An overlap is when price makes a low or a high, and then reverses and penetrates that price range of the last wave. When the market overlaps, more often than not it is making a correction. It moves in the same direction as the trend of the next larger size; a corrective wave is divided into three subwaves. It moves against the trend of the next larger size. In the above illustration, waves 1, 2, 3, 4 and 5 together complete a larger impulsive sequence, labeled wave 1.

The impulsive structure of wave 1 tells us that the movement at the next larger degree of trend is also upward. It also warns us to expect a three-wave correction — in this case, a downtrend. That correction, wave 2 , is followed by waves 3 , 4 and 5 to complete an impulsive sequence of the next larger degree, labeled as wave 1. At that point, again, a three-wave correction of the same degree occurs, labeled as wave 2. Note that regardless of the size of the wave, each wave one peak leads to the same result a wave two correction.

Within a corrective wave, subwaves A and C are usually smaller-degree impulsive waves. This means they too move in the same direction as the next larger trend. In Figure 2 below, waves A and C are in the same direction as the larger wave 2. Note that because they are impulsive, they themselves are made up of five subwaves. Waves labeled with a B, however, are corrective waves; they move in opposition to the trend of the next larger degree in this case, they move upward against the downtrend.

These corrective waves are themselves made up of three subwaves. It is important to remember that Elliott Wave is not a trading method in itself but more a theory and a great way to view and understand the market. Wave A divides into 5 sub waves, wave B divides into 3 sub waves and wave C divides into 5 sub waves.

Wave A divides into 3 sub waves, wave B divides into 3 sub waves and wave C divides into 5 sub waves. There are 2 kinds of Flat corrections, Normal and Expanded like in the photo flat.

In the expanded flat, wave B exceeds the beginning of wave A and wave C goes beyond the end of A. In a normal flat, wave B does not exceed the origin of wave A. A-B-C Guidelines: 1.

Wave C should go beyond the extreme of wave A. We begin to assume that wave C is over, once price turns and goes back into the range of wave A; at that point the bare minimum conditions for a correction are complete. Once price surpasses the extreme of wave B, we assume that the correction is over. Triangle is made of 5 waves; A-B-C-D-E. Each wave divides into 3 sub waves. A triangle usually occurs in wave 4.

At the end of wave E, price will shoot up or down in a thrust. Combination - A combination correction is made of any two of the prior waves connected by an X wave. Rather difficult pattern to recognize in real time. I try to avoid this pattern.

It is usually quite difficult to recognize in real time. Elliott wave theory rules: 1. Wave 2 cannot exceed the beginning of wave 1. Wave 3 can never be the shortest out of waves 1, 3, and 5 and is usually the longest. Wave 4 cannot overlap the range of Wave Although this is an Elliott wave rule, I found several instances where wave 4 penetrates the range of wave 1 by a little bit especially in intraday charts.

Use your judgment if you see a slight violation of this rule. For our purposes, waves 5 and C are the most important waves to recognize. The reason for this is that usually these waves signal the end of the current trend. Remember that after every trend comes a correction and after every correction comes a trend. By recognizing wave 5 and wave C and by being able to project their end, the trader can successfully project high probability turns in the market. Elliott Wave theory might seem a bit overwhelming at first but after a short while it becomes a cinch and an important part of our Forex trading plan.

Remember - a major part of our analysis is based on Elliott Wave theory but our Forex entry method is mechanical and objective. Examples of Elliott Wave pattern on different time frames: The following charts are real charts of the Dow Jones Industrial Average. Chart number 1 is a cycle that lasted for about 3 minutes; chart number 2 lasted for about 10 days; chart number 3 lasted for about 24 days; chart number 4 lasted for about 9 months; chart number 5 lasted for about 10 years; chart number 6 lasted for about 70 years.

Our basic pattern can be seen on all of them. I highly recommend reading this book for a more thorough understanding of the subject. I merely scratched the surface. Understanding Elliott Wave theory will give you a great advantage. Elliott Wave International owned by Bob Prechter himself has an extremely useful Elliott Wave Tutorial for free online. You can get started at: www. Price projections: based on Fibonacci ratios Fibonacci internal retracement: - The ratios used for internal retracements are Fibonacci price expansions: - The price expansions that are normally used for corrective sections are: A End of wave C price target projections in order of importance : - Fibonacci retracements of preceding trend: The odds increase even further if the cluster includes one projection from each of the above sets.

End of wave 5 price target projections in order of importance : - Time projections: Time projections work in the same way as the price projections only in price units. Fibonacci time retracement: - The majority of A-B-C corrections are complete in the Fibonacci time expansion: - Works in the same way that price expansion work.

