Post 27 EWU Observations from a New Student

Hi Jody,

Seems a long time since I have written. March was a difficult for me. I was without my primary computer for most of the month due to a hard drive failure and I’m still trying to put the pieces back together. The story goes on from there, but I won’t bore you with the details. Life was generally too difficult to trade.

I’m getting back into the saddle and I made some trades this week. I’m trading very small money, typically .05 lots on currencies and some nice stock market setups. Way back as early as November, I felt like the end of March was a likely time to be putting it all together and trading consistently. I don’t think that I’m quite there, yet. I’m confident I will get there. I feel like I know how to spot high probability setups, and I’m getting better at it each week. Each small trade that I make is a learning experience. So, these little $5 trades are excellent tuition when I take a loss.

My biggest issue is time. I still work 20+ hours per week on my contract programming job and it consumes a lot of my creative energy. I also have a very full life that is neither trading nor work. My goal continues to be to put 20 hours toward trading each week. Another big issue is interruptions. But interruptions are actually something over which I have control, I need to continue to find ways to reduce those distractions.

I continue to have weekly business meetings with myself which is simply sitting down in my easy chair and writing out a page of my thoughts about where I am and what I need to do. It is pretty much stream of consciousness and it always yields great ideas and narrows down what my next steps need to be. It is an excellent focusing exercise for me, of course I have a long history of journaling. This week’s meeting highlighted the fact that I got put back on my heels in March and it is time to regain the focus that I had in January. I have moved my business meeting and weekly goal setting to the weekends. I have a very clear set of goals for this coming week and have a clear idea of how much time I’m going to devote to each of the areas that need focus.

Between maintaining a vision, time actually spotting setups and trading, my own personal studies, (re)-watching videos, finding Harmonic Patterns, Updating Elliott counts, reviewing my trades, general organization and some custom programming that I am doing to back test ideas there is a lot to be done.

The current study that I am undertaking is on the Bungee, specifically Bungee Pinches and Failed Snap-backs. I am taking screen shots of Bungee Pinches with Failed Snap-backs and separating them into three categories: Those that worked, those that traded sideways and those that failed. I put each type of image into the appropriate folder then just sit and do slide-shows and look for similarities and differences. I’m beginning to see some patterns emerge, but I haven’t captured enough examples to be able to lead a reasonable person to conclude what constitutes a proper Failed Snap-back. But I do have early theories and those theories make logical sense.

I did a similar study on the Semaphores. I looked at enough examples of Semaphores that I believe I could lead a reasonable person to conclude that one of the best ways to know if a Semaphore is final is to look at the next two bars. If they are strongly in the new direction, preferably engulfing the body of the bar that made the Semaphore, there is a high likelihood that the semaphore is final. Of course, this means that you must miss the beginning of the move to get that confirmation. If it is a medium sized Semaphore, you’ll go back to the Wave, if it is a large Semaphore, you’ll go back to the Tunnel and if is a Royal, you’ll cross the Tunnel. I’m finding this very useful as a piece of information on the very large time frame so that I know where trend will be on two or three time frames lower.

I’m still very busy putting all of the pieces together in a way that works for me. I’m using pretty much all of what I’ve been taught, the Wavy Tunnel setups, the Bungee, the Semaphores, the CAO, the Harmonics, the Elliott counts and the Fibonacci ratios. I’m still training my mind to become aware of all of these aspects when I look at a chart. I find that I really enjoy the challenge of spotting the Price to Wave and the Fill the Gap. I think the way that I’m meant to trade is to capture 5-minute Royal to Royal, which in the stock market can be very lucrative since there is no spread to speak of. I have enough trading capital to potentially hold 1000 shares with a very tight stop on the 5-minute chart which means my spread is 1 cent, based on $5 commission each way. I have not traded that big yet; however, I believe that over time I can slowly build my confidence and raise my risk to the point where I can make such a trade.

As I have experimented with different time frames and capturing different kinds of moves, trading 5-minute Royal to Royal is the style of trading that captures my imagination. It means staying totally focused for the time it takes the 5 minute chart to setup, cross the Tunnel and give a Royal Semaphore on the other side of the Tunnel with a signal (like a Failed Snap-Back or CAO divergence) that the move is probably over. I think part of what I like about it is watching as each Wavy Tunnel event unfolds: Now we’re Filling the Gap, now we’re getting the BO-1 will we get a BO-3? Now it’s time to start looking for the exit…

The other thing I like about it is that it lets me trade the entire swing without having to worry about dodging in and out, just be patient see if we can get across the Tunnel and then look for that Royal to start painting. All if this happens within a day’s trading and if it is not complete, I’m out because I don’t want to hold over night. Gaps are common and I lose my ability to control my risk.

So, I’m ready to get back firmly into the driver’s seat and start to believe in myself. I look to make April an excellent month. At least a month of good learning and hopefully a month of good trading.

-dave

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