather than percent We have used three as an example This is very useful in trading ranges and consolidation periods As customary all columns are used to provide as much information as possible so a decision can be made without having to run another exploration 46 Alph mega Wave Points 3 Explored 10 30 2004 Results Rejects Exploration Bullin Bear In Close CumPrit Pit Bars Ticker A p AG SEE 96 9700 22800 z4 6500 853 3000 5 0 mmm 45 5600 17 6700 i 24 1000 0 0000 45 6900 LOBO Symbol LEND BuySell Vendor lt No Vendor Fig 48d AOi Elliott Waves 1 Swing Similar to all trade signal explorations this one scans for entry signals long or short The first column is not shown but it displays 1 or 1 and the decimal part shows the number of bars since entry One can actually follow a trade or spot the missed ones AQI Elliott Waves 1 swing Explored 11 04 7004 Results Rejects Exploration Entry Close ROC Volume Stop Ticker Sy 45 DEDO poi
55. 4 Another parameter is the choice of using the close or the high and low AO Auto Timeframe R amp S and AO Timeframe R amp S This indicator computes the resistance and support levels from a said timeframe in a chart using a different time frame You can compute monthly weekly or daily r amp s for these timeframes Here a monthly resistance and support level is shown in a daily timeframe The indicator picks the highest high and the lowest low of the selected timeframe For example it has picked the highest high of the previous month and displays in the current month week or day 1 7 1 5 1 5 1 4 1 3 1 2 11 1 0 0 9 0 8 0 7 0 6 0 5 0 4 0 3 0 2 0 1 or A 0 17 1 5 1 5 1 4 1 3 1 2 1 1 1 0 0 9 0 8 0 7 0 6 Current versus continuous version 91 AO Auto Timeframe MA and Timeframe MA This indicator computes the moving average from a said timeframe in a chart using a different time frame You can compute monthly weekly or daily moving averages for these timeframes Here a monthly moving average is shown in a daily timeframe the brown thick line The indicator picks the close of each bar of the selected timeframe and computes the moving average for the selected number of periods with the selected type simple or exponential For example it has picked the close of the previous month and displays an exponential line that bridges it to the second previous month in the current month week or day fe Chart2
56. 43 Wave 4 21 Fig 56 Wave 4 1 3 Failing Wave 4 85 Above is a list of the alerts available on most experts AS we can see only one xInside Day Alerty alert is activated and it is the failing wave 4 A failing wave 4 has retraced too Isolated High deeply to be followed by a wave 5 It usually becomes a counter trend wave Isalated Low 1 This prevents us from getting too early in what we could mistake for a wave Triangle Consolidation Alerts 5 while it would only be a wave 2 of the counter trend new trend wolfe ave 212 Difference between Intra Day and End of Day All that was said for daily weekly or monthly charts applies to intraday as well The difference lies with two aspects 1 A lower volatility than the other time frames 2 Hours and minutes added to the timeframe reference The lower volatility concerns indices and futures even in daily timeframe so the intraday set can be used to monitor them To capture waves in a context of low volatility we use a lower percentage retracement We must be careful that the sensitivities used can nest properly into each other this is accomplished by keeping in stride with the Fibonacci number sequence Then it is a matter of selecting the expert that is the most appropriate for the selected security While we will capture most of the larger timeframes with the daily set the stronger moves or spurs of volatility will not be captured by the intra
57. 5519 000 Open Chart ABBOTT LABS 30164 00000 0 1068 017 ABERCROMFITCH 5 0100 00000 00732 004 m ABLEST 10144 00000 3 0 1869 0 06 ACMOOREARTS 0 0034 1 0006 0 1660 000 ACCENTURE 10147 00000 04963 0 02 Print ACCREDOHEALTH 1 0147 00000 1 0959 0 02 ACTIVE POWER 2 0023 10003 3 0 0097 007 Save List ACTIVISION 1 0062 00000 0 1645 011 ACXIOM 0 1624 0 054 js Symbol Buy Sell Vendor zMa Vendor Fig 34a AlphOmega Elliott Impulses 21 DF will scan the database for bullish or bearish impulses just like some of the other explorations except that it will select only securities updated to the date value you entered The asterisk is to remind you to update the global variable in AO GDate before you run the exploration Signal Explorations There is a special exploration labelled AlohOmega Signal Scan It will show all the waves in 3 timeframes We sacrifice some of the information such as the fast sensitivity but we get an overall look It will take longer to run and will show some N A where the function is not yet defined for the sensitivity or there is no pattern for that sensitivity For comparative purpose it runs 30 minutes for 5 000 securities with a 950 megahertz processor While these explorations are rather lengthy and will take some time to run on our machine don t forget it is looking at a lot of records and it does all the screening we would normally do The outpu
58. 66 Rising N N s NY N C Flat N Fig 63 As we can see if the impulsions peak at exactly the same resistance level or troughs at the same support level the count is correct Otherwise the count is flawed and we will have waves 1 and 2 followed by a gray wave 3 or a Y 2 C Flat 1 Flat Ascending Rising 2 1 2 Dropping Dropping Descending C Flat n 1 Flat E Fig 64 The pattern above is different and have encountered it more often than the previous pattern The important thing to remember about them is that they usually exit the triangle in the same direction that they entered The analysis of triangles is difficult because the confusion with other valid patterns can lead us into different conclusions and we will know the true one only when it is completed There is still a triangular pattern we have not dealt with the broadening or diverging triangle It is very rare and you would get a bunch of alternating red and green waves 1 More on Interpretation of Labels There are many instances where the wave count will give us an indication of anomaly in the pattern There are two types of warnings built in the expert The first type deals with a wave 3 that is shorter than wave 1 and could become the shortest of the pattern This is against an Elliott fundamental rule and there are good reasons for such rules to exist There are exc
59. 800 22 9000 14 1000 1 5000 34 3900 a a 22 9900 15 5100 9 2400 1 2000 5 9400 140 1500 21 9000 11 5600 0 5200 33 9800 7 9500 22 5000 Frft 2 FE Ticl 0 9430 Fig 40 AlphOmega Elliott Waves X96 is the base exploration as it produce the wave count for all waves corrective and impulsive for all securities at all prices The report columns provide 2 wave counts the highest being the preferred count and the lowest being the alternate count if the wave fails The alternate is dropped as soon as the wave confirmation signal is given In addition the report columns give the stop loss and the entry price Bear 1 0012 B OUT 2 Bull Sto 14 0000 Bear Sto Bull In 14 0000 Bearln A 20 1000 e 5100 19 9100 20 2100 22 FB 25 6800 20 8000 14 2500 16 8000 Fig 41 AO EW T1 is a setup exploration to detect wave 4 that has a PTI of 35 or more and that has moved into the Trend Range Channel The report columns display in the integer portion a 4 for bull or bear patterns The fractional part is the number of bars since the confirmation signal of the wave Shown also is the Elliott Oscillator value the PTI Profit Taking Index the deepest channel line W4 TRC and the last closing price Bull Bre FT 4 0014 Wa TAC Close Ticker Su 10 4186 10 7800 APOG 63 0000 44 0000 92 0000 39 0000 57 0000 ag 000 ab 0000 35 0000 5 0000 amp 3 0000 F
60. B 3 Gh Onaga Coll Waves 5 7 For MetaStock 9 1 and MetaStock Pro 9 1 and higher User s Manual All Rights Reserved Copyright 2003 Welcome to AlphOmega Elliott Waves This set will display Elliott waves count price projections and time projections The wave count is calculated from individual wave definitions their relationship in size or time and a specific hierarchy The wave count is intended as a basis for analysis and does not pretend to be an end in itself or exhaustive Interpretation is always necessary when dealing with Elliott waves but the basic rules are strictly enforced within the set The purpose of this manual is not to teach in depth theory of Elliott Waves or the use of MetaStock software but to give you directions on how to use the tools provided in The Expert Advisor Indicators System and Explorations you have just purchased From the Web site http AlphOmegaEW com you can run Viewlets that will show you how to perform the most important tasks A simple way to understand the set is to go through the various templates of the set and the screens you can create This booklet was made short so you can read through it in less than a couple of hours so please take the time for your own benefit You will get a deeper understanding as you use the set of Experts Indicators Systems and Explorations For information on the theory of Elliott Waves an adaress is provided on page 60 All screenshots in this manual
61. Sens L1 to L4 AO Week Support and Resistance AO Weekly Histogram AO Wolf Five AO WolfWave and L MetaStock for Windows Systems AO Elliott ind AO Elliott Impulses 2196 AO Elliott Impulses L3 AO Elliott Waves Fast 8 AO Elliott Waves Moderate 13 AO Elliott Waves Normal 21 AO Elliott Waves Normal L3 AO Elliott Waves Normal EMA AO Elliott Waves w Opt AO WolfWave at Date AO ZZ all4 AO ZZ Points AO Elliott WolfWave AO TSI AOi Elliott Waves iFast 1 AOi Elliott Waves iFast 1 with DMA exit Elliott Waves iNormal 396 AOi Elliott Waves iSlow 5 AOi Elliott Waves w Opt for i AOi Elliott Waves w Opt for i with DMA exit 110 Rules 1 Trade Buying at the end of a Fourth Wave retracement This material is an abstract from T Joseph of Trading Techniques Inc 1998 Once a Wave Four is confirmed look for the following conditions Look for the Elliott Oscillator to pull back to or below the zero line Il Once the oscillator pulls back to zero check to see if the prices have retraced at least 38 of the previous Wave Three and less than 62 Ill At this time the PTI must be above 35 The PTI is an indicator that computes a probability for a Wave Five When the PTI drops below 35 the probability for a Wave Five rally is greatly reduced In addition it also increases the possibility for a Fifth Wave failure PTI is at 78 5 Oscillator has pulled back belo
62. W T1 AOi EW T2 AOi Impulses iGT 396 AOi Normal 3 I AOi Signal Scan 108 MetaStock for Windows Indicators AlphOmega Absolute Elliott AlphOmega ADI AlphOmega Auto Trendline AlphOmega Auto Trendline i f and L AlphOmega Auto WLR AlphOmega Bars since Signal AlphOmega Consolidation Triangle and L AlphOmega Dl Storsi Trend AlphOmega Gann Price AlphOmega Highlighter 0 396 to 14496 L1 to L4 AlphOmega Pitchfork AlphOmega RSI RMI Trend AlphOmega Similarity of a Wave AlphOmega Trend Resistance AlphOmega Trend Support AlphOmega Weekly Pivot Point AO Trig AO ATR Ratchet AO Auto Fib Fan AO Auto Fib Time P AO Auto Gann Angles AO Auto Gann Cycles P AO Auto Gann Fan AO Auto Timeframe MA AO Auto Timeframe R amp S AO Bear ID AO Bull ID AO DMA AO Elliot Oscillator AO Elliott Channels W3W4 AO Elliott Channels W5 AO Elliott W5 Target AO EWI Le 21 and L3 AO EWI Lx 2196 and L3 AO EWI Se 2196 and L3 AO EWI Sx 2196 and L3 AO Fib Fan AO Fib Price at Date AO Fib Res amp Sup at Date AO Fib Time at Date P AO Fib Time at Date T AO Gann Angles at Date AO Gann Cycles from Date P AO Gann Eights Angles AO Gann Eights Price AO Gann Eights Time P AO Gann Eights Time T AO Gann Fan at Date AO Gann Range AO Gann Res amp Sup AO Gann Sar degrees AO Gann Squares AO Gann Swing AO Gann Weekly RS AO Gap Resistance AO GDate AO GSe AO HiLo Channel AO ID All Sens L1 t
63. a new pattern hence the previous wave should have been a wave 1 and the current wave is a 2 This is shown on the above chart in the blue ellipse It will not amend the previous wave count only the current wave There are two reasons for not changing the count first the count could still be correct if the next wave also fails and the price resumes the initial pattern the second reason is that the label describes properly the situation at that bar with the information that was available at that time Failures can be identified and observed throughout the chart Sometimes we will have a quick double reversal and then the expert will display dots so our screen is not cluttered with meaningless symbols What we must know is that at all times we can find out the name of a symbol especially those we don t know by putting our mouse on it We also can turn off this feature and put back numbers instead of dots edit the symbol tab of the expert and uncheck for the desired sensitivities all Wave 2 t boxes There is one instance where the label could be replaced after the fact when a larger sensitivity pattern is recognized its label will cover the smaller wave and reset its counter to zero after that bar An example is shown in the green ellipse of Fig 58 In this case a 5 was shown until the wave ran over the 13 trigger used for its sensitivity It does not invalidate the previous count it only confirms a stronger move completing at the same bar This app
64. all the profit that could spring from the wave but it will give us what we have targeted The risk is still that the price will not reach our selected turn point and reverses direction An alternate way to the price projection would be to sell once our profit target is reached even if it is before the marked turn point For example a fixed percentage profit 3 The third is the most speculative in that we base both entry and exit on projections of peak and trough In this case once a turn has taken place at the projected level we enter immediately with the appropriate stop even though the signal has not been generated We exit again based on the projection as soon as the price seems to turn at the expected level Because there are many levels at which the price can turn around we take the risk of picking the wrong one for entry we will then be taken out by our stop If we picked the wrong one for exit we will miss on some of the profit Popular software Advanced Get uses two set ups called Type 1 and 2 For our convenience these set ups were coded in MetaStock with the creation of appropriate indicators generating signals similar to AdvanceGet Their indicators are proprietary Explorations were also written to take advantage of those set ups Generally the use of stops once the price is moving along the line will protect some of the accumulated wealth On the other hand it may kick us out of a position that has not reached its peak or trough ye
65. an it looks it means the first impulse is made of 5 waves the next correction is made of 3 waves and so on so forth Patterns are not always orderly as in the basic Elliott cycle when the market starts consolidating usually after a strong correction of the trend triangle patterns will take place Waves can also fail or change dramatically their range of volatility When this happens we get erratic wave counts and the trend is almost flat Fig 7 The above chart displays many patterns and cycles most embedded in a larger cycle Remembering that the circled numbers are the largest cycle we look at the red circled 5 This is the point where wave 5 of 3496 sensitivity ended it is the end of the bearish pattern and a large correction starts It is so strong that after the wave A or 1 wave B is over within a few bars We will use bars rather than days because the scale could be months weeks days or minutes as in intra day Within the A wave we have smaller patterns in roman numbers within those even smaller in bracketed numbers and lastly the smallest pattern in plain numbers As we said before patterns are not always perfect our first note of this is within the wave A where the roman pattern is a 3 wave pattern Normally an impulse is made of 5 sub waves in corrective patterns the smaller patterns adjust poorly because of the rapid change in volatility that makes the filter inadequate So here we are at the beginning of this trek and already
66. apacity Going to a larger timeframe like 2 minute to 5 minute will improve the situation as MetaStock will recalculate a bit less Performance is a matter of available RAM graphic card and processor speed as well as data line speed The last four experts fill needs that address a different concern than sensitivity AlpghOmega Elliott Waves 196 Swing and AlphOmega Elliott Waves Impulses are system like expert that will display a signal for trading Because they are lighter in coding they will not slow down the screen something that is a nuisance when looking at intraday charts The signal that is displayed may at times appear one bar later than where it is shown This is a known behavior but it is preferable to display the signal that way rather than matching the bar of entry If the signal is displayed on the bar of entry it will appear at the completion of the bar and one bar of the trade will be lost in addition to getting a delayed signal AlpghOmega Elliott Waves Points is an expert that displays entry and exit signals using points retracement instead of percentage retracement It is useful with securities that are consolidating or trading in a narrow range The last one would be a conventional volatility expert if it was not for the use of a global variable for sensitivity A global variable was created as an indicator that we edit and where we input the base percent retracement and the step between the four sensitivities monitored This expert is ve
67. aptured by the filter since we see the wave numbers at the major turn points Could the price move in between the filtered and numbered waves change our count for the pattern If we look at the patterns within each filtered wave we can see that Elliott patterns of 3 and 5 are present this is what we would expect otherwise the filter would cut through the pattern leaving us with an incoherent count As an example just take a look at the blue ellipse that shows a nice 5 wave pattern Sometimes a wave will have 7 or 9 legs which cannot form a combination of 3 and 5 the extra leg is an extension of the wave due to the volatility acceleration where an x wave appears in the count In conclusion we can safely assume that the filter does not miss a wave it will filler out the lesser degree wave patterns The red zigzag line is the indicator AO ZZ and can be adjusted for the desired sensitivity ocreen Layouts Using the Simple Screen From AlphOmega Simple and AOi Simple Templates Let s use an example to start an Elliott Waves candidate analysis Assume that from the exploration of the previous day came a signal that a wave lll of moderate sensitivity was afoot for AAR Opening the chart right from the exploration window we can see that the signal is very early due to the volatility of the price Looking at the volume indicator we get a confirmation that the security is trading more heavily than usual Even the 50 day average volume is up The outlook is be
68. are unedited except for annotations hence offering a true picture of the set s displays the data is from the market and has not been manipulated Introduction Set up First let s make sure you have correctly set up your set of Experts Indicators Systems and Explorations From MetaStock amp 7 2 and up the import is done automatically Open a chart and right click to select a template Use the AlphOmega Simple template Elliott Waves that should contain in addition to the price and volume data the following indicators gt AO P amp T Duration in gray and Wave Time Projection for 21 Normal in red AOSTORSIin green and Demand Index in red gt Exponential Moving Averages on Close for 13 55 and 144 days in green dark yellow and red gt AlphOmega Elliott Waves NV Expert gt Indicator set up for 21 Normal in dotted red lines gt AlohOmega Wave Highlighter already set up for 21 Normal in red gt AlphOmega Auto Trendline for 21 Normal in blue AO Elliott Oscillator in gray gt AlphOmega RSI RMI Trend RSI Close 14 in magenta Dynamic Momentum Index in blue and Trendline in green and Relative Momentum Index 20 5 in red Volume Moving Average 50 E in dark yellow Note that an asterisk indicates the indicators that may be verified for proper parameters set up in the provided template MetaStock imports with default set up but it is rarely a problem Y The first two are in the top inner window w
69. arish per the red bear at the right bottom of the chart The Elliott Oscillator that is located in the volume window is still bearish the gray bars being below zero 12 adest 5n fl M ad Ss t 18 L J ims m c E ME E ot wi i i i f 5 ee b a a i pee p Always watch the volume activity to confirm your readings The red line below is the Highlighter B T 5 4 3 2 1 0 Sac ls hH IIR itid iH iil UN TT December 2002 February March April May Jung M m ma m amm Fig 11 Now looking at the top of the chart we see three indicators in the same window The red line is the Demand Index that is usually a leading indicator of the pattern For now it is turning slightly bullish and but still is in bearish territory so far The green line is the STORSI indicator also known as the stochastic of the relative strength index It is just turning around and heading towards bullish territory The gray bars are the time bars since the start of the wave and the red horizontal lines are the time forecast for terminations of wave When the gray bars will touch the thin red lines the pattern could reverse or continue until the next Next indicator is the red line across the price window Known as the Highlighter it displays a pr