Fibonacci fan: A great tool that is somewhat underused yet works really well in the Forex market is the Fibonacci fan. The Square Root Theory According to the theory the prices of financial instruments move over the long and short term in a square root relationship. As an example, on the October 26th, marked by the purple square the EUR USD reached an all time low of 0.

On Jan 5th, it reached a major swing high of 0. On Dec 30th, it reached a major high of 1. On July 13th, it reached a record high of 1. All of the horizontal lines that were drawn on the chart are different degrees of the square root of the price from Oct 26th, Look at how price respected those levels again and again.

Do you see the vertical lines? They are equally spread out 29 weeks apart The rest of the red trend lines are parallels. Do you see the green trend line? It begins at the 0. In the words of W. I specifically want to know which time frame will give me a definite and dependable signal for the end of the current move also the beginning of the possible new trend.

It is logical because a first wave is just about always a trend fast price movement. Wave one the first wave in a series of waves that make up a trend always follows a correction slow price movement. Price remains in that zone until the trend is over; then it will once again move swiftly in the opposite direction, to the opposite extreme. Here is an example of the current AUD JPY trend July 4th, The real value of this approach is that I get to know well in advance which time frame will be of value to my trading efforts.

We clearly see that we would of known way in advance that this time frame is almost certain to give us the signal that this trend is over.

Did you know that speculate means observe in Latin? So, once again, how do we do it? We want to see the first wave as a swift move from one extreme to the other just like it is on the above screenshot. When we locate the time frame that displays that in real time , than we can confidently assume that this time frame is likely to show us the end of the current move. MACD The MACD is an oscillator. Many people use it for a variety of tasks.

I used it to show me divergence, nothing else. What is divergence? A divergence occurs when the MACD indicates a move in one direction while price is moving in the other; when price for example makes higher highs yet the oscillator makes lower lows. Let me give you a real life example of what divergence is. Trade Example: To show the process of how I trade. Audjpy Long. The fundamental outlook for Australian Dollar looks to be improving with recent job numbers improving and recent price bounces.

Additionally, weak jpy is much coveted by the BOJ and they will be working at making the weak yen if possible.

One other bonus for this trade is positive swap on the trade. Enter at By Kim Krompass of the Price Action Institute -- Follow Kim on Twitter Trade Plans, like any plans, whether they are for a business or for your personal life all have 3 things in common in order for you to be successful.

They must be:. Before I dive into some of the areas that may be improved, let me first look at what makes a good plan. Recently, I dined at the famous French Laundry restaurant in Yountville, CA. If you are unfamiliar with the restaurant, it has been named as one of the Best Restaurants in the world and has a Michelin 3 star rating. The restaurant has earned numerous awards and accolades in the press and among food critics worldwide.

There were 2 things that struck me about the French Laundry experience. What is the point, however, is that both the operation of the French Laundry and the food preparation follows a 5 step success plan:. The reason all of us trade is to make money. Just being a good family person is not motivating enough to keep you focused day in and day out, especially when times get hard in the markets.

All traders want to make money. But again Trading times will be Monday through Friday 8 AM - AM. But there are gaps or holes that still need to be addressed. Like a recipe, I would like to see his vision, his actual sequence of steps, the specific ingredients, the measurable actions and more deadlines.

What would that look like? I will hunt for my setups Monday through Friday 8 AM - AM. I would forget the fundamentals as that is a subjective and very hard to quantify. At the end of the 1st quarter in , I will review my progress and make any adjustments if needed.

It is simple it is straightforward and you know exactly why you are doing what you are doing every day you sit down to look for trades. Here are some of the trading conditions you want to avoid in the forex market. I want to thank Kim for taking the time to help me become a better trader and to help all of you see the process that we are going through so that you can go through a similar process in the creation of your forex trading plan. Please share your comments on my plan or on Kim's comments.

I do plan on making some adjustments soon because of Kim's feedback. Please leave a comment below if you have any questions about this trading plan!

We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow.

I hate to be the bearer of bad news but you should examine the PATTI strategies a bit more carefully as it is over simplified, unnecessarily hard work and most of the time guess work. What makes it popular is the polished marketing. Other than that, its a pretty empty system aimed at people who don't really want to learn proper trading.

I hate it when I am being sold fluff. I disagree Frankie, I know many people are trading her price action strategy with great success. I think it is a solid method that works. I have really struggled writing a trading plan but this is great as it clearly explains what you intend to do 5 days a week. I think that Kim's comments were also very helpful.

I think your plan is sound Casey although Kims' feedback offers opportunity to enhance it, which I missed. The only thing I would add is that you need a feed back action to ensure that following your plan to the letter never left you in a situation where you didn't know what to do, as well as the quarterly review of its performance Three things struck me in the detail though I appreciate that's not specifically 'the plan' 1 Time of day.

