I count the decline from the 1.60 top in EUR/USD as a three-wave decline. Based on that decline, the first chart shows the possible counts I came up with back in late 2008. The second chart shows the updates to those counts.
-If the complex correction ends up being the correct count, the (X) wave could take the form of a couple of different patterns. In the update chart below, I show that (X) wave as a flat correction. It could just as easily be a triangle or a complex.
What is your top at 16000 labelled as? Some of these scenario's depend on that. You might be able to weed some out.
While redesigning my Trade Setup Worksheet, I came across the
following item that can be added to your Risk Management toolkit.
I termed it the Risk Factor, and it's defined below. I don't know if this item
already exist and called differently, but it could be a useful tool to gage
risk on your trades if used correctly.
For a given trade, the Risk Factor is a measure of the changes in the
account balance with respect to changes in the underlying currency
pair that is being traded. In essence, the Risk Factor for a given
trade is the percentage change in the account balance due to 1%
change in the underlying currency pair.
Assuming the account is funded in USD, for currency pairs with the
USD as the base currency, the Risk Factor can be computed using
the following relation.
Risk Factor = Contract Size / Account Balance
For currency pairs with the USD as the secondary currency, the
Risk Factor is computed using the following relation.
For non USD pairs, such as the cross currency pair EURGBP, the Risk
Factor can be computed by breaking the cross pair into two pairs
containing the USD, and then use the above relations to compute
the total Risk Factor. For example, a position that is long 1 lot of
EURGBP is similar to a position that is long 1 lot of EURUSD, and a
second position that is short 1 lot of GBPUSD. Therefore, the Risk
Factor on 1 lot EURGBP is the sum of the Risk Factor on 1 lot EURUSD,
and the Risk Factor 1 on lot GBPUSD.
So how's the Risk Factor useful?
The Risk Factor can be used during trade setup to measure the effect
of the trade on the account balance. For example, a Risk Factor of 10
indicates that the account balance will change by 10% for every 1%
change in the underlying currency pair.
So if the underlying currency should change by 5% in the opposition
direction of the trade, the account would suffer a 50%loss, provided
that the Stop on the trade hadnt triggered.
While redesigning my Trade Setup Worksheet, I came across the
following item that can be added to your Risk Management toolkit.
I termed it the Risk Factor, and it's defined below. I don't know if
this item already exist and called differently, but it could be a useful
tool to gage risk on your trades if used correctly.
For a given trade, the Risk Factor is a measure of the changes in the
account balance with respect to changes in the underlying currency
pair that is being traded. In essence, the Risk Factor for a given
trade is the percentage change in the account balance due to 1%
change in the underlying currency pair.
Assuming the account is funded in USD, for currency pairs with the
USD as the base currency, the Risk Factor can be computed using
the following relation.
Risk Factor = Contract Size / Account Balance
For currency pairs with the USD as the secondary currency, the
Risk Factor is computed using the following relation.
For non USD pairs, such as the cross currency pair EURGBP, the Risk
Factor can be computed by breaking the cross pair into two pairs
containing the USD, and then use the above relations to compute
the total Risk Factor. For example, a position that is long 1 lot of
EURGBP is similar to a position that is long 1 lot of EURUSD, and a
second position that is short 1 lot of GBPUSD. Therefore, the Risk
Factor on 1 lot EURGBP is the sum of the Risk Factor on 1 lot EURUSD,
and the Risk Factor 1 on lot GBPUSD.
So how's the Risk Factor useful?
The Risk Factor can be used during trade setup to measure the effect
of the trade on the account balance. For example, a Risk Factor of 10
indicates that the account balance will change by 10% for every 1%
change in the underlying currency pair.
So if the underlying currency should change by 5% in the opposition
direction of the trade, the account would suffer a 50%loss, provided
that the Stop on the trade hadnt triggered.
Assume a standard account with $100K USD balance, and also assume
the trade setup below. The Risk Factor for this trade is 3.21 -- meaning
the account balance will increase 3.21% for every 1% increase in AUDUSD
... and the account balance will decrease by 3.21% for every 1% decrease
in AUDUSD.