70. as the popular good but expensive Elliott Waves software that Tom Joseph marketed Since their indicators are proprietary we created with our own code 30 indicators that use the same theory to compute the desired value As we never owned nor had access to this program our indicators can plot a slightly different course Our goal was not to duplicate exactly the proprietary indicators but to open access to the mathematical theory behind them Of course our indicators are adapted to our own wave definition and measurement 485 Fig 32 AlghOmega AGet Template 18 0 122 This template will display T1 indicators only if the current wave of 16 5 the selected sensitivity is a wave 4 it will display T2 indicators if 1821 the current wave of the selected sensitivity is wave 5 The 450 indicators specific to this template are 145 AO DMA the displaced moving average The displacement is 122 user defined and the line is a thick blue 130 AO W4 TRC is the Trend Ranging Channel that plots the 125 possible reversal points for a wave 4 factoring the time in the 4115 calculation The display is like dotted lines red green and 110 blue 1921 AO Elliott Channels W3W4 or AO Elliott Channels W5 is the 25 purple channel that should contain the price while the wave 3 0 deploys Only a change in volatility will make the price stray from iem the channel 75 AO Elliott W5 Target is the most likely target for wave 5 after the corr
71. ase 4 5 Comments The date input function has been modified to accommodate the intraday users who require an hour and minute input indicators now reflect this AOi explorations systems and templates have been added for intraday data strictly System Testers have been modified to use the unadorned Elliott methodology entries and exits should be closely related to triggers Helease 5 5 Comments This release is for MetaStock 9 0 and up It adds 2 new experts AlphOmega Elliott Waves Impulse Signals and AlphOmega Elliott Waves Points 2 new explorations AlphOmega Elliott Impulses 21 DF and AlphOmega Wave Points and a new system test AlphOmega Elliott Impulses 2196 with revised formulas to catch all signals either in explorations or system tests All indicators renamed with either AlpghOmega or AO as a prefix please delete all previous indicators and experts from AlphOmega Uninstalling will not erase the old nomenclature and your database will carry duplicate or obsolete indicators and experts It is a good practice to compare the detailed list at the end of this manual with your indicator system expert exploration and template lists Helease 5 6 Comments This release has a number of experts explorations indicators and templates added A global variable for sensitivity AO GSe is used to feed an expert and its related indicators as well as explorations AlphOmega Elliott Waves 196 Swing and AlphOmega Elliott Waves Points are new exp
72. at are usually very changing at a small scale when there is a violation of the trend line you know the trend has reversed AlphOmega Similarity of a Wave This indicator provides the range in which the price should plot if the pattern follows the rules of alternance and similarity from Elliott If the error range is violated an alarm signal is given This indicator 82 requires a number of input that are the sensitivity of waves under scrutiny the number of standard deviation for volatility the error tolerance level to be accepted the rate of change in percent that is a threshold the regression periods The variables to be used in a formula are WI for the expected course WI1 for the error course It is useful to detect waves that start with a powerful thrust or those that linger below expected level It will give fewer signals than most of the indicators because of the added selection criteria The adjustment of the parameters varies greatly from a market to another the volatile equities being the most suitable AlphOmega Trend Resistance and Trend Support This indicator calculates the resistance or the support based on the previous wave patterns It is fully automatic and only requires a sensitivity input it will adjust to new input meaning that once the trend is broken and a new peak or trough of the chosen sensitivity has formed Its slope changes as data for its sensitivity accumulates It will tend to adjust to volatili
73. ates that we should not trade against the trend Be careful not all the explorations have such filters There are explorations for all sensitivities such as AO Elliott Waves Explorations With those Explorations most filters have been removed so we will get a list of all the securities we are scanning with all the wave data related to them whether an impulse wave or a corrective wave Although they are provided we don t need to run them on a daily basis because without a filter we will have to analyse a lot of data and securities before finding the valuable candidates Some explorations such as AO Elliott Waves Normal 1 have filters and will display only impulsive waves Check the text in the exploration box to see the exact purpose of an exploration and details on the report columns Under the columns Bull and Bear we see the wave number and where a 6 refers to a C wave For waves A or B the labels 1 and 2 respectively are used For analytical purposes a wave one is usually difficult to trade as we have neither guideline for its end nor any price projection other than a speculative reference to the previous pattern Some will run long and powerful others will run short Elliott Wave analysts usually trade waves 3 5 and C waves 2 4 and B are used to time entries or exits Note that a different wave count could appear under both Bull and Bear column The highest count is the prime while the lowest is the alternate Fallback position when the wave fa
74. aves GSe is not shown as it appears like the HV NV and LV experts A number of indicators were created to supply the commentary of this expert Most of these will appear in your quick list followed by an extension L standing for level The expert AlohOmega Elliott Waves Points has a commentary that is based on percent retracement only the symbols and highlights are points retracement based This is to provide a comparison basis with a percent based wave The integration or fractal characteristic of Elliott waves is not as good as with percent when you use points It does not allow for a large change of volatility in the price of the security However it is more adequate during a consolidation period because the price moves in a known trading range It is easy then to decide of the number of points retracement we will use 62 opecial Display for Special Situation X Wave Fig 59 The Expert Advisor M with its huge capacity for code allows us to refine and focus on exceptions A good example is the extension wave that can develop after a wave 5 has peaked The Expert Advisor will detect that the following wave does not retrace enough and will flag it as an x wave This pattern is risky and the wave 5 can terminate very quickly or carry us to distances unforeseen However if we use the other indicators such as AOZZ we will have a better feel for what is happening The extension wave itself is a correction within the impulse wave preceding and
75. ay and proceeded to refer to the next filter only for x waves that explains the red lozenge after the middle 5 When we will see a repetitive wave 5 followed by a lozenge we will know that we should check manually the next level at 5596 to resolve when the pattern will terminate Failing to look at the next level could result in a misinterpretation of the market when volatility goes to such levels we should pay attention and heed the warning We should be aware that if the signal comes after a wave 5 extension the volatility surge has been on going for quite some time and our focus should be on a potential reversal The above chart is from Nortel and there is no need to say that many were able to jump in the correction that followed 69 Chapter 11 Three Ways to Use Elliott Waves The AlphOmega set is organized so its use is as simple as possible for a complex methodology The Experts Explorations Indicators Systems and Templates are divided between daily or normal volatility and intraday or low volatility All intraday material is either prefixed AOI or contains a small i in its name All material where the filter is a fixed percentage is provided in versions for each sensitivity Cycle and labelled as such Indicators to be used by other AlphOmega indicators do not appear in the MetaStock indicator list The Expert label names are as descriptive as possible so that when we place the cursor over the label we see the description Indicating th
76. ce projection accounting for the rules of alternance and similarity from Elliott oimply put it will look back for extended waves in the pattern if one is already present it will assume the alternate wave will not be extended This indicator is automatic and it is set to work with a set sensitivity only so use the appropriate one the sensitivity is in brackets beside the indicator name 6 The AlphOmega Similarity of a Wave is an indicator to measure how a wave matches the expected pattern according to the rules of alternance and similarity from Elliott It also defines the expected range for the present wave The rule of similarity and alternance of wave states that often wave 1 will be the same length as wave 5 if wave 2 is made of a zigzag then wave 4 will be more complex like a triangular pattern All our projection tools account for that but when we are looking at an incomplete pattern it is good to know the expected sub pattern and if confirmed we can place orders faster to ride the completion of the pattern Fig 31 The number of lines displayed should not rebuke us the dotted lines correspond to the slope of the previous impulse or correction and the same slope times a safety factor user defined The solid lines dark green and dark red are the cumulative linear regression of a user defined period the green is the pure LR while the red is the green times a safety factor that is user defined Basically we are not concerned as long as
77. cending descending symmetrical and within the later expanding or contracting What is important to remember from triangles is that they usually exit in the same direction they started Diagonals oimilar to triangles but both containment lines are heading in the same direction and the exit is in opposite direction from the trend These take place mostly in wave 4 of an impulse or the C wave of a correction Extensions cn Extensions can develop in any of the impulse waves and many times the X wave will retrace into the previous peak or trough territory AlphOmega tracks extensions by labelling the waves in the usual order and giving an X on the sixth and a 5 on the seventh this is as long as the individual wave criteria are met Truncations Truncations are literally a fifth wave failure since the peak or trough of wave five does not extend beyond the previous peak or trough This is the most frequent failure Note that AlphOmega reads this failure in its own way up to wave 4 the labels are normal and then at wave 5 failure it will reassess the count because it will see the wave as a 2 of the opposite trend which reassesses the wave 4 as a 1 of opposite trend The label of wave 4 remains unchanged as up to that point the wave meets the criteria the label of wave 5 will never display as its criteria is not met hence the label 2 of opposite trend This is important to price and time projection as it will calculate from a different base
78. chart To provide flexibility all indicators using sensitivity input have a range from 0 196 to 14496 Keeping that in mind when we drag in an indicator let s make sure we replace the default value of 21 by the desired percentage If we change a formula know that the templates that use the formula will be reset to the default value as we save our indicator it is necessary to resave the template with the chosen percentage Indicators that require a date input must have the hour and minute specified to display properly on an intraday chart Note that the standard Elliott Indicators like STORSI Elliott oscillator and the RSI have the same default values in their setup and are used as is in the template It might be necessary to adapt them to specific market An RSI at 14 bars could be too slow just like an Elliott oscillator using the difference between 5 and 35 bar average could be inappropriate Because it is usually a matter of personal preference the choice is left to us as to the sensitivity we want to use with them If we always trade the same market we should change them to the appropriate level one that we are comfortable with otherwise we can use them as is but being alerted that tuning will be needed at times When we are using ACi Simple on an intraday chart we will get a slow down of the screen display The size of the expert and the use of many indicators will consume a lot of the available memory both graphic and RAM as well as CPU c
79. d This is the Load Options for the chart Explorer Options Data Loading Load Records CO Load Minimum Records Notify When Exploration is Done This is the Load Options for the Explorer If you want coherence between your explorations and your charts make sure you load the same number of bars in both Do not do as in the above example Initial Data and Unusual Situations When you are looking at the oldest price data you have for a security at the beginning time of your chart you will find that the wave count is undefined This will lead to strange patterns initially until there is enough data analysed The long and deep waves are mostly subjected to this problem or a security that is not very volatile When you are dealing with a very volatile security you will go through all the cycles very quickly Another issue we have to contend with is when the security enters a consolidation period This means that the price is trading in a narrow range and forming triangular or sideway patterns When this situation is at hand failing waves or repeated extensions break up the wave count and the count is erratic Chapter 1 For a quick start using the AlohOmega Simple template To jump right in and get a head start drag your cursor in the price pane right click on an empty portion select Apply Template and choose AlphOmega Simple apply and close the dialog box The screen should look like this after a few seconds 181
80. d chart settings so that when called it displays precisely the way we want What is the difference between experts explorations systems and indicators 26 Experts are responsible for the labels displayed on your chart and the color of the bars additionally they can display a commentary a ribbon and a corner indicator They summarize the information of many indicators providing a readable format and serve as a reminder of things we tend to forget in an overall evaluation They evaluate a lay out for all bars up to the point they are summoned ignoring the data after the summon point this feature is as valuable as back testing Indicators will display lines on your chart whether straight or irregular horizontal or vertical Indicators can have calculated variables user input variables constants display only under certain conditions They are the backbone of charting software as we can test all the formulas making up experts explorations systems or indicators first as an indicator to verify their proper functioning and display properties Explorations are the trading source and selection center for candidates Although they never show on a chart they reproduce in the database what the indicators do on a chart Sometimes they can be substituted for a system test although this was useful only with the prior MetaStock version 7 2 and lower They perform all the screening operations acting as a filter for low traded volume and low priced securi
81. d expert is for high volatility and is identical to normal volatility but for the addition of a very high sensitivity and the modification of the labels to integrate the added information The last expert is for futures or commodities its sensitivity is very low always referring to the percent retracement not its ability to pick up a signal at 0 396 The first four Experts are almost identical except for the range of sensitivities covered The second Expert is used for low volatility situations such as indices where a price movement expressed in percentage can be very small The third for very high volatility like penny stocks and the last as mentioned for futures and commodities Highlights wv ave Signal Normal Wave Signal Moderate Wave Signal Fast Failing Wave 4 Failing Wave 4 Failing Wave 4m Failing Wave 41 IX TL Bull wIXTL Bear lh Consalidation Triangle Waming Normal Inside Day Marmow Range jGann Pullback Buy jGann Puliback Sell lsolated High lsolated Low Bullish Bearish IRSI 13 5 70 1 5 13 lt 30 57 The highlights are used to color bars according to specific criteria met at that time They be used as a signal for entry or exit indicate a specific market condition and much other information It is a visual way of displaying information automatically as certain preset conditions are met The AlphOmega Expert is using a limited number of highlights
82. d the histogram is close to a time projection line it is a very strong signal that the price is about to reverse When there is only one of the price or time that nears a projection line always prefer the price projection to the time projection Historical Projection for back testing The second type is using Price Projection Wx where x stands for the wave number Then we will need to enter the date of the beginning of the wave to be projected This is good for studying how close the relationship with Fibonacci ratios is The same technique is also used for time projections except that it must be displayed in the top inner window where the appropriate scale shows the number of bars As can be seen in the chart below we wanted a price projection for a wave two that started on May 23 2003 the date was entered according to the convention mentioned previously that is 052300 for the Month Day Hour Minute field and 2003 for the year field The price projections are displayed from the input date to today going back to the origin of the line will always tell us to which wave it is related to bar when the wave started Note how close to the end of wave 2 the first projection is For this indicator we must pick the wave number we intend to project and the date of the bar where the wave started The Highlighter cannot be used for historical projections nor the PW series since the wave count is already confirmed When we have a good correlation with his
83. day set to indicate that the expert is not capturing an out of range move it will display LC meaning Larger Cycle When there are many such labels on the chart we should move to the next expert with higher percentage retracement to make sure that we are not going against a larger trend To differentiate the intraday set the letter i is used after the prefix AO or associated with the percent number in the naming of the explorations indicators systems and templates The experts are named according to the volatility they monitor daily with NV normal volatility LV low volatility Futures even lower volatility and the last one penny stocks with HV high volatility What was said earlier about the explorations can also happen with experts indicators systems and templates If the chart is filled with too much information waves signals lines move to a larger filter retracement If we have a look at figure 57 we see the LC all over the screen the AOi Simple template was applied to a normal volatility stock The trend lines are too short because they are set for 3 sensitivity as the rest of the indicators Figure 58 shows the same template applied to an intraday version of the same stock 58 MetaStock Professional Chart1 AGILENT TECH 20 6700 re Yew Tode t n rci Noe mI ee om ig 3 8 em B c ES L AEM 4 lt
84. dex incorporates momentum and volume so that it is excellent to show tops and bottoms because it does not have a limit in its value Next refining our selection with the second round we will look at the previous patterns made by each security We are looking for repetition so we need to see in the past the same kind of waves completing their pattern If itis a first and nothing fuels it like rumours or contract news then it is Suspicious even if it finally makes it To assist us there is another exploration that compiles the success of previous impulses by security it is named AlphOmega Impulses GT AlphOmega Impulses GI Explored 11 14 2004 26 0049 42 0571 40 0000 56 6182 50 0000 46 6667 62 5000 55 5556 42 057 60 0000 Symbol A 50 0000 56 0000 43 5294 27 1423 D BD nz 4074 37 0370 58 6207 55 3191 31 00328 5 Drs 14 0025 37 0065 20 0035 14 0020 31 0054 10 0027 34 0058 26 0047 BuySell ye Aga 46 7179 40 9091 33 0411 50 5615 G4 2097 65 5172 44 4444 61 7647 52 0000 42 0086 13 0033 18 0044 57 0146 45 0099 36 0056 38 0058 12 0027 42 0068 39 0075 Ja We see that the selected security Agilent has a very weak record with waves of 21 3396 or 4 out 12 Next looking at how strong is the trend we pick the strongest and we don t count on weak getting stronger later otrong in weak market will be stronger in strong market Compar
