The Elliott wave rules - Motive waves

The motive waves: It's the pattern of the five wave, wave 2 corrects wave 1, wave 4 corrects wave 3. The sequence of wave 1 to wave 5 is corrected by the a b c sequence. - The rules of impule wave:   + Wave 1 can be the impulse wave, or leading diagonal triangle pattern.   + Wave 2 cannot retrace past the beginning of the wave 1.   + Wave 3 must be the impulse wave.   + Wave 3 cannot be the shortest wave of three impulse wave (1,3,5). It is almost the longest wave.   + Wave 4 cannot overlap the pick of wave 1.   + Wave 2 and wave 4 must have the alternations (scale of price or the patterns).   + Wave 5 can be the impulse wave or diagonal triangle pattern.

The extentions:

    The extentions are the elongated impulse waves with exaggerated subdivisions. It only appears on one of the impulse waves. Most extensions occur in the 3rd wave.

The truncations:

   The truncations is the situation that the 5th wave cannot move beyond the end of the 3rd wave. It often occurs following the strong extension of the 3rd wave.

The ending triangle ( 3-3-3-3-3)

   The ending triangle is the special type of motive wave, not yet the impulse wave. It take a wedge shape pattern with two converging lines, with each subwave subdividing into 3 wave.
You can see it in the image below:

The leading triangle (5-3-5-3-5)

   The leading triangle pattern is a special type of motive waves too, but the structure is not the same with the ending triangle. The 1st, 3rd, 5th wave of the leading triangle subdivide into 5 wave.

Basic Elliott wave theory- essential concepts

Introducing: Ralph Nelson Elliott (1871–1948), a professional accountant, discovered the underlying social principles and developed the analytical tools in the 1930s. He published his theory of market behavior in the book The Wave Principle in 1938, summarized it in a series of articles in Financial World magazine in 1939. The wave principle is dicovery that social or crowd, behavior trends and reverses in recognizable patterns. Using stock market data as his main research tool, Elliott discovered that the ever-changing path of stock market prices reveals a structural design that in turn reflects a basic harmony found in nature.

Until now, the Elliott wave theory is still one of the famous forcasting tools of the price movements. At now, one of the best research about elliott wave you can refer detail on "Elliott wave principle" Robert Prechter's books, search it on google.

The analysing system of elliott wave base on the wave patterns he discovered, at first we must understand the structure and the rules of the waves:

The five wave pattern, and the cycle:

The movement of the prices take the form of five waves of specific structure; Three waves of them, which are labeled 1,3,5 called impulse or motive wave, it indicates the direction of the trend, they are seperated by 2 countertrend interruptions, which are labelled 2 and 4, called corrective wave ( partial retracement).

"R.N. Elliott did not specifically state that there is only one overriding form, the "five wave" pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five wave pattern at the largest degree of trend. Because the five wave pattern is the overriding form of market progress, all other patterns are subsumed by it." - cited in Robert Prechter' book.

The rythm of five wave up and three wave down makes the complete cycle of eight waves. '1,2,3,4,5' is motive phase, and 'a,b,c' is corrective phase. Every wave can be subdivided to smaller wave, the image below will illustrate the cycle:

The wave degree can be subdevided into: grand cycle, supercyle, cycle, primary, intermediate, minor, minute, minuette.

Next post will introduce some basic rules of each wave types

Demark pivot point, support and resistance level

Another way to identify the support and resistance you can use Demark pivot points. It was created by the Tom Demark, he is one of the famous technical analyst, you can find many information about him on the internet.

Here is the formula: The value of X in the formula below depends on where the Close of the market is. If Close < Open then X = (H + (L * 2) + C) If Close > Open then X = ((H * 2) + L + C) If Close = Open then X = (H + L + (C * 2)) R1 = X / 2 - L PP = X / 4 (this is not an official DeMark number but merely a reference point based on the calculation of X) S1 = X / 2 - H

You can get the indicator in here: Demarkpivotpoint.mq4

Murrey math support and resistance level

Murrey Math basic support and resistance level: like the pivot point, it generates the essential support and resistance level.