RIsk to reward. Personally I would not be interested in set ups that offered less than 2 times reward for the risk. I can see you are comfortable with the low risk to reward ratio but missed any comment about win to lose ratio 3. Adding to losing positions.

To me this is increasing the risk per trade level unacceptably. I would rather see a strategy to ease out of losing positions as price goes against me. I very much agree with the adding to winners though, but each new position must still satisfy the same 'new trade' criteria before it is entered and all previous trades must at a minimum be risk free stop on break even and better at 1 or 2 times risk already thus making the new position 'risk free' I hope these suggestions make scene and are of use.

Good luck for Casey! Paul that is great feedback. Thanks so much for the time you took to go over it in detail. That is much appreciated. Sometimes trading the daily candle early has caused me some trouble.

So I will be reviewing what you said here in addtion to Kim's comments as I develop my new plan. Making a plan for me seems to be the hardest part of the trading process I know its important but thing's are going okay right now I suppose long term could be different. Plans are important because it is setting out a road map for your life. If you don't have a map how do you know where you are going? Hi, Casey here. If you want to invest in me or anything on my website I have the perfect plan.

Its called the Scam Plan, where you give me money or buy something from me and I don't honor our agreement and keep the money forever. You get ripped off and, Happy days for Casey. This step-by-step guide will show you an easy way to trade with the MACD indicator. Get the free guide by entering your email now!

Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. My Personal Trading Plan Reviewed by Trading Expert Kim Krompass by TradingStrategyGuides Last updated Nov 10, All Strategies 10 comments. Core Values: Mission Statement The purpose of trading: my trading will fit in with my core values in life to live a complete and fulfilled life serving my family and my community in my world.

Foundational Components of the plan: I am going to trade Monday through Friday 8 a. Strengths: My strength is my ability to read the charts into where the market is going and also my understanding of technical analysis.

Ruben Topaz all rights reserved Š Ruben Topaz This document cannot be altered with in any way. Feel free to share this book in its entirety with the world! Join a 4 hours live webinar studying this book plus insights every second Saturday of the month. I can assure you that the Forex trading methods described in this book work.

I tried to make my book as straight forward as I can. I hope that not too many Forex traders will use the trading entry system described in the last chapter on its own without much market analysis.

Although, that will still work rather well as long as money management rules are strictly enforced , the magic of really great Forex trading results will materialize when all of the described trading concepts will be put together in a harmonic manner. If you are a new Forex trader or a trader that is not yet achieving consistent results, you will learn a methodical procedure that when followed in its entirety will yield better than average Forex trading results.

Even if you are an expert Forex trader, I still believe that reading this book will not be a waste of your time; I know that you will learn at least one thing new that you can easily incorporate into your own Forex trading plan and benefit. The Forex trading strategy and approach taught in this book is comprehensive and complete. It includes every aspect of Forex trading that a trader should be aware of.

I added two supplementing videos to this book. You can watch them at: www. If you are a new Forex trader than some or maybe even most of the terms used might confuse you.

We search for a correction that is about to end. It makes sense because if we see a trend on a specific time frame than we are likely to be already too late to make an entry. Our objective is to enter the market at the end of a correction. Our prime target is the end of waves 2 or B. When price reaches those projected zones, we go to shorter time frames. We look to see if the pattern appears complete. We once again use the same projection techniques that we previously used.

We base our analysis on all of our available tools. After we see that the pattern on the short time frame appears to be complete then we look at our oscillators for an entry.

We patiently wait for both signals. Elliott Wave theory What are the advantages of using Elliott wave analysis? Correct pattern identification: Correct pattern identification can substantially increase the likelihood of our Forex trading success.

The most fundamental information that a Forex trader should obtain is to recognize whether the Forex market is trending or correcting. The reason is simple; the market does two things all of the time. It does that on all time frames at any given moment. Every trend is followed by a correction and every correction is followed by a trend. After the eventual end of the correction the trend should ultimately continue in the same direction that it was going before the correction had begun; very often it would make a new extreme.

What is a trend? What is a correction? When the currency market makes overlapping waves, than it is usually a clear signal that a correction is taking place.

An overlap is when price makes a low or a high, and then reverses and penetrates that price range of the last wave. When the market overlaps, more often than not it is making a correction. It moves in the same direction as the trend of the next larger size; a corrective wave is divided into three subwaves.

It moves against the trend of the next larger size. In the above illustration, waves 1, 2, 3, 4 and 5 together complete a larger impulsive sequence, labeled wave 1.