85. difference between the 5 days EMA of closing price and the 35 days EMA of the same Obviously when the bars are positive we say they are in bullish territory 15 while if they are negative they in bearish territory The next indicator is the Relative Strength Index of the close for 14 days in magenta With it there is also in red the Relative Momentum Index of the close for 20 days momentum of 5 Both indicators are used to confirm trends time waves in consolidation periods Neither is good at picking trend tops or trend bottoms They provide valuable information on the strength of the move and the direction The horizontal magenta lines across that volume window show the two thresholds of the RSI at 30 and 70 The last indicator in thin blue is the Dynamic Momentum Index and it requires no parameter All these indicators are laid without scale to preserve the volume and volume MA scale on the right TIP Be careful when trading waves for which the next order of sensitivity is undefined The wave number for the next order of sensitivity will appear with a question mark Being undefined means that a full cycle of waves has not been completed in the available security data Some securities may never go through a full cycle of the highest order The danger is that a deeper impulse could be at play than the order being investigated carrying the price in unexpected zones Orders of sensitivity are ranked by their percent of sensitivity where the
86. e 2196 sensitivity while the red one is for 3496 the blue line should have gone through the big red 3 35 but it goes straight to the big green 1 bypassing the peak at the wave 1 Although it is of no consequence it messes up the display and forces you to look at the next higher sensitivity When this type of pattern occurs you can switch to points with the zigzag function You will find out that although Equis zigzag function allows points none of the zigzag related functions have a point option AlphOmega has created High to Low zigzag function and its trigger function so you can use points the same way you use percentage z Patina Oilt Gas 30 1500 POG DER A i be EA P hy a Yun ij uan m nr t o RD IU LU NT TTA RU DULL 32 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 30000 25000 T 20000 15000 i P 10000 IE all n nm HE LM i LM li l 5000 x 100 Mar Mar Apr Jun Jul FE D 00 4 Here is a three point zigzag with an expert that shows the trigger entries and exits AO Elliott Waves Points As you can see it can catch some very nice waves Yet you must adapt the points to the price level of the security Because that process cannot be automated with MetaStock present code you will need to s
87. e and the daily or weekly picture The labelling of the symbols is such that by dropping the mouse over them you can tell the exact sensitivity it is addressing The four Experts are similar and only the percentage filter is changed to correspond to the sensitivity to be scanned 25 Price Projection from an Unconfirmed Wave Fig 21 This screen shows the parameters to be used when projecting prices for a wave at a date when we suspect that the previous is completed but confirmed When we want a projection for this type we must select the right indicator for the appropriate wave number and PW in the name for the wave in progress and enter the date of the high low at the base of the wave Making sure we enter a date at or after the completion of the high or low failing to do that will enable the display of the previous pattern projections We must enter the proper sensitivity for the pattern we are studying Using the Zig Zag function or AO ZZ will greatly facilitate our perception This projection indicator is recommended when the larger order of sensitivity is still undefined or when a full cycle of waves has not been observed The automated indicator will always start looking for a C wave or a 5 If these waves are undefined the indicator will not function and it will not display i3 T 2 4 Fig 22 This price projection shows the point of origin the lowest red bar and the beginning date start of
88. e circumstances may invalidate the result of the plot 84 Appendix 2 List of AO Indicators for MetaStock for Windows This is not an exhaustive list only the key indicators are shown The AO Indicators All indicators starting with AO were created and adapted to Elliott wave s application These indicators are the tools of the trade for Elliott Waves analysts they provide valuable information when you study a chart They are added tools to facilitate the interpretation the trading and the detection of particular setups encountered in the markets we trade Some are more frequently used and tend to be applied in almost every circumstance They were described earlier in the book and do not need additional explanation but were placed here so a full list is at hand For most AO indicators displayed in the price pane the scale of display should match that of the price to plot properly where it is different a note will describe the required setup Here are the ones you already know from the templates AO Elliot Oscillator This is basically the difference between a 5 day and a 35 day exponential moving average It comes in two styles AlghOmega and Aget that is a smoothed version of the first On top the Aget version usually displayed as a histogram it is the difference between 2 moving averages The parameters are long and short MA style and 8 bars MA 1 Chart Biomira Inc 1 66000 Daity f E Elliot Oscillator om jj cula
89. e percentage for the sensitivity differs from the accepted nomenclature and should not be interpreted as the of move but as the of filter Finally the indicators are grouped AlpghOmega AO AOi ID Price and PW Time TW and the W group Because of the formula space available it was not possible to keep long names that would have singled out the set indicators from your own However it was done with the Expert Explorations Systems and Templates There are three different approaches to Elliott Waves that will yield results that are commensurate to the risk we are willing to accept 1 The first method is to place our order with the appropriate stop as soon as the wave is identified and to let it run until the wave is exhausted which is when a wave moving in the opposite direction is confirmed This method has the merit of letting us ride the wave until all the potential has been deployed The drawback is that we will loose some of the paper profit accumulated while allowing the reverse wave to build up to the point of recognition So we need a very strong wave 2 second method is to place our order with the appropriate stop as soon as the wave is identified and then use the price projection features and the other indicators to forecast the possible turn points We would then sell when the price crosses one of our turn points whether the price continues in the same direction or not Obviously this approach will not let us ripe
90. e profit taking index PTI to gauge wave 4 failures is used in explorations and rarely plotted as you only need the value to be above 35 The thick blue line is the AO DMA Displaced Moving Average AlphOmega Vidya Template C3 C Go fa 4 en cn Fig 16 This template is using Tushar Chande s Vidya indicator an adaptive moving average The red and the blue horizontal lines indicate the entry red and the stop loss level blue Adaptive means that it adapts to the volatility of the recent bars The trade scenario is rather simple as we are given the entry price and a stop loss we must be careful not to confuse the blue trend line and the red AlohOmega Highlighter with the Vidya indicator The best way to prevent this is to 19 drag our cursor over the lines and read the name of the indicator and the values All MetaStock indicators whether custom or native behave the same way when the cursor is pointing to them Wolf Wave Template 1 1 es i E i r E T 2D o j k aW oos m rig ee Eee Fig 17 P fi Tiii s 4 Ti ori Wolf Wave is a triangle formation that 210 202 lends itself to trading Like all patterns 52 it follows some simple rules 19 0 1 The pattern is identified at point kon 4 that is at the second peak or 17 5 troug
91. ection should start opening the possibility for T2 setup 60 is the Profit Taking Index that computes the momentum 55 built during wave and compares with the wasted momentum ae from wave 4 The remainder is an index that should not fall m below 35 to have a good probability for a wave 5 ah The T1 setup is projecting the point of reversal of the wave 4 to 3000 get to trade the wave 5 as soon as it starts The T2 setup is the TT mw se next logical step of T1 that is project the point of reversal of LA 4500 wave 5 to get to trade the whole correction waves ABC as soon M ee as it starts See the annex at the end of this book for a detailed a explanation mber December 2003 February March Note For your convenience indicators having the prefix AO are listed in Appendix 2 with their graph They are all related to Waves in one way or another The required inputs are outlined clearly when you insert them in your chart and their use and interpretation is generally simple if not obvious The most important one is the AO ZZ that will display the Zig Zag of the peak of high and trough of low Many of the indicators in the AO category have the auto label meaning that once laid on a chart they will update as the data comes in Where the name has a P added to the end it must be used on the price plot and displayed as a histogram without scale This will enable the display o
92. een r popp s MAL oe iin p pe hmi Ill Use a DMA to sell on a price crossover The DMA is a simple moving average displaced in time or shifted to the right With the momentum in the market continuing the DMA keeps below After the price peaks in Wave Five it will eventually drop below crosses the DMA This provides a confirmation to enter a trade IV Place a stop loss at the high of the day before the crossing Do the reverse for a declining Five Wave sequence 112 Je 1 Initial Data and Unusual Situations 2 e T 3 For a quick start using the AlohOmega Simple template 3 T 14 4 5 Elliott Waves A Graphical eene nnne 5 Elliott Waves Basic 6 EO VVaVes Faltetissu cuida RN DE 7 GRADINS e H 11 FENNO WV AV 11 Sree Eo ER 12 AlohOmega Aget and AOI Aget 18 AlphOmega Vidya eene nennen 19 Vo Wave ob Lue eb bid P nda 20 Chapter A rinnan nri qa tu di itus dea S 20 Fce ana
93. en reached This can be done with an indicator The Expert Advisor or with the Enhanced System Tester 10 Monitoring all the securities for which we have a position to make sure the patterns are progressing as foreseen Sometimes a broader pattern will have developed since our entry this is the time to reassess whether we want to ride the larger wave or stick with the initial Preferably we should adhere to our initial trading plan Well here it is We tried to keep it simple not to be overwhelmed with information that is not critical at this point Once again this is the way do it it may not be the best It can seen why developed all these indicators when you revisit the steps If this method is too complicated look at the alternative detailed in a little document from the Advanced Get software writers It uses two types of set up summary provided at the end of the manual and explains very well how to benefit from each You can download the complete document from http tradingtech com The indicators required for these set ups are already in the AlohOmega set and although the PTI Profit Taking Index is proprietary a similar one has been coded for our use There are two explorations that will search for the patterns and give us the key indications for making our choice Note that the set ups apply only to a wave five beginning or ending Day Traders For day trader the obvious difference is that we have only a limited use for an ex
94. en you try to group them to simulate a date function the eight digit limitation of the program makes the data inaccurate The time input is necessary for intraday charts f you do not use intraday do not forget to add the 00 after the day otherwise your input will be rejected as too small The order in which the inputs are required is also very important as you need to retain sequential relative position for each bar As an example let s assume we will input these two dates December 20 1999 and January 16 2001 in the following format Month Day of Month and Year mmddyyyy 12201999 or 12 201 999 01162001 or 1 162 001 17 It is easy to see that the biggest number numerically is not the latest date If you compared these two dates you would be told that December 20 1999 is the latest bar Another problem would take place on certain days where the decimal place would throw the day numeral off It gets even worst when you need to add the hours and the minutes for intraday charts The system AlphOmega is using checks the year first and separately to overcome 8 digit limitations it is then building a serial that groups the month and the day and the hours on the integer side the fractional side has the minutes In addition the largest number has only 7 digits keeping it in the accuracy limit of MetaStock Look at the Wolf Wave graph that uses the date features to not only start displaying at the right time but also the relevant data before the de
95. entary may differ from the one on the screen This is due to the use of a simplified wave definition in the commentary It will match the screen 90 of the time but where the volatility is high or a consolidation range is taking place it will not be able to discard the repeated extensions or the alternation of waves 2 34 Points versus Percentage You will note that until now we have used the zigzag function with its percentage version only There is a good reason for that The percentage allows us to deal with all securities without personalization it does not matter that the price is 2 or 10 because all proportions are kept The zigzag can also work with points instead of percent for instance you would look at a 3 points change rather than a 396 However a 3 points change is quite different for a 10 versus a 100 security It means that you would need to adapt your points to each security to catch properly the waves So far there is only a disadvantage in using points but is there a disadvantage in using percent Yes and a rather annoying one the top and the bottom of a wave are two different bases to which your zigzag percent is applied This translates in the need for a larger move downwards than upwards for the same percentage So the trigger for a down wave needs more price move than the trigger up wave It is not such a big deal when the stock is trending as the proportions must evolve with the price move But when a stock is consolidating or
96. eptions but a system should not thrive on exceptions AlphOmega will warn us by posting the label in light gray for wave 3 and wave 4 this tells us that if wave 5 is not shorter than wave 3 then disregard wave 3 and 4 Wave 5 is probably a wave 3 and you should expect the pattern to continue into a wave 4 and 5 Look at the chart for an example in the ellipse 67 Fig 65 In the black rectangle a triangle pattern has been detected and the labels c and d appear They sim ply mean that the peak at c is lower than the peak at and the trough at d is higher than b and b are norm al waves and the pattern is detected only once c fails D top A label e would have shown if peak had bee lower than c In the red parallelogram is an example of how the expert will react to a surge in volatility where the filter will no longer acts propery and will give whipsawed signals However the next sensitivity will catch properly the end of the wave As mentioned previously this feature can be turned off 2 The second type is for a wave 4 that retraces in wave 1 territory and will display orange bars for as long as the wave can still be labelled as a 4 and is in the said territory This rule suffers more exceptions than the short wave 3 and for that reason AlphOmega has chosen to use a different form of warning No example necessary for this one The next chart is about pattern failure where the count is reset to one
97. er together the price range is narrowing So we can either trade the last fifth wave that could be the breakout or the unusual fifth wave that turns around before breaking in the other direction To do this type of trade we must use a stop entry In other words a buy stop will allow us to enter a trade only if the price goes up past our stop and the reverse for a sell stop The breakout means that we expect the trend to resume its former direction Let s look at the chart to understand the forces at play 65 9 5 4 0 5 5 9 0 YO 6 5 6 0 5 5 5 0 4 5 4 0 3 5 3 0 2 5 2 0 1 5 35000 30000 25000 20000 15000 he NAA 10000 TIS m 0 5 May June July can J Fig 62 The triangle is automatically and clearly outlined by the blue lines joining the peaks and troughs of the pattern Elliott says that a triangle should contain 5 segments no more no less The dark red roman labels are at the peaks and troughs for this normal sensitivity triangle starting at end of wave ii The detection of the pattern occurs at the last peak or trough of the pattern in this case at the trough labelled X The indicator will display from that moment the triangle as we see it Note that if the triangular pattern is almost horizontal or flat the expert will display specific labels that will be discussed later From a tradi
98. eraging the base and periods for the signal The choice of data arrays is between close of the bar or high and low HM EEUU EM M 1 i AO Vidya This indicator is based on Tushar Chande s work and is an adaptive moving average The orange line is the Vidya while the red is the entry and the blue is the exit level The parameters are number of periods smoothing factor and acceleration 105 AO W4 TRC This indicator plots the trend resistance channels of a wave 4 for the specified sensitivity showing as round dotted lines If price penetrates the red dotted line the probability of a wave 5 is greatly reduced There are two modes available AlohOmega and Aget the method of calculating differs The other indicators are from the AlphOmega Aget template 106 Final Word on the Presentation in the Manual As you browse through the manual you will see that some screenshots are from older releases the screenshots are replaced only when the input has been modified for the displayed indicator With time all screenshots will be refreshed but all efforts are on the product development for the time being Your comments to make the manual easier to read would be welcome Helease 4 0 Comments The major change in this release is the restructuring of the low volatility expert the deletion of the option to use the closing price in indicators and the addition of new indicators such as Time display of vertical
99. erts with trade signals rather than wave counts New templates were added with AO Auto Timeframe R amp S an indicator that computes the resistance and support for other timeframes such as weekly or monthly levels in a daily chart There are eight new explorations four for the L global sensitivity two for detecting the success rate of a particular wave number for 13 and 2196 sensitivities The two last ones are trade signals exploration for 196 sensitivity and Elliott Oscillator 3 successive bars that are positive after a fourth negative Helease 5 7 Comments This release has three main features first the Ticks users will find a complete set of tools adapted to their data feed period a second is another set of tools that will estimate the sensitivity to use from a horizon of user defined length The set for ticks is available on demand as it contains a large number of additional indicators and two experts with one template The next important addition is a trading plan something that is very difficult to handle in MetaStock It is work in progress as it is far from what had in mind The last addition is a pattern finder indicator that will help you visualizing complex patterns the bat the butterfly the crab and the Gartley With the indicator come four explorations one for each pattern and all tailored for a 1396 retracement 107 Complete list of experts explorations indicators systems and templates MetaStock for Windows Explorations
100. ext wave for it to meet the definition of a proper pattern When the peak or trough does not appear as dotted line it is because another line is stacked on top of it otill in the price window the red horizontal line is the Highlighter for normal 2196 sensitivity It is a price projection for the wave completing its pattern It will show only the most common projection and should not be taken as signal to buy or sell when crossed it can be used to move your stops The last indicator in the price window is the automatic trend line usually in blue if there is no trend it will default to the last trough The trend line acts as a support or resistance for the price a crossing of line and price is a significant sign of trend changing TIP Why have trend lines when the tool already exists on MetaStock amp toolbar Because when you are cycling through many graphs you do not want to place manually the trend lines AlohOmega has a number of automatic indicators that relieve you of the chore of placing them on a chart these indicators are also tuned specifically to elliottist needs and their setup will respect accepted technical analysis rules Among these indicators you have trend lines pitchfork price or time projections Gann angles and Fibonacci cycles In the volume window there is an exponential moving average of the volume for 50 days in dark yellow The Elliott Oscillator has gray bars that are overlaid without scale The Elliott Oscillator is the