Contract Size = 4 * 100,000 = 400K
Risk Factor = (400K * 0.8015) / 100K = 3.21
However, looking at the trade setup, 4% of the account balance is
risked for this trade. So if this trade doesn't work, then the expected
change in AUDUSD to trigger the Stop is
Loss (%) / Risk Factor = 4 / 3.21 = 1.25%.
That is, AUDUSD must fall 1.25% below the entry price for the Stop
to trigger.
Here's the validation ..............
An alternate method to calculate the change in AUDUSD to trigger the
Stop for this traded is as follows:
While redesigning my Trade Setup Worksheet, I came across the
following item that can be added to your Risk Management toolkit.
I termed it the Risk Factor, and it's defined below. I don't know if this item
already exist and called differently, but it could be a useful tool to gage
risk on your trades if used correctly.
For a given trade, the Risk Factor is a measure of the changes in the
account balance with respect to changes in the underlying currency
pair that is being traded. In essence, the Risk Factor for a given
trade is the percentage change in the account balance due to 1%
change in the underlying currency pair.
Assuming the account is funded in USD, for currency pairs with the
USD as the base currency, the Risk Factor can be computed using
the following relation.
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
Well done ,,,,,,,,,,,,,,, Fxctrader
after 3 years of being in here you are the first i've seen that
has taken the time to examine and post a solid MM strategy
just as there are many wave counts occurring at the same time
,,, there are also many different MM strategies to choose from
It's up to you the trader to decide on your own Money Management guidelines,
because we don't all have the same tolerance for Risk
/////////////////////////////////////////////////////////////////////////////////////////////////////
anyway ,
i see you have been doing your Money Management home-work .....
This is the most important home work you can ever do when it comes to trading
Why ,
because trading is all bout your ability to manage Risk , no matter what wave count you think is occurring !
----------------------------------------------- ------------------------ ------------ -------------------- --------- -------- ----------- -----------
Successful trading is about your ability to manage Risk of the individual trades that you decide to take
no matter what trading style you are using , and staying ahead of taxes and inflation
Money Management is a lengthy subject matter that is to be studied ,,,,, more so than wave counts
( this is what i call a solid Money Management plan )
All you dollar bulls out there, don't say I didn't warn you.... Anyone considering bullish USD positions should first take into account the long term chart here... Also Prechter has been calling for the collapse of the U.S. economy for years, and it looks to me like it's under way and will most likely be a long, slow, painful death....
(Chart Re-Post)
Assume a standard account with $100K USD balance, and also assume
the trade setup below. The Risk Factor for this trade is 3.21 -- meaning
the account balance will increase 3.21% for every 1% increase in AUDUSD
... and the account balance will decrease by 3.21% for every 1% decrease
in AUDUSD.
Contract Size = 4 * 100,000 = 400K
Risk Factor = (400K * 0.8015) / 100K = 3.21
However, looking at the trade setup, 4% of the account balance is
risked for this trade. So if this trade doesn't work, then the expected
change in AUDUSD to trigger the Stop is
Loss (%) / Risk Factor = 4 / 3.21 = 1.25%.
That is, AUDUSD must fall 1.25% below the entry price for the Stop
to trigger.
Here's the validation ..............
An alternate method to calculate the change in AUDUSD to trigger the
Stop for this traded is as follows:
What is your top at 16000 labelled as? Some of these scenario's depend on that. You might be able to weed some out.
Hi Pippin,
The price action leading up to the 1.60 top can be counted a few different ways. You can count it as an impulse or as a correction. For my EW analysis system it doesn't really matter though. All I'm concerned with is the three-wave decline. Based on that three-wave decline, all of the counts I posted earlier are possible.
My EW analysis system is only concerned with two degrees of trend per setup. I don't have any reason to try to throw letters and numbers at every single little wiggle the market has made in the past fifty years to come up with a successful wave-count. As far as long-term EUR/USD goes, all I care about is what patterns that three-wave decline can be a part of.
