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Thread: Triangles and Wolfe Waves - Need your inputs

  1. #1
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    Lightbulb Triangles and Wolfe Waves - Need your inputs

    Hi Guys,

    I'm sure you must have heard about converging triangles trading method.

    To refresh your memory, here's a quick summary.

    Identify swing high/low points on the chart and plot trend lines.

    The rules are:

    Swing A > Swing C
    Swing B < Swing D

    The opposite for bearish/SELL opportunities.

    Trade Entry Rules:

    Wait for price to cut above the trend line AC and open trade after the first candle closes above the AC trend line.

    Stop Loss would be set to the previous candle's low or the most recent swing low.

    Target Price would be:

    Half the pips of AB.

    Ex: If Point A to Point B was 20 pips difference, then target price would be 10 Pips from trade entry.

    Now, Wolfe Waves tells us that we can ride after wave point 5 is formed. By plotting trend line AD (or 1, 4 in WW terminology) and the convergence of 1, 3 (or AC) and BC (2, 4) we get an estimated time when the target price is reached.

    Now if we combine these two methods, we can potentially ride the trade two ways (ex: uptrend as well as downtrend).

    Below is a quick summary from EURUSD H4 charts, plotting the points based on the rules from Triangle Convergence. (Click on the EURUSD chart to visually follow the text below)

    Now what I did was from the Wave 5 point, I multiply the pips distance from our entry to the peak and substract that from the peak price point, which gives us the approximate price where the downtrend will end.

    Explanation of the chart below:

    Point A = 1.29942
    Point B = 1.28434

    Total Distance = 0.01508

    Divide this by 2 and add to our entry point which is 1.29716. So our target price is (1.29716 + (0.01508/2)) 1.3047

    Now this becomes our Wave 5 for Wolfe Wave. But to make the price estimate a bit more accurate, I multiply 0.00754 by 3. Or in other words, substract quarter pips more to the distance between points A and B.

    Therefore, from 1.3047 our approximate target price is
    1.28208 (1.3047 - (0.00754x3))

    To stretch this a bit further, if you calculate the # of candles it took to reach the first target price and multiply that by 3, we would approximately get the # of candles for price target #2 to be reached.

    In the chart below, it took 16 hours or 4, H4 candles to reach our first target price. Then on the downtrend, we expect price to reach within 48 hours or 12 H4 candles.

    Price reaches our estimated price in 44 hours.

    So how can we use this method?

    1) Wait for converging Triangle to be formed, plot target price.
    2) IF target price is reached, we then calculate # of candles & Target price in pips
    3) You can round off the target price to a few pips lower and set TP and enter the trade
    4) Based on # of candles from Triangle to peak, we multiply that by 3 to get a better idea when price will reach our TP

    What I would like you to do:


    • Do you trade this method? Or maybe its already there somewhere with a different trading name? (Maybe help in identifying elliott wave 3?)
    • Do you trade triangles exclusively? If yes, can you add to this thread with constructive criticism/suggestions?
    • Do you trade Wolfe Waves (or gartley or XABCD)? If yes, can you add to this thread with constructive criticism/suggestions?
    • Can you contribute to this thread by looking at charts and trying to see if the price estimates for triangles and the Wolfe waves does indeed reach?


    Charts:

    Attached, EURUSD Chart with description.
    USDCHF chart with just basic info. What's to note is the # of candles. It took 40 candles to reach our price target from triangle. So we expct wolfe wave 5 price estimate to reach in 40x3 (120 candles). In actual, price reached after 139 candles (not too far away from estimated time)

    Triangles and Wolfe Waves - Need your inputs-eurusd-example.jpgTriangles and Wolfe Waves - Need your inputs-usdchf-example.jpg
    Last edited by derago; 03-29-2013 at 06:30 PM.
    kor4x likes this.

  2. #2
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    excellent explanation

    Quote Originally Posted by derago View Post
    Hi Guys,

    I'm sure you must have heard about converging triangles trading method.

    To refresh your memory, here's a quick summary.

    Identify swing high/low points on the chart and plot trend lines.

    The rules are:

    Swing A > Swing C
    Swing B < Swing D

    The opposite for bearish/SELL opportunities.

    Trade Entry Rules:

    Wait for price to cut above the trend line AC and open trade after the first candle closes above the AC trend line.

    Stop Loss would be set to the previous candle's low or the most recent swing low.

    Target Price would be:

    Half the pips of AB.

    Ex: If Point A to Point B was 20 pips difference, then target price would be 10 Pips from trade entry.