101. f vertical lines Some indicators refer to P no brackets in their name This is the P function from MetaStock that refers to any indicator that you click on a chart AlohOmega uses the P function to allow you to apply AlphOmega indicators over the variable you pick on the active chart Usually you just have to drag the indicator from the list to the chart plotted variable and release the mouse button If there is a required input a text box will appear to request the missing parameters TIP Of all the indicators provided with the set only a few should not be displayed in your indicator quick list All ID s indicators belong to that category as well as the system s the PW s and the TW s The Wave Projection and the Time Projection are inserted in layouts and can be ticked off the quick list DO NOT ERASE ANY OF THEM 3l Chapter 7 Zigzag Dynamics What is the real profit potential we can expect from a wave How accurate and timely is the signal The wave we will study starts on March 30th 2001 to end on September 21 2001 At the time we have recognized the beginning on April 16th we plot a red line to the date we know the wave has ended October 11 2001 Why do we have a delay Simply because the price must travel a certain percentage before the peak or the trough is confirmed This is what MetaStock calls the dynamic portion of the Zig Zag indicator While many think that the dynamic portion makes the indicator useless believe it
102. h 172 2 trade is triggered from as point 5 that is the next trough 15 5 or peak the opposite of point 4 bide 3 Lines are drawn between 140 points 1 3 and 2 4 These lines 115 should converge and touch at E the time the target price will be 139 reached 115 4 The target price is calculated ce from the extension of the line 10 0 between points 1 4 95 2 AlphOmega shows the extensions of All those lines so you can see the 30000 Ay A NBI ps 20000 aiia lilia BELLI litis g crossings or near crossings In addition the indicator provides the Estimated Time of Arrival number of bars to crossing and the price target The Expert Commentary also warns of the May Dune July September Odot Hcvernber December presence of Wolf Wave patterns and the target price We can run an exploration for the pattern at different sensitivities we will get the bars since the point 4 was discovered and the trend of the pattern 1 for bullish and 1 for bearish The indicators do not go beyond the ETA otherwise we would have the extensions running very high or low and disturbing our price scale This pattern is not very frequent and although the calculation is easy the results are not reliable For more information on this pattern there is a site that has developed a methodology for correctly assessing the various points and the conditions required to trade the pattern Please refer to WolfeWave at ht
103. h functions The variable Trig is not to be confused with AO T that is also displaying the trigger but as a binary signal thus on or off AO T does not appear on the indicator drop down list It is used internally by other indicators AO Price Projection W2 Price Projection W3 Price Projection W4 Price Projection W5 and Price Projection WC These indicators will allow you to plot a price projection for any wave of the corresponding number in the past You need to input the sensitivity of the wave and the date in the format described before The use of this indicator is best in testing the projection of prices against waves for which you already know the results It helps establish if there is a correlation between the price movement of a security and the Fibonacci projections AO PW Sens AO PW3 All Sens AO PW4 Sens AO PW5 All Sens AO PWC All Sens L for all These indicators are the wave definitions for price projection They are providing information for other indicators and as such do not display information However they calculate variables that can be used in formulas P1 are variables that represent the price projection possibilities for each wave They vary according to the wave number W1 is another array that measures the price move of a wave Hence you can compute percents or other formulas from these variables When you program the calls for these variables the function button will list all
104. h cycle 8 13 21 and 3496 Note that the label appears at the end of a wave When several waves from a different cycle end at the same bar the largest cycle has priority over the lesser ones its label will be superposed over the others making them invisible Since the larger cycle needs more retracement to be confirmed the labels of the other cycles will show until then Retracement is a word that we must explain before going any further To know that we have reached the end of a wave and the beginning of the next the price must reverse direction and retrace a portion of the distance difference between peak and trough covered during the wave deployment The importance of the distance and that of the retracement will determine the cycle of the wave This puts a lot of emphasis on the threshold of retracement for a specific cycle retracement being measured in percent distance retraced over distance traveled during the wave The threshold we name Trigger and the Expert can color the bar on which the trigger is crossed for a specific cycle To this end the Expert must be edited using the password go the Highlights tab and check the box for the selected cycle the default value is set to uncheck for all but the 2196 cycle This trigger can be a signal for entering or exiting a position The Elliott oscillator is the next indicator of importance in your chart It is the difference between 5 and 35 day moving average of the High or the Low dependi
105. hat a correction will be smaller than an impulse hence we will prefer impulses for trading Our goal in trading is not to identify all possible wave configurations but to identify the trend and trade with it so we can make a profit by placing the appropriate orders Remember that impulse waves alternate with correction waves We want to trade impulses to minimize the number of trades and benefit from the strong price action of the dominating trend From the fractal effect mentioned above we also know that a smaller pattern is nested into a larger wave so we can adjust to a specific level of nesting to match our trading style This is referred to as cycle or sensitivity selection since the filter used works from a percentage of price retracement Elliott Waves Patterns A pattern is made of series of impulses and corrections where the trend is maintained such as in the 8 wave cycle where the first 5 waves are a trend and the last 3 waves are a correction that is against the trend To state it in a simpler way all impulses within a pattern must be in the same direction an 8 wave cycle is thus made of two patterns Why is it important to know a pattern from a cycle Because in Elliott methodology there are rules and observations that apply strictly within 7 a pattern the rule of alternance is an example that we will discuss later Patterns are also fractal and many times we will see a pattern referred to as a 5 3 5 3 5 It is a lot simpler th
106. he previous impulse then you will know it is truly a new impulse for the 1396 and the continuation of the 2196 and 3496 impulse The above mentioned problem will also cause confusing label display As the higher level wave completes its cycle its label will crush the lesser wave label thus changing the interpretation of the pattern This point is so important that a graphical example is necessary The two charts were taken at 22 days interval and they depict very different patterns the first is a short term bullish where a long position would yield an interesting profit The red dotted lines on the right side of the chart show the different support levels for a wave b If one enters early in the coming wave c the minimum target for profit is the peak at wave a that is 2 20 Of course the other indicators are showing that the trend is weakening as we would expect from a correction There is one puzzling element the size of the wave a spans well over the 2196 trigger and in fact it is enough for a 3496 trigger What should we do A prudent approach would be to wait for the confirmation of a wave b An even more conservative attitude would have us wait until price moves above peak a but this would leave us with a reduced profit zone Look at the first chart 33 Although the pattern is long term bearish it seems that there is a short term bullish RES opportunity WA aA Thik looks like thd last B D support level for wave b wave e
107. he price projection It is nevertheless a way to trade a triangular pattern although the risk is in my opinion greater because these patterns often fail to develop fully Many Elliott Waves software analyse and show irregular ABC patterns This is an area where many Elliott chartists will disagree on the wave count many times the pattern has to complete before the correct nomenclature can be applied Nevertheless we have in the set two indicators that will detect converging triangles whether ascending or descending and the Expert can also flag them One indicator works from the latest data available and will only show the latest formation cannot back test the other will display the triangle from the date you select the date being the latest peak or trough of the triangle formation you want to display for back testing This pair of indicators approach has been used with price and time projections as well so you track or test depending on the mode you are in Note Remember that the ABC pattern follows the 12345 pattern and that one of theses patterns will nest in an impulse while the next one will nest in the corrective wave In other words a cycle overlaps two patterns and once the 5 wave pattern is completed the wave counter for all sub waves is reset to 1 and the next sub wave will be either a 1 or an A When the main trend changes all the waves are reset to 1or A Chapter 3 Filtering Waves Let us deal with the concept of filtering waves di
108. hile the last four should be in the Volume inner window You can choose to have no scale or use left side scale to protect your volume scale Your AlphOmega Simple template should look like the graph in Fig 1 below The other AlphOmega templates Elliott Waves 8 Elliott Waves 13 and Elliott Waves 34 will have all of the above where the 21 is replaced by 896 1396 and 34 If you place an icon at the bottom of your window the templates are called at will and do not replace your smart charts All these templates are included in your set Please take the time to verify that the correct settings are in place for the indicators with an asterisk otherwise all the templates will show the same Wave depth One word before we get in the screens layout The Explorer and the charts should be run with the largest amount of data you have In the options have used Load 3500 records because the slowest cycle can evolve over many years Since you must capture one full wave At least one Peak and one Trough before The Expert Advisor can see it you must also have a full cycle of waves before you can track accurately wave 5 or A B and C The Expert Advisor forms an opinion on what is displayed and so it cannot know that this wave is actually the fifth if it doesn t see the previous four The more data you have and the more reliable is the wave count Load Options r periods display Prompt for dates when chart is opene
109. ic Pitchfork Trend Resistance and Support Weekly Pivot Point Gann Angles Cycles and Fibonacci Levels are part of the offered selection 65 Fig 28 Pitchfork The use of the pitchfork is like that of a 2 5 channel if the price moves out of the pitchfork so the trend is changing A good pattern should travel from the external forks towards the middle one then to the opposite fork In the 40 example the price trend has reversed when wave 3 diverged from the outside fork This is not unusual when we are dealing with a C 39 wave The fork will redraw automatically when 55 the trend change is confirmed by a retracement equal to the sensitivity used 15 Trend Resistance and Support are like the AO PTF we have seen in the Simple template 0 5 28 M w e m co 2 2 lf 2 November December 2003 February March Fig 29 Gann Angles The use of Gann Angles is the subject of big books but we will try to simplify Gann theorized that price was trending according to geometrical patterns if we draw a square a price move of 1 unit would consume 1 unit of time and thus the slope would be a 1X1 ratio He proceeded then to identify the most common ratios used by price Our automatic indicator will compute the slope for 8 of those ratios using the sensitivity to capture the base ratio 1X1 and derive the others from it So we don t have to modify the space between bars to make a perfect square the indicator will ad
110. ice projection that is based on the preceding pattern It is a probability and its accuracy is greatly dependant on the fit of the pattern to the norm This calculation only accounts for price constraint and market sentiment exhibited before the projection many events taking place after could impact the price and impair the accuracy of the forecast It is very much like a poll and should factor as such The blue line is another valuable indicator it is a trend line drawn between the 2 latest peaks or troughs and in this case it is a bearish crossing A crossing of a trend line as we have here is very significant Casting a look at the moving averages tells us what is going on in three different time frames bearish in the three time frames as price is below all three the color of the candles and the corner indicator at the bottom of our screen provide additional bearish information 13 The bottom of the screen completes the picture with the volume moving average dark yellow the Relative Momentum Index thick red line is definitely bearish as is the Relative Strength Index magenta line and the Dynamic Momentum Index dark blue line If we had conflicting signals we would have a choice of moving to a security with none or gauging the overall value of the present security This one is definitely bearish and a candidate to trade short Before rushing in a trade a few steps should be taken 1 Check the Fundamentals of the security even if you fee
111. ig 42 42 AO EW 2 is another setup exploration to detect a wave 5 about to end The report column displays for the integer a 5 and bars since signal in the fractional part Other columns are the Elliott Oscillator the DMA Displaced Moving Average the minimum target price for wave 5 and the last closing price Bull Bre SOS Min Togt 17 000 33 7900 39 0000 24 6700 3 8500 AR ERI 1 0000 1 0000 1 0000 1 0000 1 0000 46 1935 45 8525 29 6947 2 9404 Fig 43 Close 45 8700 46 2000 20 400 4 1900 Ticker 5y 17 9500 AO RSI Divergence is an exploration that scans for divergence between the RSI Relative Strength Index and the price If the divergence is more than 3 it will be listed The report columns are the 3 divergence signal bull or bear divergence the last closing price and the volume 35 Div 1 0000 Bull Volume 29359 0000 8833 843b 843 0000 154721 4531 12305 0000 6320 0000 4705 0000 22500 0000 34785 0000 1584 0000 3203 Bear Close Fig 44 Fal 51 7374 26 9596 50 9226 50 1350 r 2929 ire 50 6205 24 692 23 1333 43 5571 Ticker ASTM ACTT ADCT RET AMG ACY AL AAP s 3s AO Triangle Exploration is scanning for triangles formed by waves It scans 3 sensitivities and the report columns provide a signal where minus is bearish triangle and the number of ba
112. ils The alternate count disappears when the threshold confirming the prime count wave is crossed Test Alternate count cannot be more than a wave 2 can you figure out why Remember that the alternate count is valuable information Some explorations are very slow to run as they indirectly call on indicators that are not part of the exploration In the note box of the exploration there is an indication of the execution speed All the ones starting with AO are usually faster Explorations like RSI Trend Violation and Trendline Violation will give you a list of the securities where the RSI or the price has penetrated the trend line These signals will last for only a few days to avoid listing securities that are too far along the new trend 37 TIP A useful tip is to sort the results by bars so we look first at the most recent additions to the list It enables us to focus on the fresh opportunities If we open our charts from The Explorer window the default template will normally appear instead of the specific template that would fit the exploration There is a way to overcome this by simply calling the templates we installed earlier This action will open a chart in addition to the smart chart would also recommend applying to this chart the corresponding AO ZZ indicator to ascertain that it is still moving in the proper direction It is a lot easier to see how the waves are counted when we have the indicator in front of us Use the AO
113. imes the golden ratio in other words times 1 618 When applied to the waves this theory enables the projection of price and time objectives for the market behaviour Modern technicians have established relationships between the different waves of the cycle and elaborated rules and probability calculations This set makes use of these rules and accepted relationships between the eight waves of a cycle In addition it will monitor 4 different cycles to enable you to trade different timeframes and risk levels Elliott Waves Basic Principle Now let s see how this relates to the basic clean chart as displayed by MetaStock i HH Hd H rn Al li ut Fig 4 If we link the tops of each bar we get a line that changes direction and sort of looks like ocean waves Elliott quickly seized this similitude and defined a wave as series of successive bars where each high is equal or higher than the preceding one and each low is higher than the previous one conversely series of successive bars where each low is equal or lower than the preceding one and each high is lower than the previous one lf we apply this to our chart using the AlpghOmega Absolute Elliott indicator we get the following Fig 5 Already the waves are more discernible and steeper by the mere fact that we chose between the high and the low to connect the bars We also observe that the rule as simply as it is stated does not answer all possible relationship betwee
114. ing the 144 days EMA and the 55 days EMA we look for a price that is above for long trades all these averages Next if the 55 days EMA is getting further above the 144 days EMA we have a trend getting stronger On volatility we don t want too much but we need a minimum if the wave is to come through Let s avoid securities that are in a consolidation mode they make waves that move within a narrow range Finally we check the Time Projections to see if the pattern is running out of character and out of time is it in long winded extension Looking at the chart below we see that there are no time projection not yet met by the histogram This round will require a lot of practice but let s not forget that it is a selection within the best our risk should be very small at this point if we misinterpret the charts AGPETD AQ Wave 12 2 00 31 0000 0 00 00 0 00 16 0000 50 1000 19 0000 I A pon the arrow points is last Fibonacci lol HL for o gt Fig 68 8 Third and last round is comparing the fundamentals of the remaining candidates We cannot do serious trading not knowing what we are buying We don t need to plough through tons of annual reports just to go to a good Internet financial information site and compare key financial informat
115. ion Earnings per Share EPS capitalization oales and Earnings forecast Debt Equity ratio and Cash This step will prevent us from buying an almost bankrupt stock This will take away all the would be candidates and leave with the best at hand today Yet we don t have to take it maybe all of them should be discarded If not then go for it Beware that we are not looking for the same signals if we are short selling we want a company that is in trouble 9 Having selected our best candidate we now make a trading plan We determine an entry price a stop loss and a target price before placing an order Most AlphOmega explorations will give us most of that information Once we re in the money our stock is better than our entry cost price commission we can move our stop loss higher to protect our profit if we are long like to get out when made my target even if there is still some action Managing our investment is as important as selecting it We don t leave it to others to tell us when to exit we want to be in control Using the Signal Scan exploration to make sure we did not forget to exit a position that is ripe by looking for the fresh exit signal if we were in a wave 3 then a wave 4 signal should trigger our exit It is better if we do not use an exploration for an exit signal MetaStock is not a portfolio manager If it is the only tool we have we then create an alert that will warn us that the price target or the stop loss has be