The price action leading up to the 1.60 top can be counted a few different ways. You can count it as an impulse or as a correction. For my EW analysis system it doesn't really matter though. All I'm concerned with is the three-wave decline. Based on that three-wave decline, all of the counts I posted earlier are possible.
My EW analysis system is only concerned with two degrees of trend per setup. I don't have any reason to try to throw letters and numbers at every single little wiggle the market has made in the past fifty years to come up with a successful wave-count. As far as long-term EUR/USD goes, all I care about is what patterns that three-wave decline can be a part of.
Well, here is one for you.
Notice the 2 expanding flats. I actually asked a question on EWI message board regarding expanding flats as the targets seem to differ.
In a webinar EWI said wave C can be equal to A or 1.382 times A. You see the first expanded flat is more that 1.382 times A, but more important, the DJIA is identified as an expanded flat with the 14000 top as a wave B. The 6500 level is over 1.382 times wave A. So, that could mean a bottom is in. However, Steve Hochberg doesn't think so, he thinks the bottom will be much lower. So, I am awaiting an answer. Cannot find a consisive ratio analysis on expanded flats anywhere.
However, back to eurusd, a double zigzag on supercycle degree could be playing out.
Last edited by Ilovepippin; 07-19-2009 at 08:15 PM.
All you dollar bulls out there, don't say I didn't warn you.... Anyone considering bullish USD positions should first take into account the long term chart here... Also Prechter has been calling for the collapse of the U.S. economy for years, and it looks to me like it's under way and will most likely be a long, slow, painful death....
The same message goes to you as well, Brad. If the USD starts a long-term rally, don't say you weren't warned.
The first chart posted below is a long-term monthly chart of USD/CHF. The clearest segment of price action, to me, is the area I have outlined in red. That segment of price-action is a clear three-wave rally. Based on that three-wave rally, we can objectively come up with a list of possible wave-counts in which that three-wave rally can be a part. The second chart shows that list of possible wave counts.
The third chart shows that same list of possible counts and includes all of the price action that comes after that three-wave rally. Looking at this chart, we can see that five of the six counts listed are immediately bullish. (In a long-term perspective, that is. Of course price can go down on the smaller degrees of trend.) The only bearish count is the first one which has price still declining in wave (3) of a long-term decline. My preferred long-term counts are the flat and triangle corrections.
You'll notice that the last two counts, the double- and triple-threes, are drawn showing that there is more USD weakness required to complete those patterns. However, you can also count both of those patterns as already complete as of the March 2008 low. That means that those corrective patterns could be complete, indicating that a long-term bull market is beginning there as well.
So while you may be a hard-core bear on the USD, keep in mind that there are plenty of legitimate, bullish counts available. The key is to stay objective.
Well, here is one for you.
Notice the 2 expanding flats. I actually asked a question on EWI message board regarding expanding flats as the targets seem to differ.
In a webinar EWI said wave C can be equal to A or 1.382 times A. You see the first expanded flat is more that 1.382 times A, but more important, the DJIA is identified as an expanded flat with the 14000 top as a wave B. The 6500 level is over 1.382 times wave A. So, that could mean a bottom is in. However, Steve Hochberg doesn't think so, he thinks the bottom will be much lower. So, I am awaiting an answer. Cannot find a consisive ratio analysis on expanded flats anywhere.
However, back to eurusd, a double zigzag on supercycle degree could be playing out.
You could also count the price action from 2000 to 2008 as a five-wave rally. Or you could count that flat correction as wave (X) of a double three. You could come up with several scenarios for that segment of price action. And that's the reason I'm not concerned with how to correctly label that part of the chart. The top at 1.60 could be a wave (C) or a wave (5) top. Price could be headed higher or lower from there. So by focusing only on the decline from 1.60 and treating it as a three-wave decline, the list of possible wave-counts I came up with covers all scenarios. If price is headed higher, I've got a count for that. If price is headed lower, I'm good there too. If price decides to chop around for several more months, some of the counts I posted earlier cover that possibility as well. The correct count will present itself in a few years, but until then I have enough to go on for now.
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Originally Posted by justy10125 