+ 2/8ths = This market is too high and needs monitoring closely. + 1/8ths = OverBought (Too high on enthusiasm) Top 8/8ths = Upper end of the Octave (wants to stay in here) 7/8ths = Weak Fast Reverse Line 6/8ths = Pivot Reverse Line 5/8ths = Upper Trading Range (Comfortable trading in here) 4/8ths = 50% = hardest to break through (up or down) the 1st Time 3/8ths = Lower Trading Range (Comfortable trading in here) 2/8ths = Pivot Reverse Line 1/8ths = Weak Fast Reverse Line Zero/8ths = Lower End of Octave (wants to stay in here) - 1/8ths = Oversold (Too Low on enthusiasm) - 2/8ths = This market is too Low and needs monitoring closely.

The two Murrey strategies are recommended:

+ Buy at 1/8 close at 4/8 or Buy at 0/8 close at 2/8

+ Sell at 7/8 close at 4/8 or Sell at 8/8 close at 6/8

For detail strategy, you can refer this one: Murrey math rule.pdf

You can download the indicator for MT4 platform here: Murrey_Math_Line_X_eng.mq4

And find other versions in my forex indicators collections

Point and figure chart ( X O chart)

Intructions Point and figure chart is one of a popular chart was created by the japanese, don't like other chart, it solely calculate the price movement. The prices are showed on both axis. it has been described as one of the simplest systems for better determining solid entry and exit points in trading.

Calculation:

To display point and figure chart, you must specify the box unit, and mark X letter when the prices rise by the box size and mark O when the price fall by the box size

For example:  

I specify the box unit at 1 USD, the prices rise up from 10 to 15 USD, you mark X from 10 to 15, then prices fall down to 12, you mark O from 14 down to 12.

15 X

    14 X O

    13 X O

    12 X O

11 X

10 X

Some ways to use point and figure chart:

Source: http://www.investopedia.com

Renko chart indicator

Renko chart or brick chart, it's a more smoothed than candle stick chart, the price in the same scale will put in the same box (you can modify this box unit) , the changing of the box color generates the entry signal. Renko chart isolates the underlying price trend by filtering out the minor price changes. So, renko charts can also be very helpful when determining support and resistance levels. Calculation

Renko charts are always based on closing prices. You specify a "box size" which determines the minimum price change to display.

To draw Renko bricks, today's close is compared with the high and low of the previous brick (white or black):

+ If the closing price rises above the top of the previous brick by at least the box size, one or more white bricks are drawn in new columns. The height of the bricks is always equal to the box size.

+ If the closing price falls below the bottom of the previous brick by at least the box size, one or more black bricks are drawn in new columns. Again, the height of the bricks is always equal to the box size.

+ If prices move more than the box size, but not enough to create two bricks, only one brick is drawn. For example, in a two-unit Renko chart, if the prices move from 100 to 103, only one white brick is drawn from 100 to 102. The rest of the move, from 102 to 103, is not shown on the Renko chart.

In MT4 platform, you can use this renko live chart v3.4 EA to show the chart. Attact the EA in normal chart, modify the box unit, and then open the offline chart.

Here is the example:

you can set the indicator in this chart to get more accuracy signal.
sources: refer www.metastock.com

Pivot point

Pivot point is one of the popular way to identify the support and resistance level base on the relations with the high, low, open, close price of the previous day.

The fomula is: pivot point (PP) = ( high+low+close)/3 supports and resistances level: First support (S1) = 2*PP - high First resistance (R1) = 2*PP-low Second support (S2) = PP - (high - low) Second resistance (R2) = PP + (high-low)

you can download the indicator indicate the pivot levels in here: pivot custom timeframe

yearly pivot

autopivot...

Many version you can find in my indicators collections.

  

Ichimoku trading strategy

Ichimoku Kinko Hyo-Equilibrium chart at a glance Ichimoku Kinko Hyo is one of the famous trend trading trading system that has been successfully used in nearly every tradeable market. It is unique in many ways, but its primary strength is its use of multiple data points to give the trader a deeper, more comprehensive view into price action. This deeper view, and the fact that Ichimoku is a very visual system, enables the trader to quickly discern and filter "at a glance" the low-probability trading set ups from those of higher probability. There are 5 basic components in this system:

- TENKAN SEN (turning line)

(HIGHEST HIGH + LOWEST LOW)/2 for the past 9 periods

- KIJUN SEN (standard line)

(HIGHEST HIGH + LOWEST LOW)/2 for the past 26 periods

- CHIKOU SPAN (lagging line)

CURRENT CLOSING PRICE time-shifted backwards (into the past) 26 periods

- SENKOU SPAN A (1st leading line)

(TENKAN SEN + KIJUN SEN)/2 time-shifted forwards (into the future) 26 periods

- SENKOU SPAN B (2nd leading line)

(HIGHEST HIGH + LOWEST LOW)/2 for the past 52 periods time-shifted forwards (into the future) 26 periods

The area between senkou span A and B making the KUMO ( the cloud)

Basic signal: 

The Kumo indicates the derection of the trend and the big supports and resistances.
Tenkan and kijun crossover generate the entry signal.
Chikou span messures the momentum of the trend.