116. ion coupled to the trend line the green wave 1 in July with it we can scan the entire database even if we have not inserted the indicator in our template It will flag for us the violations and the bars since its occurrence AlphOmega Auto WLR Wave Linear Regression is similar but uses linear regression of all prices closing within a user specified number of bars Jod 27 April ay June July Other Indicators There are many indicators coming with this set refer to the appendix for a complete list and description 1 One inherent limit to these Indicators or Experts is caused by the way MetaStock handles functions that are not defined Any formula referring to this undefined function becomes undefined and has no value not even zero the indicator simply does not show on the graph To overcome this there is a set of indicators that will give us a wave count although the larger order is still undefined This is done automatically in The Expert Advisor but not in The Explorer where a special exploration to pick all the securities that are trading in the undefined sensitivity is required Nowadays we avoid trading the undefined because we could be trading against the trend 2 To actually display the way a price bar is considered in Elliott methodology use the Absolute Elliott that will display a red line between all selected highs and lows 1 i 1 H Fig 27 Absolute Elliott 3 Line indicators such as Automat
117. ip wolfewave com They provide the tutorials and some very good samples of patterns in different markets My approach is from an Elliott Waves perspective although following the same rules since the pattern is now commonly known by that name need to state that have no knowledge of their specific methodology only a personal interpretation and don t know how successful they are with theirs Chapter 4 Price and Time Projections AlphOmega uses 2 styles of price and time projections both are based of the same Fibonacci golden ratio but they are used in different conditions The one we have seen so far is the current price or time projection it is called current because it can only work on the bars since the latest peak or trough of the same sensitivity As the price moves to a new peak or trough the projection will be replaced by a fresh one using the new peak or trough At times we will need to see how a security has done versus projections in the past this is the back testing or historical projection To use that style we will need to enter a date and time from which we want the projection to be made Let s go through an example of each type to understand their use 20 Current Projection Wr T Lr eS 27 iw RENE oom L EL ed EI Ls Eg Tl Ed ete ti N 3 eB fe 5 August SSS Fig 18 July This screen from Agile Software shows the
118. it resets the calculation for where the new wave five will carry Sometimes we will see more than one extension to wave five in fact we may see a whole new 5 wave pattern this could be indicative that the volatility is measured poorly by the sensitivity percent used in the expert or events of crucial importance took precedence in the market sentiment Try looking at a larger timeframe or sensitivity when we keep having repetitive extension waves will help to overcome this Important Please note that this nomenclature of x wave is specific to AlghOmega and differs from textbook definition By definition an extension is a five wave pattern within one of the impulse waves comprised in a five wave pattern From this definition you can have an extension in any of the 3 impulse waves Our definition for the x wave is closer to the missing wave of Glenn Neely or simply like a bridge between the wave 5 and its extension that is a continuation of wave 5 In fact there could be more than one x extension if the volatility is too high This will happen in times of strong trends Because the filter cannot cope with the acceleration in price movement it will display erratic peaks and troughs The filter is static and cannot be made dynamic for the time being MetaStock does not allow a variable in the arguments of that function Our x wave never takes place after a wave 1 or a wave 3 but a grayed wave 3 and 4 may be followed by an adjusted wave 3 and 4 This situa
119. just the slope to maintain the integrity of the ratio When price starts straying from the ratio it was aligned with the trend is changing Fig 30 Gann Cycles use a base 8 to divide the progress of a cycle through time It then seeks to match this length of time to the next waves of the same sensitivity by projecting in time the expected reversal points Note that the projections for future bars do not display until there is price data for these bars To display properly this indicator must be dragged on the chart and when the properties dialog appears enter the sensitivity change the style of line to histogram when asked which scale to use select none This will make the histogram float freely in the price pane as displayed above Gann related indicators All indicators referring to Gann levels or angles are not displayed in a way that the geometric relationship is apparent Gann uses symmetry and geometry to measure price progression To perceive this relationship the display should have the horizontal and vertical scales in the expected ratio to form square boxes However the calculations are correct in spite of the appearance 29 4 There is an AlphOmega Consolidation Triangle warning indicator This indicator attempts warning the user that the security is entering a consolidation phase This indicator is also in the Expert The indicator is a binary type it only has a value of 0 or 1 5 The AlphOmega Highlighter is a pri
120. l 150 00 9 Short Maintenance 150 00 95 Slippage Buy Sell Sell Short Buy to Cover x Back Vig Plot on Chart Discard Fig 53 Other System Tests AO Elliott Ind is a system test that will scan for waves generated by a user specified indicator not the price So we could trade on the waves of the RSI for example This system uses the P variable from MetaStock AO Elliott Waves Normal EMA is similar to the other system test but will exit on a cross of the exponential moving average These variations on the base theme seek a faster exit signal AO Elliott Waves w Opt is the same but the sensitivity is optimized with values between 3 and 50 in increments of 1 Only the triggers are used to enter or exit a trade AO Elliott WolfWave is testing the well known pattern As mentioned several times this pattern assumes a wave failure SO its results are mitigated The sensitivity used is 21 AO TSI is the system test of this adaptive moving average similar to Vidya AQi are the same as the system tests described above only the sensitivity is reduced and in principle the test should be performed on intra day data or very low volatility securities 55 Chapter 10 Experts The Expert is activated from the menu by attaching it to a template or a chart It is the code that will generate our labels for waves color the bars according to set conditions display a commentary as in Fig 54 The commentary will be adapted
121. l you will hold it only for a short while 2 Figure out your stop loss and your entry price before the trade 3 Set your target price so you can e a Cashin some of the profit as you go along e b Move your stop loss so it is tight enough to protect your profit Keep in mind that this is not a recommendation to buy or to sell securities It is educational material and you should do your own due diligence before entering a trade The AOi Simple template works exactly the same way and uses similar indicators that are set for sensitivity of 5 as the sensitivity ranges from 196 to 8 The template is used for Indices or low volatility equities where the price changes very little when expressed as a percent of the security price Explorations for intra day securities should be restricted to a small number of candidates as we run it off the quotes server unless your provider allows you to download intra day data The expert used in AOi Simple is the AlphOmega Elliott Waves LV where LV stands for Low Volatility This expert can be used with Indices low volatility security or intra day data The expert does not care about the end use but is very sensitive to price changes If we use it with the wrong level of sensitivity say a highly volatile stock it will display too many waves and signals will not catch the bigger waves displaying instead an LC Larger Cycle label If it happens all we need to do is call a higher sensitivity expert and attach it
122. le through the AO indicators where you input the date from which the calculation must start however this indicator is fully automatic and requires only a sensitivity input AlphOmega Highlighter 8 13 21 34 1 3 5 L1 to L4 This indicator provides the price projection based on the Fibonacci numbers and integrating the rules of alternance and similarity from Elliott It does not provide a range but a single value that fits best the rules It can be used in combination with the AlohOmega Similarity of a Wave The variable AOHL can be used in a formula to refer to the output of the indicator AlphOmega Pitchfork This indicator plots the Andrew s Pitchfork lines for the sensitivity you selected Other than the sensitivity no input is required the indicator will adjust for incoming data It is very useful to plot the channel in which the price action will take place should it move out of the fork you know whether a new trend is taking place or it is getting stronger in the same direction or it is changing direction Using forks at different sensitivities can help pinpointing the smallest trend change AlphOmega RSI RMI Trend This indicator generates automatically a trend line on either the RSI or the RMI It uses Peak or Low functions so that the sensitivity should be adjusted to your preference If there is no trend the line is flat at the last peak or trough It is useful to flag a significant change of trend in the above indicators th
123. ler cycle that will repeat itself This is called the fractal theory and it says that the patterns are replicating from a small scale to a larger An example of decomposition of waves for a complete cycle would be 5 3 5 3 5 5 3 5 read 5 waves followed by 3 waves and on To make it easier to follow a simple graph will describe what Elliott Waves and its typical patterns are The thick solid or dotted lines are impulse waves the others are corrective waves A corrective wave should not retrace more Wave 5 than the entire impulse wave an impulse wave should move Wave 3 beyond the end of the previous e impulse wave p An Elliott cycle is composed of an ascending or descending five waves and a three wave s corrective suite An impulse wave can be made of a complete ascending or descending three or five waves at a lesser scale Fig 3 Knowing the waves pattern in itself would not be of great help if it was not for the complementary knowledge brought by Fibonacci an Italian mathematician from Pisa Although he lived in a very different era his contribution is enormous to the use of Elliott Waves He postulated that there was a proportion or ratio that applied to natural phenomenon which he called the golden ration He proceeded to prove it with calculations and a list of numbers came out These numbers are 1 1 2 3 5 8 13 21 34 and so on Each number is the sum of the previous two and in addition corresponds to the previous number t
124. market definitions Please note that there is much disagreement on the Fibonacci ratios to be used to match a specific pattern There is also a question of accuracy that is how close to the ratio must the retracement be To avoid taking a rigid approach we decided that the indicator should allow the user to choose the percentage of precision while we adhered to the ratios of Harmonic Trader as they made more consensus than others The Bat Pattern Fig 69 Left we have a bullish Bat pattern while the bearish version is on the right With the pictures come the Fibonacci ratios to be applied Below is a screenshot of an AlphOmega detection made with the exploration and displayed with the indicator AO Patterns The chart displays the Zigzag pattern of the Bat from its origin and then it displays the close while the trade should be taking place The minimum target for most of these patterns is 61 896 of the CD leg Be careful it is not 61 896 of the peak or trough We highly recommend that you get familiar with these patterns before you actually trade one They are all based on a reversal of a trend Keep in mind that not all the ratios have the same importance in the definition of the pattern hence the need to know the crucial ones Let s also bear in mind that the length of the line is irrelevant it is the range of the price that is key When looking at the purple line we can see that it is like a letter M and that the CD leg is not longer than the o
125. mber of candidates is very low less than 0 196 The looser the criteria and the larger the number of hits MetaStock Professional Abgenix Inc 22 5000 ABGX File Edit View Insert Format Tools Window Help 4 ae a gt Bx eR F 0 Pattems g fo R du AO STORS A0 PRT D Wave nix AEDES AY ERE MON e ES er 100 ey ew eae ay T 7 CAA 0 verre em ee HEBEL 50 vai MELLE LENGUA V Ny i 20 AlphOmeg AG FRAMA AO Patte N 234 23 22 22 21 21 35 20 1 19 E 184 18 Mo i 3 16 16 EN 15 2 14 14 R 13 Aur 12 11 11 10 10 9 9 8 8 7 7 6 7 6 5 5 4 4 3 3 2 2 m Alph meg AD Ellio 0 0000 nix 2 pue 100 ge m VE AN zi u amp yaar ae SZ Wenn ee A ll us S TTL TAA 1 a m 40 Colored Yolume 0 nix 60000 60000 50000 50000 40000 40000 30000 30000 20000 20000 10000 10000 Fl IM June July August September October November December 2006 February March April x _ 400 H Dv D o w Ge e e o Fig 77 80 Conclusion These simple explanations should enable you to use immediately your Experts Indicators System and Explo
126. merit of simplifying the concepts without loosing the essential Note that have no connection with Robert Miners or his site his information is public knowledge you are interested in an academic approach then you Will want to visit the Elliotticians in Australia The approach is a lot more detailed from a descriptive point of view of the theory it is not as good from an application standpoint What mean is that it is more difficult to extract a process that you will be able to follow to select your investment portfolio The site is at http www elliottwave com For those who wish to learn about indicators and use of MetaStock there is an Australian site that strongly recommend http www stockcentral com au It is well managed compared to the forums available from Yahoo not meaning that Yahoo is responsible for what their customers are doing Spammers are a plague on any forum 75 Chapter 12 Special Patterns When trading Elliott Waves we come across patterns that look like Elliott but that fail the test These patterns are frequently in consolidation markets The Gartley the bat the butterfly and the crab are among those and they are discussed in detail on the Harmonic Trader site www harmonictrader com As many of you requested an indicator that would detect and flag these patterns we have designed one that fits with our methodology the filtering of waves It works like the AlphOmega set and it is based on the accepted
127. n the bars For example inside days the last bar has a lower high and a higher low than the previous or outside days the last bar has a higher high and a lower low than the previous cause a dilemma as too which from the high or the low do we choose On top of this this rule does not account for the direction of the trend within the bar itself from the opening price what was the direction of the price Did it go from high to low to close or something else The later cannot be answered from the data downloaded all that is certain is that the opening took place before the closing but we don t know 6 if the high was hit before the low or the reverse However we can elect that when the close is higher than the open the trend is bullish and it is bearish for the reverse situation It may look trivial at this point but when you will be faced with making an entry you will understand its importance Furthermore when making projections for price the results will be noticeably different Note that the indicator has a set of rules to decide which of the high or low it should take making it easier than remembering the individual rules Back to our waves could we trade on the basis of this information alone from a technical analysis standpoint We certainly could but the whipsaws would be costly in commissions or brokerage fees We need to filter or eliminate some of the swings we need to look at a broader picture Let s apply the AOZZ indicator and use
128. n bar the last close or exit price as the previous exploration the entry price at the bar following the cross the expected price target and the percent profit between the entry price and the close or exit Results Rejects Exploration Stplzs Closers Entry Tat Prt Ticker Sur 6 1400 zi ll 2 5 BL 0 04629 BER 594 CHH CERT CHEL DOD LFTL Sumbaol Buy Sell Vendor Fig 38 AlphOmega Signal Scan is exploring 3 sensitivities for recent confirmation signals less than 3 bars If we look carefully at the report we can see that at least one of the three sensitivities will be less than 3 bars old The second column is giving us the percent of change since the signal So 0 0556 stands for 5 76 21 lt ROC T Br ROC 34x Bm ROC TickerSy 3 0001 0 0556 Fig 39 41 AlphOmega Vidya is based on Tushar Chande s indicator and it will scan for a cross of the Vidya line The Vidya indicator is an adaptive moving average so its average accounts for sudden volatility changes The report columns show Long and Short trades 1 is a short the stop loss the last close or exit price the entry price the accumulated profit since the entry the profit as a percentage of entry price L 5 Brs 1 0021 15 2500 000 1 6600 EFIE 141 5900 21 6400 11 3700 0 5000 34 6000 Close 16 45 50 9500 1 7900 6 5500 141 3
129. nel This indicator will plot an average of the highs and the lows thus forming a channel This indicator has no parameter but uses 10 periods for the moving averages of the high and low When price strays from the channel volatility is higher the channel almost acts like an 4 0 102 AO Impulses GT This indicator will plot the number of good impulses for the specified bars period and the specified sensitivity It will also provide number of good impulses and total impulses This is for a quick back test check of the fit of sensitivity to the price action of the security TT TTR LTH See irent alll AO Input W Highlighter This indicator will plot the standard projection for the specified wave number from latest peak or trough at the specified sensitivity Useful if you want to check different sensitivity without having to drag several indicators in your chart Make sure the wave is still running otherwise it will not display anything 45 2 40 i ji 1 1 ee N 5 1 Y 2 20 x 1 5 Ves THe o zw 103 AO Latest R amp S Boxes This indicator will plot the latest wave resistance and support level for the specified sensitivity The resistance and support used are the previous peak or trough of the sensitivity Its main advantage over the PTF indicator is that it shows the older data so you can find how reliable these supports and resistances have been in the past 4 0
130. ng mechanics of a system optimization is excellent to fine tune our trading signals once we are satisfied that the system executes properly the code optimization should not mask inefficiencies with its benefits Many of us will try to use the system tester as signal generator for trades First we should know that the indicators do not function the same way in the system tester as on the chart No matter how we write the code we will never match precisely the buy and sell signals from the system tester to our indicators In addition to running our indicators the system tester has its own logic and code to deal with user parameters such as delay stop loss and more It cannot deal with 2 signals on the same bar and yet it will exit long and enter short on the same bar Nevertheless we must strive to make indicators that will issue signals on time and check the system tester code to see if it parallels the indicator signals or is at least reasonably accurate 2 MetaStock Professional Agilent Tech Inc 18 9200 File Edit View Insert Format Tools Window Help mx amp gt Maza v amp fu amp 5 apama Normal 21 Equity nix des ELAn T TEA in n ENERO dd x alH w Sh SR RR 100 11 b ae za M j V od A WA y 11 11
