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or correction. In this book, the EOW targets for a simple ABC and a five-wave trend are taught. outlier When determining the cycle ranges, an outlier is a time range that is much longer or shorter than the other ranges. The outlier ranges may be not be included when determining the cycle ranges. Time Band In a bull trend, the overlap of the recent high-high cycle range and the recent low-high cycle range. If the recent time cycle rhythm continues, the assumption is that the next high will be made in the Time Band (overlap) range. Outliers may be eliminated when measuring the L-L or L-H ranges. In a bear trend, the Time Band is the overlap of the recent low-low and high-low time ranges. time retracement (TR) Compares the time range of a corrective section to the prior trend section. The most frequently used TR ratios are 38.2 percent, 50 percent, 61.8 percent, 100 percent, and 162 percent. Simple ABC corrections are usually complete in the 38.2 to 61.8 percent time retracement range. Complex corrections are usually complete by the 100 percent time retracement of the prior trend section.
Chapter 6 Entry Strategies and Position Size entry strategy The strategy to determine the entry conditions and specific entry and initial stop-loss prices. The entry strategies recommended in this book are completely objective once the trade conditions have been met. The two recommended entry strategies in this book are the momentum reversal trailing one-bar-high (low) and the swing breakout.
Following a smaller time frame momentum reversal in the direction of the larger time frame momentum, the entry price is trailed one tick above/below the last completed bar. The entry price is adjusted with each new bar if the trade has not been executed, as long as the smaller time frame momentum has not made another reversal in the opposite direction. If the trade entry order is executed, the initial protective stop is placed one tick below/above the swing low/high made prior to entry. The principle is that the trade is only entered if the market takes out a bar high or low in the direction of the trade.
momentum reversal trailing one-bar-high/low entry strategy
position size The number of trading units (contracts, shares, lots) for the trade. The
maximum position size should represent capital exposure of no more than 3 percent of the account. (See Chapter 6 for how to calculate maximum position size.) swing breakout entry strategy Once the conditions for a trade are made, initiate a go-long or go-short entry at a price one tick above/below the recent swing high or low. Place the initial protective stop-loss one tick below/above the swing high or low made prior to entry. The principle is that the conditions for a reversal or trend continuation have been met and the trade is entered as the market moves above/below a swing high or low in the anticipated trend direction. trailing one-bar-high/low Once the conditions for entry have been met, including the smaller time frame momentum reversal, a go-long or go-short entry is trailed one tick above/below the high/low of the previous bar. Used on all time frames of data.