+ Strong signals - A strong buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A strong sell signal occurs when the opposite occurs. The signals must be above the Kumo.

+ Normal signals - A normal buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A normal sell signal occurs when the opposite occurs. The signals must be within the Kumo.

+ Weak signals - A weak buy signal occurs when the Tenkan-Sen crosses above the Kijun-Sen from below. A weak sell signal occurs when the opposite occurs. The signals must be below the Kumo.

+ Overall strength - Strength is shown to be with the sellers if the Chikou Span is below the current price. Strength is shown to be with the buyers when the opposite is true.

+ Support/resistance levels - Support and resistance levels are represented by the presence of the Kumo. If the price is entering the Kumo from below, then the price is at a resistance level. If the price is falling into the Kumo, then there is a support level.

+ Trends - Trends can be determined by simply looking at where the current price is in relation to the Kumo. If the price stays below the Kumo, then there is a downward trend (bearish). Alternatively, if the price stays above the Kumo, then there is an upward trend (bullish).

Dealing desk, no dealing desk forex trading platform

The types of the forex trading platform. The first step when you want to get in the forex market, you must find a broker providing services. So you must find your selection criteria. The are 2 types of brokerage firm: Dealing Desk and No Dealing Desk . Dealing Desk also known as the Market Maker, while the No Dealing Desk can be subdivided into Straight Through Processing ( STP ) and the Electronic Communication Network + Straight Through Processing ( STP + ECN ).

Dealing desk brokers 

Dealing desk forex broker make money through spreads (bid, ask price) and the opposite transactions for their customer. You may think that there is a conflict or a fraud, but really is not. The maket maker offer the reasonable bid and ask price, they can adjust them to protect themself when the market  widely fluctuates,can be understood that they are not affected with purchasing decisions of customers.
The prices were controlled by market maker, the customer can't see the real price of the interbank market.But you do not need to worry, the competition among the brokers are fierce so if the exchange rate offered by Dealing Desk incompletely equal in interbank market, but there is just only a very small difference deviation .
When broker gets the order they start trying to find an appropriate order from a customer or through other liquidity providers , is a large organization is willing to buy or sell a financial asset .However, in the absence of appropriate transactions to match , they will have to get the opposite of your transactions and from this point of interest between you and the brokerage company will also conflicting . Please note that brokers have different risk management policies vary, so please check your broker about this .

No Dealing Desk brokers

As the name suggested , No Dealing Desk forex brokers move the customer's oders straight through the system to the liquidity provider (Investment banks, hedge funds, mutual funds, other brokers, other clients).
The brokers build bridge linking together and making money through spreads, using STP or STP+ECN system they can get the best price for their customer.
The spreads they offer are ordinarily lower than dealing desk brokers but the fluctuations are depended on the situations of the market at the specific time.

Heiken ashi MTF indicator

You want to analyse multi time frame with heiken ashi chart, but just want to see it on an only chart. you can use this indicator. there are many setting options on it

The default setting is :  TimeFrame1 = "Current time frame";  TimeFrame2 = "next1";  TimeFrame3 = "next2";  TimeFrame4 = "next3";  MaMethod = MODE_SMMA;  MaPeriod = 6;  MaMethod2 = MODE_LWMA;  MaPeriod2 = 2;  UseHAHighLow = true;  UniqueID = "4 Time frame HA";  LinesWidth = 0;  LabelsColor = DarkGray;  LabelsHorizontalShift = 5;  LabelsVerticalShift = 1.5;

Here is the image of it:

As you can see it indicate the 4 timeframes heiken ashi smoothed, if you just want the heiken ashi candle, you can modify the moving average period at 1.
download the indicator at here: 4mtf heiken ashi

Double BB MACD divergence trading

This stratey use 2 bb macd indicator, one for messure the power of current trend , one for making entry point decision. it generate both normal divergence and hidden divergence, but before making the decision you must specify the market situation that is trending or sideway that is the most important element in trading. Both of 2 indicator can generate the signals, you can use other oscillator indicator with the same idea of divergence trading. For example below I use 2 indicator on heiken ashi chart:

You can find many situation like this when market is running, waiting for the close of the candle and then get in. The normal divergence indicate the reversal at the big support and resistance, hidden divergence indicate the continuing of the trend, but it must appear on the way of that trend you are identifying.You can get 2 indicators in my indicator collections:

BB Macd nrp smoothed

BB Macd.ex4

Hope some one like this!