131. ng on the trend We use it to differentiate between a third wave and a fifth wave as you will find out later in this manual The RSI and the STORSI are used to time entry or exit but not to pick a top or a bottom of market The Demand Index is better at picking top or bottom of market because it incorporates volume in its calculation Do not be concerned if you do not understand everything at this point we will discuss in more details each part of the screen Terminology The terminology we use through the book is that of R N Elliott To describe the various cycles of wave pattern we use four descriptive in each Expert The cycles are divided in fast 8 moderate 13 normal 2196 and slow 3496 for the normal volatility NV expert they are divided in ifast 196 inormal 396 islow 59e and fast 896 for the low volatility LV expert used in the AOi Simple template These cycles correspond to intermediate primary cycle and super cycle for the normal volatility expert they are minuette minute minor and intermediate for the low volatility expert The correspondence is approximate since we use a mechanical approach to the evaluation Sensitivity refers to the used as a filter In addition there is a Futures expert with sensitivities from 0 396 to 2 1 a HV High Volatility Expert with sensitivities from 3496 to 14496 both are used in special conditions The Futures is used for high price conditions such as for indices or securities
132. ng perspective the problem really starts with the fifth segment most of the time the last segment will be the one that breaks out of the triangle while at other times it will bounce one last time against the wall before breaking out For this reason the triangle is difficult to trade In our chart the fifth segment broke out of the triangle which is very common The safest way to deal with it is to wait for the breakout from the triangle here at 3 25 before taking a position Then with appropriate stop loss and parabolic stops we can make a profitable trade This pattern converging triangle is very similar to the Wolf Wave and the difference is in the fifth segment where the Wolf Wave will touch or penetrate a little the wall to break out the other way With the indicators come the explorations for various sensitivities The whole set is easier to use once we understand the nomenclature Of all the accepted rules for Elliott there is one aspect where AlphOmega does not follow the pack When a triangle flag or pennant is taking place a sequence of waves takes place where the labels should run from a to e w y and z These waves do not follow at times our internal definition of a pattern which is wave three does not top wave 1 wave 5 does not top wave 3 With version 4 3 AlphOmega has created a special set of symbols that will start displaying a converging triangle from wave 3 and the letters c d and e will be used Here is how it will look
133. nprofitable Trades Margin Calls 0 Total i Overdrafts 2 Long 3 Short 4 Profitable Timing Average Loss t 420 81 Average Trade Length 58 Highest Loss t B878 75 Longest Trade Length 95 Lowest Loss 25 11 Shortest Trade Length 14 Most Consecutive 5 Total Trade Length 583 Maximum Position Excursions Unprofitable Timing Long Favorable 2749 57 Average Trade Length 18 Short Favorable 7589 46 Longest Trade Length 40 Long Adverse 1361 87 Shortest Trade Length B8 Short Adverse 411 75 Total Trade Length 127 Trade Efficiency Out of Market Timing Average Entry 3 50 o Average 30 Average Exit 356 880 5 Longest 130 Average Total 15 36 5 Total 164 Average Long Entry TDA e Average Long Exit 25 56 Average Long Total 15 88 Average Short Entry 69 84 5 Average Short Exit 46 94 Average Short Total 15 78 5 54 Enhanced System Tester Result Details View 4 ES Options Save d Print f Help Summary Orders Positions Equity Simulation Options General Options Broker Options Points Only Test Interest Rates Initial Equity 10000 Margin Default Size 100 Units Money Market Trade Long Yes Trade Short Yes Margin Requirement Optimizatian Results 5 Lang Initial 100 00 95 Long Maintenance 0 00 5 Trade Execution Options Realistic Market Prices Buy Price Sell Price Sell Short Price Commissions Buy To Cover Price Entry 1 00 Of Transaction Cost Delay To Open Exit 1 00 Of Transaction Cost Short Initia
134. nsitivity orB MEE vet T 2 1 2 8 a i 1 2 1 Wi 7 0 or 1 It is useful to check the acceleration of a pattern or a noticeable slowdown of the momentum 98 AO Gann Range This indicator will plot the Gann ae in eights fpr the specified date of the peak or trough of specified sensitivity The types are shown on the ehe N 5 je net ta the displayed chart Sensitivity x 85 Year in format yyy 2003 F s aue Time Bar in farmat mrmddlah mmi nan 3 75 Tipe 1 z aqit 4 iocks T d 7 0 65 6 0 55 2 0 4 5 4 0 35 d P e yu iy Fa 30 La NENNT 25 Hh ET a 20 1 5 xi 4 Y 1 0 icu 2 z 4 0 5 ors SON In asco sensitivity You Can also A E mbe le number of lines to display and the type as shown in chart a al aue Time B ar in format 101 00 Mumber af Vues 5 Degree 1 180 or 0 2201 ah 43 43 or A 2 5 1 1 1 Q2 i2 4 X3 21 2 4 2 BE B 99 z nem n a st x a AO Gann 3 ator will plot the price levels for Gann squares and degrees from thetdate of the peak or trough of specitie elect the type of projection like 45 degrees square etc 17 nth D ay Time Bar in Format mmddhh mm 10100 St dt 16 1 8 2 45 3 54521 S 15 14 13 12 11
135. nt Summary Agilent Tech Inc Alcoa Inc AD Elliott Waves Normal 21 Results ID Security Symbol Period Date Range Met Profit Gain Tra Trade Profiti Avg Status i Agilent Tech Inc Daily 1999 11 7255 39 72 55 17 10 7 2 10 Completed 2 Alcoa Inc Daily 1398 04 i2282 83 22 03 5 4 el 5 25 Completed Back Viel Plot on chart Discard Fig 51 This is a view of AO Elliott Waves Normal 21 system test on 2 securities picked this one to show that even under adverse conditions it is possible to generate a trading profit This example tells us that out of 17 trades on Agilent 10 were profitable and 7 lost money Yet the overall gain is 72 55 and what explains this is that the losses are smaller than the gains Wave s failures also account partially for the loosing trades Alcoa is even worst with a 50 50 trade split and again the percent gain is 22 83 The system parameters are shown in Fig 51 There is no delay in the execution of the order because the delay is already built in the system code When looking at the chart in Fig 47 with the buy and sell signals it is obvious that a one bar delay is used The interest rate was realistic at the time the system was run and the same could be said about the commission rate The closing price is used on all 4 types technically the open should be used for long exit and short exit Many systems will give a common signal for entering long and exiting
136. o L4 AO Impulses GT AO Input W Highlighter AO Latest R amp S Boxes AO P amp T Duration L AO Patterns AO Pivots and R amp S AO Points Trig AO Price Projection PW2 AO Price Projection PW3 AO Price Projection PW4 AO Price Projection PW5 AO Price Projection PWC AO Price Projection W2 AO Price Projection W3 AO Price Projection W4 AO Price Projection W5 AO Price Projection WC AO PTF and L AO PTI AO PW2 AO PW3 All Sens All Sens AO PWA All Sens L1 to L4 AO PW5 All Sens L1 to L4 AO PWC All Sens L1 to L4 AO Sensitivity Optimizer AO Signal Scan 21 and 34 AO STORSI AO Swing Lines AO T All sens L1 to L4 AO Time Projection W2 AO Time Projection W3 AO Time Projection W4 AO Time Projection W5 AO Time Projection WC AO Timeframe MA AO Timeframe R amp S AO Today and L AO Trailing Stop AO Triangle AO Triangle at Date AO Triangle gt AO Trig Hist AO Trig Levels AO TSI AO TW2 AO TW3 L1 to L4 L1 to L4 N Umm Uum Umm Aa All Sens All Sens AO TWA AIl Sens L1 to L4 AO TW5S AII Sens L1 to L4 AO TWC AIl Sens L1 to L4 AO Vidya AO Vidya s AO W4 TRC AO Vertical Line AO Vidya AO W4 TRC AO Wave 4 Failing All Sens L1 to L4 AO Wave Performance Monitor AO Wave Price Projection All Sens L1 to L4 L1 to L4 L1 to L4 SE es 109 AO Wave Three Rule All Sens L1 to L4 AO Wave Time Projection All
137. ofit percentage is measured from the entry base of 11 34 Although the profit looks pitiful when compared to the wave it took 122 bars to reap it If you annualize the rate it is the equivalent of 59 8 on a trading year of 240 bars Can we improve the profit zone by improving the confirmation signals To ignore the confirmation signal means that we don t know if the wave has really started or ended The risk is that if it hasn t really started the price could head in a different direction At the other end the price could continue its trend after we have exited There are tools like Fibonacci and Gann projections to help you evaluate if a peak or trough has been reached Other indicators such as momentum or trend will also provide valuable information they are not reliable in every market If we do not want to compromise on the confirmation signals is it possible to know which waves will yield enough potential to provide a reasonable profit There is no absolute knowledge however there is a necessary condition always trade with the market trend Waves that take off too quickly can falter early Back testing with the security will show typical potential Good wave identification is a solid foundation This is the area where personal experience will lead over concepts Note that this is the most conservative way of trading the waves and that it excludes using price and time projections to anticipate the reversal There are many tools to get earlier signal
138. or currencies that vary very little in percentage over the studied timeframe The HV is typical for Penny Stocks or securities with large price variations over the studied timeframe This is the area where your own judgement will make the final decision as to which expert is the most adequate To assist you in making the decision use the AO ZZ All4 indicator to display graphically the trends and corrections You are looking for trends that deploy repeatedly over your preferred investment timeframe tH Worldgate Communications Inc 2 06000 WGAT TER 1 T 20 eee 10 Oty Nehe aa pd ett TTT TN Ee PT at NI 2 L This is an example on displaying 4 different trends with AO ZZ Ald The timeframe is the time required to deploy an impulse wave It is Here we have a expressed in bars of the selected periodicity ten bar interval p pi Dip E e NUN NUM 26 March April x 1000 D 4400 4E Chapter 2 Elliott Waves A Graphical Overview Elliott waves are based on a study of market behaviour from R N Elliott His theory was not as complex as the rules derived from it by modern technical analysis Generally the market will move in cycles and Elliott postulates that a cycle is made of a rising trend of five waves followed by a corrective move of three waves hence an eight waves cycle Within each of these waves you will have a smal
139. ots the channel for a wave 5 as shown by the dark cyan lines Shown at the same time is the Wave 5 Target in dark red and the displaced moving average in blue This is a screenshot of the template Aget The parameter for this indicator is sensitivity The indicator will not plot a channel if there is not a wave 5 deploying instead it will default to the latest resistance or support if n iv 24 AO Fib Price at Date P This indicator will plot the Fibonacci price level from a selected date for a peak or trough and the selected sensitivity There is a choice of type of projections between 1 Alternate 2 Corrective 3 Extended and 4 Exponential The lines start at the bar of the selected date The Fibonacci ratios range from 382 to 2 618 and more with the Exponential type i j d w jl i Prats E F 5 Lu E 5 reete i m i 15 sui OL is gt 05 94 AO Fib Res amp Sup at Date This indicator will plot the Fibonacci resistance and support level from a specified date and for a selected sensitivity The parameters for this indicator are sensitivity date multiplier number of lines to display and the type type can be 1 Extensions 2 Roots and 3 Quarters i UU 5 1 np i e re dm oum B 62 zu 4 n oc co io AO Fib Time at Date P This indicator will plot the Fibonacci time projections for a selected sensitivity and from the specified date on the price
140. ow 1 volume average below 50 000 It takes Fou out of the trade if the close is lower than Column Column B Column E Column Column E Column F Filter FnmlVar Alph mega System One EQTY 10 00 Col Mame Cancel Functions Securities Options Help Fig 23 This is snippet of the code used in one of the system explorations no longer in use As you can see the formula calls for a variable that we can see when we open the function window in design or edit mode The names that are used by AlohOmega are mnemonics and we should easily guess their meaning If in doubt just e mail your question and we will answer promptly As we get more familiar with the set we have preferred indicators that are used in specific cases where we need to enter our personal parameters This is an ideal project to start implementing our own formulas A safe way is first to copy the indicator we want to modify and save it under a name that AlohOmega will not overwrite in the update process avoid using AO or AlphOmega Once the indicator is saved we can modify to our heart s content the code to suit our needs 25 initially we will deal with small modifications like altering the default input parameters so we don t need to input our settings each time we use it Indicator Editor Formula M ame Midas Display In QuickList Formula Year in format 1900
141. phase The report columns show the signal or the target price the last close the target gain bars since the wave confirmation signal and bars to the target Tar 214 Llose Toth Bars 212 Ticker Sy 32 0000 AMEx 4EP 0 0000 0 0000 0 0000 ANA 32 0000 amp RDM 16 0000 5 2 0000 ASIA 45 0000 ATTU 17 0000 14 0000 BEAM 44 0000 EMAN v gt Fig 48 44 Note that in explorations where the profit is shown on the bar that the signal is issued the profit percent or value will not always be 0 The Explorer keeps accumulating the prior data and does not clean the buffer until new data is available The formula feeds continuously the delta of price to this buffer After one bar all numbers are correctly restated Explorations The intraday explorations do not work like the other explorations They must be run on intraday data If you do not store intraday data on your computer you must select your data provider s database and run the exploration from his server This is very slow so you should explore only a small number of symbols These explorations are very sensitive and will yield too many signals on an end of day database Once the database issue settled we can say these explorations are yielding identical report formats and work in the same manner as the end of day explorations However the volume and price filters have been removed as we cannot expect to have
142. ploration although there are some in the set Yet we certainly can spot the ideal candidates from an exploration but as the day grows these results are no 74 nix 250 200 150 100 50 longer appropriate From step 3 to the end we can verify our choice and prepare our trades Many indicators are suited for intraday application and they will accept hour and minute input so we can monitor the trade on the real time screen These indicators are labelled with an i in their name Candlesticks are also very useful in short term analysis and it is the reason we opted for that format in our default template MetaStock provides a candlestick expert as well as good documentation in the User Manual Please refer to them to get familiar with candlesticks formation Day traders must use alerts within the expert to be warned of a specific condition taking place This is the best use have found for the alerts however be forewarned that only the active window will display an alert make sure you cycle through your day portfolio at regular intervals to give a chance to each window to display it This is an extract of guidance given to a client who suggested should write a step by step approach for newcomers to Elliott Waves Please note that there are excellent sites on Internet that will provide better and more in depth guidance on the methodology My favourite is Robert Miners at www dynamictrading com There are many others but this one has the
143. project how our trading system would have performed in the past under the parameters used We benefit from 10096 hindsight What we should be looking for is an equity line that is moving steadily up without jerky ups or downs Even if the system profits from one spectacular trade it is not good enough It has to perform on several trades to become acceptable So when we test different parameters we don t go for the one that gives us the highest return on one trade we go for the one with the most winning trades There are two types of systems provided with the set One type addresses all sensitivities it will tell us how the security behaves within the defined cycles The second type of system let s us test the desired sensitivity through the use of the optimization so we can fine tune our analysis or select the order of sensitivity that is the closest to the optimization basis mm A Elliott Waves Fast Equity Bl x 100 O0 ET mtu illias fe orl re NT rr Aj 100 aerial 1111111 1 pre 12000 100 5 11500 11000 10500 10000 9500 9000 50000 40000 Jj TT 30000 e 20000 IA BM a coo 0 ry March April May June July August September October November December 2003 February L3 Fig 49 This screen shows the result of a normal Elliott wave s system test with the buy and the sell arrows The result may look impressive but the purpose of sho
144. rademarks of Equis International Equis International makes no representation or recommendation about this set of Experts Indicators Systems and Explorations Site http AlohOmegaEW com AlphOmega Inc Longueuil Canada Phone 450 651 8181 or Fax 450 651 0557 All Rights Reserved Copyright 2003 81 Appendix 1 mega Blott Waves 57 Partial List of Indicators for MetaStock for Windows This is not an exhaustive list only the key indicators are shown For a complete list see page 80 AlphOmega Absolute Elliott This indicator provides the waves as defined by Elliott in an absolute manner the trend is established as soon as the high is higher than the day before or the low lower than the day before There is no filtering of waves and the indicator goes from highs to lows the close or the open are not used Its main use is to show which array open close high or low is selected according to the rules of the set AlphOmega ADI This indicator provides the accumulation distribution index of the security using moving averages This is not compared to another index or issue The variable ADI can be used in a formula AlphOmega Auto WLR and L This indicator provides the linear regression of the security using the closing price since the start of the wave There is a sensitivity input and it has a variable to be used in formulas You can select the sensitivity to match the time frame or wave size you want to st
145. rations With MetaStock and your quotes you don t need anything else to select from thousands of securities the ones that offer trading potential If you like using the set tell your friends so they can order it If you don t like the set take the time to drop E mail to roberttasse videoiron ca will reply and take in consideration your comments in order to improve the tool and satisfy if possible your demand There will be no advertising for this product other than good reputation we are trying to keep the price low so everyone who owns MetaStock can enjoy the set Put your money in the Market not in hardware and software If you would like to see improvement or specific features you have in mind please write or E mail to the address above There is a section called Commentary at the GoEmerchant Storefront for AlohOmega it will be updated regularly to provide insights on the use of Elliott Waves The first one is included in your set of files This booklet is not about recommending buying or selling but rather a guideline to interpreting the specified methodology This information should only be used by investors who are aware of the inherent risk in securities trading AlphOmega Inc and Robert Tass accept no liability whatsoever for any loss arising from any use of this product or its contents Please note that MetaStock and Equis are registered trademarks used by Equis International The Explorer M and The Expert Advisor are also t
146. red line The other red lines are the projections based on the Fibonacci relationship between the preceding waves As a matter of fact the peak of wave 3 where the green 1 or A is took place a shade above the first projection line The lines will run from the start date to date for look back projection The display is similar for potential waves or confirmed waves With the AO indicators we have price projections that are also made from dates and are easy to use All we have to do is to point our mouse over the peaks and troughs we want to start the projection from note the dates and input them in the indicator fields The date is always the peak or trough from where we want to make the projection Note that the difference between this indicator and the AlphOmega is in the validation of the pattern made by AlphOmega to apply a full set of projections The AO will make a projection that will have fewer possibilities because it is based only on the previous wave it ignores the relationship to other waves of the pattern It is for a fast Fibonacci layout 24 Chapter 5 Formula Building All the tools in this set can be duplicated then modified to suit our own need or preference We can even extract portions of formulas to create our own indicators experts explorations or systems The easy way to create our own indicators is by referring to AlohOmega indicators through the formula call and formula variable call functions of MetaStock