The impulsive structure of wave 1 tells us that the movement at the next larger degree of trend is also upward. It also warns us to expect a three-wave correction — in this case, a downtrend. That correction, wave 2 , is followed by waves 3 , 4 and 5 to complete an impulsive sequence of the next larger degree, labeled as wave 1. At that point, again, a three-wave correction of the same degree occurs, labeled as wave 2. Note that regardless of the size of the wave, each wave one peak leads to the same result a wave two correction.

Within a corrective wave, subwaves A and C are usually smaller-degree impulsive waves. This means they too move in the same direction as the next larger trend. In Figure 2 below, waves A and C are in the same direction as the larger wave 2. Note that because they are impulsive, they themselves are made up of five subwaves. Waves labeled with a B, however, are corrective waves; they move in opposition to the trend of the next larger degree in this case, they move upward against the downtrend.

These corrective waves are themselves made up of three subwaves. It is important to remember that Elliott Wave is not a trading method in itself but more a theory and a great way to view and understand the market.

Wave A divides into 5 sub waves, wave B divides into 3 sub waves and wave C divides into 5 sub waves. Wave A divides into 3 sub waves, wave B divides into 3 sub waves and wave C divides into 5 sub waves. There are 2 kinds of Flat corrections, Normal and Expanded like in the photo flat. In the expanded flat, wave B exceeds the beginning of wave A and wave C goes beyond the end of A.

In a normal flat, wave B does not exceed the origin of wave A. A-B-C Guidelines: 1. Wave C should go beyond the extreme of wave A. We begin to assume that wave C is over, once price turns and goes back into the range of wave A; at that point the bare minimum conditions for a correction are complete.

Once price surpasses the extreme of wave B, we assume that the correction is over. Triangle is made of 5 waves; A-B-C-D-E. Each wave divides into 3 sub waves. A triangle usually occurs in wave 4.

At the end of wave E, price will shoot up or down in a thrust. Combination - A combination correction is made of any two of the prior waves connected by an X wave. Rather difficult pattern to recognize in real time.

I try to avoid this pattern. It is usually quite difficult to recognize in real time. Elliott wave theory rules: 1. Wave 2 cannot exceed the beginning of wave 1.

Wave 3 can never be the shortest out of waves 1, 3, and 5 and is usually the longest. Wave 4 cannot overlap the range of Wave Although this is an Elliott wave rule, I found several instances where wave 4 penetrates the range of wave 1 by a little bit especially in intraday charts. Use your judgment if you see a slight violation of this rule. For our purposes, waves 5 and C are the most important waves to recognize.

The reason for this is that usually these waves signal the end of the current trend. Remember that after every trend comes a correction and after every correction comes a trend. By recognizing wave 5 and wave C and by being able to project their end, the trader can successfully project high probability turns in the market.

Elliott Wave theory might seem a bit overwhelming at first but after a short while it becomes a cinch and an important part of our Forex trading plan. Remember - a major part of our analysis is based on Elliott Wave theory but our Forex entry method is mechanical and objective. Examples of Elliott Wave pattern on different time frames: The following charts are real charts of the Dow Jones Industrial Average.

Chart number 1 is a cycle that lasted for about 3 minutes; chart number 2 lasted for about 10 days; chart number 3 lasted for about 24 days; chart number 4 lasted for about 9 months; chart number 5 lasted for about 10 years; chart number 6 lasted for about 70 years.

Our basic pattern can be seen on all of them. I highly recommend reading this book for a more thorough understanding of the subject. I merely scratched the surface. Understanding Elliott Wave theory will give you a great advantage.

Elliott Wave International owned by Bob Prechter himself has an extremely useful Elliott Wave Tutorial for free online. You can get started at: www. Price projections: based on Fibonacci ratios Fibonacci internal retracement: - The ratios used for internal retracements are Fibonacci price expansions: - The price expansions that are normally used for corrective sections are: A End of wave C price target projections in order of importance : - Fibonacci retracements of preceding trend: The odds increase even further if the cluster includes one projection from each of the above sets.

End of wave 5 price target projections in order of importance : - Time projections: Time projections work in the same way as the price projections only in price units. Fibonacci time retracement: - The majority of A-B-C corrections are complete in the Fibonacci time expansion: - Works in the same way that price expansion work. Fibonacci fan: A great tool that is somewhat underused yet works really well in the Forex market is the Fibonacci fan.

The Square Root Theory According to the theory the prices of financial instruments move over the long and short term in a square root relationship.

Email Enter email address. Many people use it for a variety of tasks. Establishing entry and exit strategies beforehand will lower stress and create buffers for making profits. My strategy will be using weekly and daily charts to identify the trend. The trading plan should also include the criteria for money management methods and assess these on a regular basis.

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