RSI MACD alert indicator.

This indicator measure the power of MACD by using RSI method to get the indicator that more smoothed, faster and accuracy signal. Like the other oscillator indicators, it measure the power of the trend, giving the slope up, slope down signal, signal alert at 30-70 level and divergence signal indicate the retracement or the reversal signal of the trend. MACD setup (24,48,9) RSI (5). You can set up alert sound on it.

you can download the indicator  right here: RSI MACD, or you can find it on my forex indicator collections: http://anzforextrader.blogspot.com/2013/04/forex-indicators-collection-1.html

US dollar index ( ICE dollar index and CME dollar index)

At this time there are 2 versions of  US Dollar Index, the indicator indicates the statistics and overview of the forex market. CME US Dollar Index Dow Jones CME US Dollar Index futures shall be settled by physical delivery at termination to a Special Quotation of the Dow Jones CME FX$INDEX calculated using the final settlement price of expiring CME Euro /U.S. dollar futures, CME Japanese yen /U.S. dollar futures, CME British pound /U.S. dollar futures, CME Swiss franc /U.S. dollar futures, CME Canadian dollar /U.S. dollar futures and CME The Dow Jones CME US Dollar Index is weighted and calculated as follows:

Where Units equals 4 in the case of CME Euro /U.S. dollar futures; 2 in the case of CME Japanese yen /U.S. dollar and British pound /U.S. dollar futures; and, 1 in the case of CME Swiss franc /U.S. dollar, Canadian dollar /U.S. dollar and Australian dollar /U.S. dollar futures. Size refers to the trading unit of each of the six Index constituents, e.g., the trading unit for CME Euro /U.S. dollar futures is 125,000 Euros, the trading unit for CME Japanese yen /U.S. dollar futures is 12,500,000 yen, etc. Price refers to the price of each of the six Index constituents, e.g., CME Euro /U.S. dollar futures may be at $1.3595 per Euro; CME Japanese yen /U.S. dollar futures may be at $0.010901 per yen, etc. The Dow Jones CME US Dollar Index may be calculated as 144.7330 in the example illustrated below.

Dow Jones CME US Dollar Index = Basket Value ÷ $10,000 = $1,447,330 ÷ $10,000 = 144.7330
you can get more information on CME rule book.

ICE US dollar index

The ICE US dollar index (USDX) is a geometrically-averaged calculation of six currenciesweighted against the U.S. dollar. The U.S. Dollar Index was created by the U.S. Federal
Reserve in 1973. Following the ending of the 1944 Bretton Woods agreement, which had
established a system of fixed exchange rates, the U.S. Federal Reserve Bank began the
calculation of the U.S. Dollar Index to provide an external bilateral trade-weighted average of
the U.S. dollar as it freely floated against global currencies.

The formula is:

Sources: CME and ICE book.

DEMA smoothed moving average indicator.

DEMA indicator developed by Patrick Mulloy that first appeared in the February, 1994 Technical Analysis of Stocks & Commodities. It's based on both a single exponential moving average (EMA) and a double EMA. The fomula of it is:

The idea of this method like MACD histogram, smooth the moving average 2 times to get a new indicator lesser lag than either of the original two.

You can see it on this chart:

As you can see on this chart (DEMA set up 21 and 13) , this indicator are faster and get less fail signals than the other type of moving average. You can compare it with other moving average by yourself.
You can find the indicator by searching my indicator collections.

COT report, open interest. Solution for the volume in forex market

There are 3 important elements in trading, they are: price, volume, and time. In other market like listed stocks exchange, we can get the volume transaction in a day through the information systems of broker and floor exchange, in the OTC market like forex market, we can not statistic the volume exactly, the volume that broker provided, it just for reference, in MT4 platform the volume is just the tick volume, and it will be different with the other brokers. One of the alternative solutions for this problem we can use the COT report to get the informations that the investors is going to do in furture and option market.