147. rice Projection but applied to time projections AO Weekly Support and Resistance Uses beginning of week data to plot support and resistance level using the highest and lowest of the previous week AO Weekly Histogram Plots a histogram that increments weekly from the input date This indicator is to be used in charts that are daily or shorter the idea being to be able to see both time frames on the same chart AO XTL Ag Extended trend indicator This indicator is based on the Commodities Channel Index and it points to an established trend bullish or bearish or to the absence of trend AO ZZ Core indicator that plots Elliott s zigzag to be used for waves This indicator uses the high or low of the bar accounting for inside or outside bars the zigzag running from the low to the high and high to low Please note that all indicators in dark red do not plot a graph They provide information to other indicators and their variables can be used in formula design oome indicators can be used in explorations or systems while others will only plot if there is an input from the user such as dates Many times you can overcome the input problem by removing the input function and substituting a fixed value usually the coded default Before interpreting the resulting information you should document yourself on Fibonacci and Gann theories Although the goal is always to forecast a turn point there are rules to be followed when using these tools oom
148. riginal XA this is a key point in distinguishing between the different patterns The Bat and the Gartley have a shorter CD than XA while the Butterfly and the Crab have a longer CD than XA 76 0 50 aT 0 Mit 50 D c A E A0 Pattems AD STORS 8 0 F 31 pa T 5 6 5 5 5 5 0 l d 8 amp 0 1 1 Inm MetaStock Professional Anadigics Inc 7 13000 File Edit View Insert Format Tools Window Help Wave J AG P amp T D an eo 4 0 mz 3 Ellio 0 94223 v 55 MB Snes IPSE pnr HH EI anan fE E A0 Patte 7 0 6 0 5 5 5 0 4 5 4 0 3 5 3 0 AO Colored Yolume 30000 20000 10000 NA dn 0 i TM MN V Y x 50 M fs nix 30000 20000 10000 0 0 b 12 19 je 3 10 pz 24 31 7 4 21 28 5 12 19 27 o t7 23 30 Jo 13 21 127 je 3 20 27 fiz 24 1 je fis 22 30 12 19 26 E May June ptember lt s October November December 2006 February March a Cmm SEN MEBEREEN For Help press F1 Here is a look at the di
149. roach we selected to respect the hierarchy of waves and always favour the display of the largest and most powerful wave The alternative is usually to display all wave labels for the same data point making the chart difficult to read this alternative is not possible with MetaStock as only one label can be displayed for a given bar 64 The last example we have is related to x waves We have seen previously that the expert can detect an x wave and when it happens we should anticipate the trend to resume Sometimes an x wave will take place although the wave has gone beyond the point where it is normally considered an x The expert will not flag the x wave since it is past the reversal point it will however label the next wave properly as a 5 As you know the extensions can repeat more than once in a pattern An example is shown in the red triangle Although the wave is called an does not happen in version 5 7 and up because the would be b wave retraces past wave the expert labels it a 5 and later a 4 because this higher sensitivity is also completed As can be seen from these 3 examples having the expert display the labels does not mean there is no interpretation to be applied The wave failures are more frequent in consolidation periods trading range while the x waves and extensions occur in strong trending periods The failure patterns were studied by Elliott chartist who derived construction rules and identified them as
150. rs since the making of the triangle ala 1 0000 135 1 0000 Bre 2 4 Bre 13 4 34 143 0000 Fig 45 Brs 54 3 316 0000 SE Ticker S 43 AO TSI looks for crossings in the TSI to generate a signal either bullish or bearish TSI is made of 2 moving averages slow and a fast a signal is issued when they cross while the direction of the crossing gives a bullish or bearish signal The report columns display the signals and the number of bars since the signal in the fractional part the value of the closing price when the signal occurred the exit signal for bull and bear and the profit difference between entry price and last close or exit price EET 1 0009 9 2700 0 7300 FUW S 24 F500 5 6400 41 7900 30 5000 14 5900 5 2500 0 6200 53 1500 59 7500 22 9900 Fig 46 AO Wolf Five n perf scans for wolf wave setups once the last phase is engaged refer to wolf wave pattern explanation above for the 2196 sensitivity The report shows the signal or and bars since the target price the entry price the expected percent gain the last close and the percent gain from entry to the last close Sig Brs Ta 21 Entry P z Frofit 1 0012 10 7120 0 4095 0 3158 0 6908 0 4096 0 7562 0 677 1 3320 0 6092 0 0808 2 0238 0 3968 0 9946 Fig 47 AO WolfWave Normal scans for wolf wave patterns at 21 sensitivity before they engage in the last
151. ry useful where the regular experts are not catching properly the waves and where the counts are inconsistent adjusting the sensitivity by a few percent points may make the difference between a count that we can trade and one we cannot To help you narrow down the base sensitivity an indicator was added to compute an average rate that would capture efficiently the waves it is far from perfect but will give a start value that can be refined The indicator is AO Sensitivity Optimizer and the global variable is AO GSe where we input the base rate f o Formula Formula Insert the most appropriate sensitivity for AOZZ az default value 4 Insert the most appropriate next inferior level for sensitivity of AOZZ az default value 32e2 22 35el 655e3 GS5e8 95e4 06GS5e2r 65e3 v EE The next screenshot is about a new expert that attempts to circumvent the screen slowdown By displaying less information you use less system resource A good way of using this expert is to combine it with the regular wave count expert You first look at the wave count at the daily level then the interval you normally trade i e 10 minute bars then you apply the impulse expert and monitor your trade with the arrows produced by the later expert If the situation becomes confused switch back to the wave count expert to reassess the pattern Fig 58a 60 MetaStock Professional Biomira Inc 1 56000 File Edit Vie
152. s with various risk levels At times we may not want to ride the whole wave but just a quick profit this entails that we are out of the trade when the price has reached a predetermined target However most of the time we worked hard enough to make the selection so we want the most of it In a recent article read that after years of compiling the gain from different systems the single system that outdid all of the rest was a cross of moving averages When we think of it it makes a lot of sense the delay caused by the slow reaction of the longest average is akin to the wave confirmation This is a reason why we like to use exponential moving averages with Elliott waves They provide a view over different time frames as we vary their length the same is true about Elliott waves when we look at 4 different sensitivities Trend lines support and resistance are very similar in their application to a chart their main difference is the number of points required to compute them The points are extremes and the path in between is not accounted for this is a plus for using them in tandem with the MA because they are more sensitive to a sudden volatility change than the MA that will average down the surge The combination of several of these tools will help us pre empting the confirmation signal to increase the gain potential of a wave By the same token our risk will also be higher so we need to use a stop loss to prevent a large loss from a counter projection
153. scussed earlier A filter normally eliminates all price movement that is not significant enough to impact on the analysis of the waves How do we know that we are not missing a critical wave that could change the count of our pattern To evaluate properly we must first have a visual representation of all possible waves we then apply our filtered wave count on the same chart Looking at the chart we can see that our wave numbers correspond to major peaks and troughs of the red AO ZZ indicator This indicator will plot the peaks and troughs using the following Elliott rules 11 1 today s high is higher than yesterday or the low is lower than yesterday s low 2if today is an inside day use previous day 3 if today is an outside day use high if previous was high or low if previous was low 4 if today s high is equal to yesterday high use high These rules incorporate inside and outside days they will plot Elliott s definition of a wave Experience has shown that inside days when the high to low range is included in yesterday s range are not indicative of the trend direction when filtering waves Ignoring these days will give better signals and eliminate whipsaws 40 35 3l 20 10000 A 5000 V p kal lil im iilii Im August September November December 2002 February March jApril May June July Fig 10 We observe that all major peaks and troughs are c
154. se particular lines is very significant as it implies either a change in the trend or in its momentum The crossing of the lines themselves is also a key to the direction the new trend is about to take In Elliott waves the trend is confirmed by a trigger that sets the wave s direction the moving averages do almost the same thing and thus have a great bearing in the analysis of an Elliott pattern 92 This indicator is a displaced moving average to help locating the end of a wave 5 in T2 type of setup There are three parameters periods forward displacement and data array i e AO ZZ or the close of the bar or the high and the low This indicator can also be used as an exit signal when price crosses over or under as it is more or less adaptive to volatility It is used as such in one of the system test 1 5 AO Elliott Channels W3W4 This indicator will plot the channel for a wave 3 or a wave 4 for the specified sensitivity Shown here is the sensitivity of 34 or waves labelled A and B in light green When the price moves out of the channel the trend is either loosing or gaining momentum depending which side of the channel is crossed The parameter for this indicator is sensitivity The indicator will not plot a channel if there is not a wave 3 or a wave4 deploying instead it will default to the latest resistance or support 5 0 n 25 2 0 15 93 AO Elliott Channels W5 and Wave 5 Target This indicator pl
155. sed to provide a visual key in the chart Wave labels e Bullish pattern including all of its waves 1 to 5 will be coloured green and bearish will be red e The sensitivity will be indicated by using a different font or presentation for the numbers o Fast 8 sensitivity will use small numbers 1 2 3 4 5 a b c o Moderate 13 sensitivity will use small bracketed numbers 1 2 3 4 5 a b c d e o Normal 21 sensitivity will use bold roman numbers i ii iii iv v a b c d e o Slow 34 sensitivity will use a combination of symbols and bold capital letters and circled numbers 1 2 3 4 5 A B C D E The high volatility HV expert uses the similar notation inserting bracketed bold roman numbers i ii iii iv V a b c d and e as the slow 3496 sensitivity the combination of symbols and bold capital letters and circled numbers for the very slow 55 sensitivity TIP There is a recommendation about the scale to be used for the price indicator In Elliott Wave s analysis the moves are easier to study using a semi logarithmic scale This enables you to see the patterns with the price acceleration accounted for the Fibonacci projections look more appropriate and fit the scale without compressing the price data in a tiny line The drawback to this scale is that less information points are available it becomes very difficult to see price without using the pointer to actually display it You can
156. splay of the configuration of the AO Patterns indicator j amp mumdawt mmm NO April TT 4 H Fig 70 AO Patterns Properties Color Style Horizontal Lines Formula Parameters Sensitivity Error Margin Select Bat Butterfly 1 Crab 2 Gartley 3 Fig 71 Appliquer vj Interbank FX v Trade 13 521 M T1 The Butterfly The Butterfly has a similar look to the Bat that is like a letter M for bullish and a letter W for bearish As said above the last CD leg is longer than the XA leg We also note that the ratios between the intermediate points have a different value except for BC MetaStock Professional EchoStar Communications Corporation 30 5600 DISH File Edit View Insert Format Tools Window Help X mx Dm E SR BB c R v amp AGNM BOERS T Dy STORS AO P amp T D Wave ES HH VU Ste POR ATS f fA f slut AO 300 Nl lull mane EASES F TMT ed monk x RR 1 Mph meg AlphOmeg A AD FRAMA Patte 34 0 33 5 33 0 32 5 JAM EE 32 0 3 21 5 3104 30 5 9 300 m ind B z 29 5 29 0 28 5 28 0 27 5 27 0 3 26 5 26 04 25 5 25 0 24 5 24 0 4 4 t 4 4 4 4 4 4 4 4 4 4 4 4 240 1 1 T T H fA r
157. t It is all a matter of comfort and we should never get into a situation where our emotions will take over from our judgement There are ground rules for trading discipline to help us cope with our emotions Rules We should look at it as running a business and having to make a decision with all the information we can muster We will not take a risk that could kill our business we are running a business not a lottery Fear and Greed are the two worst enemies oticking to our trading plan no change in midstream Read the market do not guess or make it say what we want Do a minimum fundamental due diligence for the stocks we contemplate buying Don t put all our eggs in one basket spread the risk by sticking to our caps per security Our trading plan includes risk and reward ratio entry and target points always a stop loss pU Qrosc ooo 70 Step by step Elliott Waves 1 Download our EOD quotes after 6PM and make sure they were downloaded properly i e we have a price for today on all monitored stocks 2 Run our favourite exploration s mine is the AO Elliott Waves 2196 or the associated signal explorations Run all the explorations simultaneously doing it over night if they are time consuming We can run up to 10 explorations in a night depending on our computer speed more with over 1 Gigahertz CPU oUF BUS sape cce 12 2600 7 52 14 2100 14 5100 9 0400 3 3900 4 4300 11 1200 17 7400 Bear stp
158. t Waves HL v5 3 has detected a Gann Swing or Pullback that is usually a bearish pattern It should be used with other indicators Weekly Pivot Point Resistance and Support he first weekly resista second support eve nce level is at 2 33 while the second resistance level at 2 66 The first weekly support level is at 1 78 while the z Fig 54 56 In the course of time many analytical comments were added to this expert The difficulty resides in keeping the essential and to not overload it with trivial observations Your comments in that respect will be welcome The real force of these commentaries is to remind the user about things he already knows but will overlook in the frenzy of the action It also serves as an educational tool for the beginner or occasional analyst It helps bringing back the focus to the overall picture not only the Elliott Wave or the opportunity for a quick gain Another feature of this Expert is the alert it can generate when the special patterns are encountered This alert will let us know it s specific and to consult the Expert Commentary for further information So as we rotate through our securities these alerts will pop up to warn us Since it could easily become a nuisance to have alerts pop up continually the alert can be disabled from the Expert dialog In addition they have been set only for significant patterns not for wave confirmation or other things you can view easily from the chart The thir
159. t is a smoothed version of the first The DT version is shown on top while the AlphOmega is at the bottom AAT ECA t Fig 71 AO ZZ is very special and almost the foundation of this set Do not tamper with it Many indicators use it for their calculation Inc Fig 72 Alphabetical Index of the all other AO Indicators AO Trig This indicator is used to show the trigger level of a wave and the required retracement to confirm its end It has a sensitivity input and is dynamic for the short segment which is the line that will display at the selected retracement percent applied to the lowest or highest price value since the beginning of that wave As long as there is no higher or lower value it will display until the price crosses it giving a confirmation signal then the short line will be replaced by the long one and a new short will trail the highest or lowest To know from which value the short segment computes look at the bar where the short line starts On bar 1 you will hardly see a dot but as bars go by the line gets longer Wave was confirmed when the price crossed the long red line Wave B 4 ii Will end when the price will cross the other way the short red line a x 0 5 AO ATR Ratchet This indicator is used to show the stop price level of a transaction initiated at the specified date It is a self adaptive average that reacts to volatility The parameters are sensitivity
160. t provides us with much information and we can open the most promising 38 securities right from The Explorer The signals will last only for a few days to prevent information overload as explained before Another type of signal exploration is AO EW T1 and AO EW T2 that will display a list of securities that meet the conditions set up for these type of trades T1 is a trade set up for a wave 4 that is almost complete and is about to reverse and start a wave 5 impulse T2 is a trade set up for a confirmed wave 5 that is nearing its end A displaced moving average is used to anticipate the trend reversal A summary of these trade set ups is provided in the annex at the end of the manual The explorations are provided to demonstrate how the Elliott Waves could be used in trading analysis We could certainly improve on them by adding our own experience with our preferred indicators The set is so designed as to enable us to call formula variables into our own formulas the AlphOmega formulas can be used with any system we create and within systems indicators experts or explorations We can also use our password to alter values Explorations can be used for other purposes than finding a list of securities that match the search criteria We can create an exploration that will give the results of a back test on the whole database Below is a sample that shows the output of such a back test These explorations have been removed from the set as the new
161. tected signal Where the short red line starts To illustrate look at a Wolf Wave pattern that uses internally the date indicator to start the display only from the date selected Lets add regarding the Wolf Wave pattern that this pattern is very risky as it expects a normal wave to fail and the pattern to reverse Protection The formatting of the proprietary indicators and experts is limited by password protection only to avoid mishandling However some changes can be made without the password so just be careful that you don t merge your indicators into the background A password has been provided with the set to make it an end user flexible tool be careful of the integrity of the set once the formulas are changed Make sure you have a back up copy to restore the original set AlphOmega Aget and AC Aget Templates These templates are almost the same as the AlphOmega Simple the difference is with the style of the Elliott Oscillator style used by popular Elliott Wave software and the addition of indicators used in the T1 and T2 setups used by Tom Joseph of Trading Techniques The indicators are AO Elliott Channels W3W4 AO Elliott Channels W5 AO WATRC AO DMA and AO Elliott W5 Target All are in the price pane and will display only if the current wave matches the conditions for the normal 2196 sensitivity must be a wave 3 4 or 5 The T1 and T2 setups are explained in the annex at the end of this book The expert is the same as in
162. the AlohOmega Simple template The AlphOmega Highlighter is removed as well as the Demand Index the RSI RMI indicator Aget is like the above template but with indicators set for its sensitivity range and the appropriate low volatility expert that is the same as the AOi Simple template The same comments apply for this template as the ones made for Simple To Create a Template with a Different Sensitivity The template was created for 2196 sensitivity only It is easy to create one for the other sensitivities to start we need to double click on all the indicators that are sensitivity based in this case the P amp T Duration gray histogram at the top of our screen and in the price pane AO PTF AO Elliott Channels W3WA4 AO Elliott Channels W5 AO WATRC and AO Elliott W5 Target The Wave Time Projection 2196 red horizontal lines at the top of the screen must be deleted and replaced with the desired sensitivity Wave Time Projection Note This procedure can be used for all the template styles provided with the set It is a good idea to name them differently to avoid an update or upgrade that would overwrite it We must take care when moving to a different sensitivity that we have changed all the sensitivity based indicators and that the Elliott Oscillator is in tune with our new sensitivity Using the Template Below is a screenshot of the template and the T2 setup we are in a wave 5 and the setup requires that we enter as soon