    Now, Wolfe Waves tells us that we can ride after wave point 5 is formed. By plotting trend line AD (or 1, 4 in WW terminology) and the convergence of 1, 3 (or AC) and BC (2, 4) we get an estimated time when the target price is reached.

    Now if we combine these two methods, we can potentially ride the trade two ways (ex: uptrend as well as downtrend).

    Below is a quick summary from EURUSD H4 charts, plotting the points based on the rules from Triangle Convergence. (Click on the EURUSD chart to visually follow the text below)

    Now what I did was from the Wave 5 point, I multiply the pips distance from our entry to the peak and substract that from the peak price point, which gives us the approximate price where the downtrend will end.

    Explanation of the chart below:

    Point A = 1.29942
    Point B = 1.28434

    Total Distance = 0.01508

    Divide this by 2 and add to our entry point which is 1.29716. So our target price is (1.29716 + (0.01508/2)) 1.3047

    Now this becomes our Wave 5 for Wolfe Wave. But to make the price estimate a bit more accurate, I multiply 0.00754 by 3. Or in other words, substract quarter pips more to the distance between points A and B.

    Therefore, from 1.3047 our approximate target price is
    1.28208 (1.3047 - (0.00754x3))

    To stretch this a bit further, if you calculate the # of candles it took to reach the first target price and multiply that by 3, we would approximately get the # of candles for price target #2 to be reached.

    In the chart below, it took 16 hours or 4, H4 candles to reach our first target price. Then on the downtrend, we expect price to reach within 48 hours or 12 H4 candles.

    Price reaches our estimated price in 44 hours.

    So how can we use this method?

    1) Wait for converging Triangle to be formed, plot target price.
    2) IF target price is reached, we then calculate # of candles & Target price in pips
    3) You can round off the target price to a few pips lower and set TP and enter the trade
    4) Based on # of candles from Triangle to peak, we multiply that by 3 to get a better idea when price will reach our TP

    What I would like you to do:


    • Do you trade this method? Or maybe its already there somewhere with a different trading name? (Maybe help in identifying elliott wave 3?)
    • Do you trade triangles exclusively? If yes, can you add to this thread with constructive criticism/suggestions?
    • Do you trade Wolfe Waves (or gartley or XABCD)? If yes, can you add to this thread with constructive criticism/suggestions?
    • Can you contribute to this thread by looking at charts and trying to see if the price estimates for triangles and the Wolfe waves does indeed reach?


    Charts:

    Attached, EURUSD Chart with description.
    USDCHF chart with just basic info. What's to note is the # of candles. It took 40 candles to reach our price target from triangle. So we expct wolfe wave 5 price estimate to reach in 40x3 (120 candles). In actual, price reached after 139 candles (not too far away from estimated time)

    Click image for larger version. 

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ID:	3212Click image for larger version. 

Name:	usdchf-example.jpg 
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ID:	3213
    __________________________________________________ ______________________________

    Is The formation on eurusd in 4hour chart which is currently forming is the same as above explained....?? waiting for "D" to be made which I expect around 12780 and than a push to the upside which according to calculations which are above explained coming around 1.28860, and from there expct wolfe wave 5 price estimate to reach 1.2660.

    how many candles and hours will be required to reach TP1 & TP2 can not be told as few things are still under formation in the pattern....

    Any comments ......??
    Attached Thumbnails Attached Thumbnails Triangles and Wolfe Waves - Need your inputs-eurusd-30mar2013.jpg  

  3. #3
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    Hi adeel,

    Thanks for your chart.

    From the looks of it, the triangle hasn't been formed yet. At this stage, it would be risky (although tempting to catch a move before it happens) to comment because point D hasn't been formed yet.

    What makes this triangle formation tricky is that we have more than 1 swing low points (note the two circled areas in the chart below).

    Triangles and Wolfe Waves - Need your inputs-eurusd-h4-triangle.jpg

    We need clean swing highs and lows in order to predict the pip movements.

    Below is my hypothesis:

    IF (and a BIG 'IF') the triangle does eventually form with clear swing points then you should be looking at a potential downside pip movement of about 6.93 pips.

    Approximate Swing point D should happen between 1.27586 region, then the entry price would be 1.27430 and target 1.26736.

    Stops would be at 1.27662 (but its going to be a very tight stop).

    Thus summarizing 'Triangles'
    Entry - 1.2743
    Stop - 1.27662
    Target - 1.26736
    Risk: 23.2 Pips
    Reward: 69.4 Pips

    Once price reaches the estimated price range, then you can expect a reversal (riding the wolfe wave).
    Quickly calculate the # of candles from point D to our est. price zone.