We can get the COT report at Commondity trading commission website: http://www.cftc.gov/MarketReports/CommitmentsofTraders/AbouttheCOTReports/index.htm
Here is the example:


Detail:

Commercial - Describes an entity involved in the production, processing, or merchandising of a commodity, using futures contracts primarily for hedging

Long Report - Includes all of the information on the "short report", along with the concentration of positions held by the largest traders

Open Interest - The total number of futures or options contracts not yet offset by a transaction, by delivery or exercise

Noncommercial (Speculators) - Traders, such as individual traders, hedge funds and large institutions, who use futures market for speculative purposes and meet the reportable requirements set forth by the CFTC

Nonreportable Positions - Long and short open-interest positions that don't meet reportable requirements set forth by the CFTC

Number of Traders - The total number of traders who are required to report positions to the CFTC
Reportable Positions - The futures and option positions that are held above specific reporting levels set by CFTC regulations

Short Report - Shows open interest separately by reportable an non-reportable positions
Spreading - Measures the extent to which a non-commercial trader holds equal long and short futures position

you can see the COT indicator combine with chart in this website: http://www.timingcharts.com

SPDR Gold Trust - the largest gold ETF world

SPDR - The product name for the Standard & Poor's Depositary Receipt, which is an exchange-traded fund (ETF) managed by State Street Global Advisors that tracks the Standard & Poor's 500 Index (S&P 500). Each SPDR share represents one-tenth of the S&P 500 index and trades at roughly one-tenth of the index's dollar value. The term also can refer to the general group of ETFs to which the Standard & Poor's Depositary Receipt belongs. With vast holdings, each purchase dynamics of SPDR Gold Trust have strong influence on the market. SPDR Gold Trust is one of the trust fund (ETF) SPDR managed by State Street Global Advisors - a division of State Street Corporation, Asset Management Group the second largest in the world.

Previously known as SPDR Gold Trust and StreetTracks to 20/5/2008, the fund was renamed SPDR Gold Trust.
As of May 6/2012, SPDR Gold Trust is the sixth largest trusts in the United States and is the largest gold trust world.

Instead of trading physical gold, investors purchasing shares of the SPDR Gold Trust. SPDR Gold Share the SPDR Gold Trust shares issued by, sponsored by the World Gold Council. This stock is listed on the New York Stock Exchange on 11.18.2004 with the GLD code and traded on NYSE Arca from 13/12/2007.
So far, SPDR Gold Shares is trading at 4 floors including floor New York Stock Exchange Arca (NYSE Arca), Singapore Stock Exchange, Tokyo Stock Exchange and the Stock Exchange Hong Kong.

Each initial GLD shares worth the equivalent of 1/10 ounce of gold. When the stock price is different from the current price of gold, the fund will exchange for gold stocks. Often each sale, will fund at least one basket swap equal 100,000 shares, each basket is then exchanged for 10,000 ounces of gold. With this mechanism, the stock price is guaranteed SPDR similar to gold prices. The number of gold bought and sold each day are publicly SPDR Gold Trust.

Paulson & Co. fund billionaire John Paulson is currently the largest shareholder of the SPDR Gold Trust, with assets of up to U.S. $ 3.62 billion in 2012.

Physical gold holdings by the SPDR Gold Trust gold vault beneath the HSBC Bank in London - the monitoring of the fund, or in the basement of a branch of the HSBC bank in the form of 400 oz gold bars.
Soros Fund Management LLC Fund of billionaire George Soros also increased holdings of SPDR Gold Trus additional shares 49% in the quarter to 1.32 million shares III/2012.

The amount of gold held by the SPDR Gold Trust increased. If 8 tons of gold that the fund is held on the first trading day prior to the date 10/01/2013 11/18/2004, this fund holds 1337.73 tonnes of gold, equivalent to more than 43 million ounces of gold, worth price of U.S. $ 72.02 billion. The amount of the fund's holdings to a record 1353.34 tonnes on 7/12/2012.

Currently, the gold trusts holding about 2,630 tonnes of gold, equivalent to the output of the world's gold mining within 1 year. With such large holdings, the gold ETF SPDR Gold Trust in general and in particular have important influence to the world gold market. In sensitive cases, the dollar and the oil market are unpredictable, the trading dynamics of the attention has focused ETF.