163. the entry price and the close or exit the percent profit over the entry price AlpghOmega Wave Points does the same thing but using 3 points instead of percentage It scans the database for triggers Columns are different though as shown in figure 37a Fig 37 3 0046 5 0099 1 0011 1 0032 3 0056 1 0014 3 01 32 1 0039 1 0003 3 0016 3 0091 mL 21 0400 1 6200 33 1200 25 8100 2 BODL 33 900 53 3833 6000 23 8500 B00 Symbol MSA Closes 20 3100 22 5900 1 7900 42 2100 32 6800 1 5200 45 5100 59 9900 9800 19 5900 4 7400 Entry 20 5000 1 3200 33 6100 26 9900 2 0700 33 6500 82 4600 6 0000 20 4000 5 3500 T 5400 Prit 0 5904 MSA Ticker Sy Security Company Abercrombie amp Fitch Accredited Home Lenders Holding ACE Ltd Advanced Med Optics Affymetrs Inc Ar T Inc Autran Hldgs Inc Alcon Inc Ambac Finl Grp Inc Amer Express Inc Symbol BuySell Results Rejects Exploration Bull In Bear Ir Clos B3 Ban Inspect Open Chart Sort Print Save List Open Chart S or Print 12 C Save List Fig 37a 40 AlphOmega RSI Trend Violation is similar to the AlphOmega Trend Line Violation exploration shown below The report columns display the wave number negative is a bearish pattern the stop loss at the violatio
164. the same volume on intra day bars and the variation is too large from 60 minute to one minute bars It is easy to set a volume or price filter by entering the edit mode of the exploration and going to the filter tab to add our filters AOI Normal 3 I Explored 05 09 2003 09 58 Results Rejects Exploration Security Mame Morm SIplss Closers Entry Frft 5 Inspect ACLARA Bioscience 1 0007 27500 28500 27800 00700 0252 Actuate Corporation 1 0030 Open Chart ADC Telecammunice Aerospace Inc Comfort Sus Usa Inc 1 0005 Discover Laboratom 7 0002 ECI Telecom Ltd 1 0033 Print Enterasys lac 3 0003 Save List Symbol ACLA BuySell J Vendor Mo Vendor Fig 48a AlphOmega Pitchfork Scan and AlphOmega Pitchfork Medians These explorations are designed to find Andrews Pitchfork using Elliott price retracement like waves The second provides the median value as the price is approaching 45 AlphOmega Pitchfork Scan Explored 10 05 7004 Results Rejects Exploration Point C Close Bars Point B Point 4 Ticker S memet Inspect 915003 1 1300 6 6200 3 4700 0 9900 1 0400 19 5100 16 8500 3 3100 2r aun 18 0900 Symbol EGHT Bang i T i Buy Sell E DODO 2 0000 2 0000 1 0000 4 0000 1 0000 2 0000 1 0000 3 0000 1 0000 Close A4D4DD 4
165. ties System Tests are providing the back testing capabilities necessary to implement a trading system In the report are grouped all the essential information on the trades their efficiency the required capital and drawdown the entries and exits for each trade statistics on the system tested as well as a comparison with a buy and keep for long term trade A chapter will be devoted to each of these topics later in the book Chapter 6 Trend Lines and Other Indicators Fig 26 A trend line will show the direction of the trend for the sensitivity we select Let s look at the chart The picture shows a trend line coming from peak of wave ii and moving in the same direction as the bearish trend Exar has undergone since the beginning of the year 2001 The trend line is drawn by the indicator AlphOmega Trendline It will seek to connect the 2 previous peaks or troughs and draw a line with the same slope as long as there is a confirmation of the trend by a 100 day linear regression of Close in other words the slope of this average must negative to connect 2 peaks or the reverse for the troughs It will also adjust if there is a missing peak or trough in between to avoid giving a counter trend direction to the line It will continue the line until there is a change in the trend Looking again at the picture we see that the trend line was not violated A bullish trend emerged with some volume activity but never crossed There is an explorat
166. tion is detected by the Expert and displayed properly however the Explorer cannot differentiate since it detects the beginning of the wave and not the completed pattern It will however correctly track the relocated 3 and 4 When there is a textbook extension in wave 1 3 or 5 the Expert will display this extension in its cycle as a five wave pattern followed by an ABC correction pattern these two patterns are separated by the peak or trough of a larger cycle opotting an extension is important because it tells you information about the next impulse s Not seeing one in the first 2 impulses will strongly suggest that one is coming in the third impulse Do not confuse this textbook extension with the x wave 63 Interpretation of the Expert Labels MetaStock Professional A SCHULMAN 19 3400 2 amp Bam SR ay di 35 a sl Hl 6 7 o 1 im ATR b UNIV BAS AACS adu fr D 4 mii P eA TA Poe P if it L Ms 14 NA E E Lii ar IL an FEMA AR os 418 Ma n LL ud M vlla TETTE kk A Maaa Eg rii lili jaugust September ER Fig 60 We will at times see confusing labels within a wave pattern for example a wave 3 will break before retracing fully the previous wave It is a case of wave failure How does the expert handle that It will assume that the previous wave s count was wrong and it was part of
167. to be most useful once understood It provides a confirmation that the trend has indeed reversed and we must sacrifice the price movement needed for the confirmation The confirmation process has to occur at both ends of the wave hence the delay between the dates and the signals The impact on the price is as follows the trough started at 9 45 and was confirmed when the price was at 11 34 thus a price move up of 2196 Then the peak occurred at 18 50 but was confirmed only once the price retraced to 14 80 thus another price move down of 21 While both price moves are of 2196 the base is different The first base is the trough so 9 45 plus 2196 of 9 45 is 11 34 The second base is the peak of 18 50 and 2196 of 18 50 less 18 50 is 14 80 So the price move has to be larger when coming down than going up Does it leave enough price movement for a profit f Anm 5000 NM nn EET E agen 111111 l TATT hil iil I l ill lll r Il ll I ili iu l ili 100 April May August September Fig 33 November December The answer is crucial and explains why many wave traders loose money when using indicators that are not fully understood The two horizontal blue bars show the profit area included in the wave Fortunately this wave is long enough 32 to allow a 30 496 profit after the confirmation signals The price appreciation between the trough and the peak is 95 896 measured from the trough The pr
168. torical projections meaning that the price reversals are very close to one of the projection lines we can expect this correlation to be maintained during the whole cycle It is preferable to do this kind of back testing when we see drastic price changes across the time frame we are studying if the correlation is not really good it might be better to change the sensitivity to a higher number to find the level that it is responsive AO ZZ is a very good tool to check how well the waves are caught at significant peaks and troughs 22 EMI VN i YA AA FARN AA Ya Lr nl HEIRAT LENT LIT Nee nn HET I rT 18 0 17 5 terre ee eee 17 0 16 5 2 16 0 15 5 15 0 14 5 14 0 13 5 13 0 12 5 12 0 11 5 1 1 T 11 0 JI ou 9 5 Date for the requested wave 2 projections shows also in the projections as their lines start at that date M i 9 0 4 i 8 5 i 8 0 ZO S T 7 5 7 0 6 5 Historical 6 0 Wave 2 55 Projections 5 0 4 5 4 0 3 5 90000 80000 KY WA Auta 70000 UN f 74 h i MILIUM Wi 60000 d V Ye Mi 50000 hy 40000 bomi n 20000 Lap PTUS NOE EM hi Hattie i 20000 rmm TUTTA IIT ITI mm f lupa November December 2003 February March April May June July August September October NI BE Fig 20 Special Rules
169. trading sideways it could be moving in a corridor that is just the height of the up trigger and too small for the down trigger The outcome is that the wave pattern has one direction confirmed and not the other thus breaking the sequence of the pattern It will only be resolved if a larger pattern eventually closes the loop Let s look at examples Worldgate C Communications Inc 2 61000 WGAT TER Ate Kae The problem is that for the same percentage of retracement a greater price This situation debases the differential is required on the ZigZag until the two cycles get way down than on the way up synchronized again 1 9 1 8 T4 1 6 1 5 1 4 1 3 PU 1 1 1 0 0 8 0 100 ww MEN 17 December February April ns D 00 4 bkEH The first example to the left of the chart shows a down wave i followed by an up wave 1 the i label showed because on the way up after there was enough price movement the label ii never showed because the price move was only enough to display the lesser sensitivity 1 The consequence is that the pattern ends the big green 1 there are three legs but not one in the same displayed sensitivity it should have been i ii iii sequence where the last one iii would have been replaced by the big green 1 The second example on the right is identical but let s look at the zigzag lines from AO ZZ The blue line is for th
170. ty surges by maintaining a safe distance from the price line AlphOmega Trendline and i and L This indicator is using the previous peaks or troughs to establish the trend The trend is also confirmed by a 100 days linear regression on the Close The indicator uses Highs and Lows to draw the line When the indicator has nothing to show it reverts to a moving average of 50 days instead of showing a zero that would change the scale display of your graph Tl stands for trend hence T and line with L This is the variable you can use formulas When the price crosses the trend line it usually means that a change in trend is taking place There is an exploration that scans for violations of trend lines AlphOmega Weekly Pivot Point This indicator provides the resistance and support levels based on the weekday Highs or Lows as per published formulas from Guppy site The variables that can be used in a formula R1 R2 S1 and S2 Because the pivot is updated only once a week with the highest and lowest for that week it makes the resistance and support display for the whole week AO ID All Sens and L These indicators are for identifying the wave pattern and do not plot anything but the wave number The variable associated with them is Trig and it displays the value of the price after which the wave is identified The price must move to a certain value before MetaStock will accept it with either the Zigzag or the Peak or Troug
171. udy AlphOmega Bars since Signal The purpose of this indicator is to tell you how many bars since the wave was recognized It incorporates a few variables such as BarsO that is the bar count TotSig is a cumulative count of the signals i e waves You can select the sensitivity for the waves to align your indicator to the expert used AlphOmega Consolidation Triangle and L This indicator requires an input for the sensitivity of the waves investigated The output is binary and tells you the security could be entering a consolidation or triangle pattern It is not trending at that point You want to adjust the sensitivity for the waves to the expert used AlphOmega Dl Storsi Trend This indicator generates automatically a trend line on either the Demand Index or the otorsi It uses Peak or Low functions so that the sensitivity should be adjusted to your preference If there is no trend the line is flat at the last peak or trough AlphOmega Elliott Retracement This indicator is a measurement of the retracement of the actual wave versus the previous It has three variables Prime is the retracement percentage Second is the third wave from the start retracement versus its preceding wave Combi is the sum of Prime and Second AlphOmega Gann Price This indicator plots price levels of the next wave using Gann geometry In this case a line is drawn at each eight of the price range of the previous wave Many other types are availab
172. umn data to indicate an exit from the trade the column heading would then be labelled for example Close X Refer to the description header of the exploration for specifics AlphOmega Impulses GT is an exploration to find how many impulses were profitable between the entry and the exit signal The report columns display for 3 sensitivities 1 the percentage of good trades over total trades 2 the integer is the number of good trades while the fraction is the number of all trades This way we know if the percent is meaningful as a good percentage over many trades is more reliable than a 10096 on one trade 39 Fig 36 lt 41 bbb n Trade F O012 6 0012 21 0055 F 0019 2 0002 5 0012 21 0061 4 0006 5 0005 31 0052 Mod db arl 53 5714 56 0976 35 2113 41 6667 39 4833 58 46 43 4783 43 7500 47 0508 46 9136 m T rade 15 0032 15 0020 46 0002 25 0071 5 0012 11 0031 45 0077 10 0023 r 0016 40 0095 Fast 5 8947 FT rade 23 0022 rur MN Ticker AlphOmega Normal explores the database for impulses at the 2196 sensitivity only It has a volume and price filter to eliminate securities without real trading volume The report columns display the wave number and bars since signal a stop loss computed at signal time the last close or if there is a minus sign in front of the number it is the exit price the entry price after the signal the cumulative profit between
173. various possibilities for the termination of a wave 3 This screen is generated using the Simple template and adding the Wave Price Projection 21 indicator to the price window The Wave Price Projection is available for most sensitivity and these projections are based of Fibonacci ratios the indicator will only show the projections for a wave termination that fits the definition of the current wave For an impulse wave it will not show intra wave projections meaning prices before the previous peak or trough for a corrective wave it will only show intra wave It will also account for displaced end of wave 3 patterns when the initial wave is too short and the Expert detects an extension of it A similar indicator the AlohOmega Highlighter thick red line will narrow the range It has replaced the Wave Price Projection in the Simple template This is not to be confused with the AlphOmega Similarity of Wave indicator that is an indicator for waves breaking the similarity pattern at the onset A third method is used when the preceding wave is not yet confirmed but you suspect it is completed The indicator is Price Projection PWx where the P stands for potential and the x for the wave number Its purpose is to enable a price projection even if the last leg is still dynamic and unconfirmed It functions as the preceding one you enter the date of the suspected beginning of the wave to be projected Since the projections start from the bar date we entered
174. vity for the low volatility Expert is the lowest sensitivity for the daily Expert Below is a screenshot of the daily Expert Commentary Window Ble 4 Nortel Networks Corporation on 2002 07 24 E Open 1 68 Low 1 60 High 1 78 Close 1 78 Change 0 06 Please note that al wave counts are based on the high low price in this commentary arning AlphOmega Eliott Waves HL v5 3 has detected possible point 4 of a pattern for Nortel Networks Corporation This pattern is an expanding triangle and trades from the next point When the peak or trough will farm usually after crossing ar touching the extended line of points 1 and 3 the price will move in the opposite direction towards the target line formed by the extension of points 2 and 4 he estimated target price is 3 22 The present wave patterns are fast amplitude 896 bearsh wave moderate amplitude 1355 bearish wave normal amplitude 21 Yo bearish wave 5 slow amplitude 3436 bearish wave 5 Martel Networks Corporation is long term Bearish as the 144 days moving average of 6 22 is decreasing The Relative Strength Index is at 433 77 in the neutral territory The Relative Momentum Index is at 15 75 in the oversold territory An important indicator for Elliott waves the oscillator is at 0 59 in negative territory this is a bearish sign An equally important indicator the STORSI is at 7 98 This value is in the oversold territory iphOmega Elliot
175. w Insert Format Tools Window Help amp 8 e oe fo amp d i amm an ae em m A A EA e LS TL Sum 25000 20000 15000 10000 5000 84 135051 TETET lili Il DibtaudaectetettteatsPrevae 0 Wx 1000 ERE 1 2 e 55 5 A April August September October November December lt 00 4746 v mananan c pi r2 Gu Gu r ria ra BIOM M No Vendor For Help press F1 9 23 NUM Fig 58b This screenshot is the AlphOmega Elliott Waves Impulse Signals which purpose is to give timely signals to the trader While we presented it earlier the way to use it differs from the other experts The symbol for each sensitivity must be turned on or off depending on the monitored wave To leave them all on would overload your chart and their priority ranking would overwrite some signals The same can be said for long trades versus short trades if both are displayed you will eventually miss an exit signal as the entry signal that has a higher priority than the exit will crush it The arrows will show once the price retracement is equal to the sensitivity selected Once an arrow is displayed it is not affected by the newer bar information for each entry you will have an exit The commentary will assist
176. w zero eee esses oes ee Gore oe ee i EE SPOOL ALi EA ECL LIT IV Retracement should hold above the last Wave Four channels the red one Wave Four channels are time sensitive providing thus the timing element for Elliott Wave analysis A perfect Wave Four should terminate above these channels Containment of the retracement level above the top two channels provides a higher probability for a confirmed Wave Five V The stop loss should be either the Trough of Wave Four or 6296 retracement of Wave Three Vl Look for a fifth wave projection target given by the Fibonacci indicators If the potential profit ratio is greater than 5096 the trade is worth considering Do the reverse for a declining Five Wave sequence 111 Rules 2 Trade Selling at the end of a Fifth Wave rally This material is an abstract from T Joseph of Trading Techniques Inc 1998 Once a confirmed Wave Five is detected look for the following conditions Look for prices to be near the Fifth Wave Fibonacci projections H Make sure the Elliott Oscillator confirms a Fifth Wave by giving a lower high with the Oscillator pulling back to zero in between Wave 5 Channel 9 3 1 i su Dum php 2 A aa i TEN ELN 1 I jJ J hl gt ol Rf 2 3 Displaced Moving Average Lower peaks where price has higher peaks This is called a divergence Elliott Oscillator has pulled back below zero in betw
177. wing this screen is to demonstrate that there is a lag between the time of entry and the time of exit This lag accounts for the time and percentage move necessary before the indicator recognizes the wave With Elliott waves there is always a time lag for confirmation The trend of the equity line is upward like you would expect of a good trading system Nevertheless some securities will never give good results because the volatility span is too small for us to capture any profit In the system the commission fees are calculated at 196 in and 1 96 out by default The system uses long and short trades Below is the report from the Enhanced System Tester The system has not been optimized but used raw to demonstrate the principle with its flaws The equity has been raised to 1 000 000 because to trade indices that hover in the 9 000 you need more than 10 000 to buy 100 shares Of eight trades only five were profitable one long and four short The system works in both directions and it is crucial in Elliott methodology 50 BE Hj Save am Print 7 Help Summary Orders Positions Equity System Summary AO Elliott Waves fast HANG SENG INDEX HSI Simulation Date 2003 02 25 21 51 12 750 Daily Bars 2000 02 08 Through 2003 02 25 1113 Days Performance Performance Indices Profit 576697 95 Buy amp Hold Index 174 26 b Performance 52 67 Profit Loss Index 74 54 5 Annualized Performance 17 27 s Reward Risk Index 87 40 Buy amp Hold Profit
178. ystem test the optimum points for each price range you want to define for your traded securities 36 Chapter 8 Explorations AlphOmega Trendline Violation Explored 2002 07 02 Fig 34 Leave This screen shows The Security Name We XBars Dec Explorer window and 2157 CENT HLDG 26 0005 1 0004 12 0000 mam the output of AlghOmega A B WATLEY GRAP 1 0005 1 0003 1 1500 Eh Trendline Violation When ACCLAIM ENTMT 5 0003 1 0002 4 5000 we run an exploration a VEDI gt filter is applied to take out ACCREDO HEALTH 3 0001 14 0000 47 1000 securities not meeting ACLARA BIO 40003 1 0002 1690 selected criteria For AES 2 0001 1 0000 5 4800 example in certain AFFL COMPUTER ngns 1 0000 49 9000 explorations all securities AFLAC 10188 10002 301500 ES UT m CES counter tren E SOFTWARE xu si corner indicator are ak IE A discarded It also discards SS ON SSS oe all securities that are less than one dollar in price and less than 100 000 shares in 50 days MA of volume The filter can be modified with the password protecting the code from unwanted changes In addition the exploration will not flag up waves for a down trending security and down waves for an up trending security in other words the corrective waves unless it is designed for that This is an additional precaution as waves moving against a long set trend are very short risky and common sense dict

AlphOmega Elliott Waves 5.7

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