    Multiply that by 3 to get the approximate time for price to reach the target (Target Price would be (0.00693x3 = 0.02079)+ 1.26736)) of 1.28815.

    Triangles and Wolfe Waves - Need your inputs-eurusd-h4-hypothesis.jpg

    Again, this is hypothetical because point D hasn't been formed yet. In all probability the triangle might be invalidated if the current candle you see breaches the A-C trend line, or if D is formed well inside the triangle that you see price cutting through the B trend line that you currently see.

    You could wait out the triangle formation (which is a great way to validate Wolfe Wave 5) and then ride this wave 5 as the reward potential here is much greater than the # of pips you get from Triangle trade.

    Hope this helps and keep the charts coming

  4. #4
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    yes, very much true , it wud be great if u also point out the alphabets (A,B,C,D) in the above triangle which would be easier for every one to understand, i love this work of urs and really excited to work on it more but for that I have to learn the exact things e.g triangles formation from you, I can actually create its EA as I am a programmer too.

    I am actually stuck in some of my long positions in eurusd and I can smell that from these type of wonderful explanation and analysis, I will be able to clear my float.

    Really thankful to you for all this, I would be really happy to speak to u on skype, add me: adeel000999

    keep the charts coming and your amazing analysis.

    thanks

  5. #5
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    And wanted to tell u something, since the time i read your explanation, I scrolled my eurusd charts and found these kinds of patterns and than I served my last whole night and today afternoon in doing calculations....its like I served more than 16 hours on it and I am loving it as its so wonderful and 99.9% its successful.

    thanks for your hard work, Respect and appreciate.

    keep the charts coming and your amazing analysis.
    thanks

  6. #6
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    Also, it would be great if you share the upcoming patterns with charts for all of us, it would be very helpful.

  7. #7
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    Please also let me know that this only works on 4hour time frame ???

  8. #8
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    Hi Adeel, thanks!!

    Please also let me know that this only works on 4hour time frame ???
    Triangles work on any time frame. You can start with 15M and go higher (I wouldn't go beyond W1, unless there is a potential LONG trade and that on pairs that can earn my +ve swaps, so I make some extra money when the trades are opened overnight for a couple of days).

    it wud be great if u also point out the alphabets (A,B,C,D)
    Its quite simple actually. Let's say we are looking at eurusd-h4-triangle.jpg image. So from the left you notice the first pivot (its approx. 1.2880) that will be your Point A.. from then on look to the next pivot which must form below. Or above if the previous first pivot was below) and that becomes point B, so its easy to check C and D.

    Upcoming charts

    EURCAD, USDCHF, NZDUSD. I have marked the entry/exit/stop prices

    Triangles and Wolfe Waves - Need your inputs-usdchf-0104.jpgTriangles and Wolfe Waves - Need your inputs-eurcad-0104.jpgTriangles and Wolfe Waves - Need your inputs-nzdusd-0104.jpg

    Fine tuning the system
    Upon closer analysis, I think there is a bigger chance to make winning trades based on this first set of signals. As I mentioned this is a combination of converging triangles and wolfe waves. Therefore, this first set of signals are purely 'speculation'. So if you want higher probability trades, then trading the Wolfe wave reversal is more ideal. If you refer to my first post, you can see how to calculate the pip distance travelled and the # of candles.

    Hope this helps.

    I'll add you to skype but i'm not online during weekdays (lots of distraction).

    In regards to building an EA, i'd rather like to see some indicator being built with automatic pip calculations for both triangles and wolfe waves. This method is still in the early stages and I discovered a potential weakness to the triangles system from another thread over here. Hopefully if the other member uploads some chart patterns which I asked, then I will be able to sort out the weakness to the system.

  9. #9
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    A quick update that I won't be around much during this month (maybe on weekends) as i'm going to put this system to test by participating in a demo trading contest.

    The trading plan is quite simple. For triangles, i'll be opening 0.1 lots and IF they hit the specified target price, then i'll open a trade with 1 lot as by this time it will be clear in terms of the target price (which is double than the TP for triangles) and also the estimated # of candles it will take to reach the wolfe wave TP.

    Wish my luck and do post your comments/questions on this method, if not immediate, i'll try and reply them over the weekends.

    Thanks.

  10. #10
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    hi
    the charts above u send, one of the chart is for usdchf where it's about to break triangle and will reach TP 0.9551, and than once it reaches TP it will form WW5... ?? which I am expecting to come to 0.93248 as its target... ??

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