Using C4s as a "brick wall"

[theoryman]

Thought it might be a good idea to move this discussion from the S&P thread.

Once you have any completed C of 4 then the next wave is a 5th which cannot fail and it's not allowed to retrace beyond its start, hence the concept of a brick wall.

So the problem now becomes "Is it a C of 4?" and "How certain am I it is completed?"

If I am wrong, what is the max cost/risk to bank?

If I am right, how much is the minimum reward given that the 5th cannot fail?

Have a look at these four examples, all based on the same possible C of 4, which just happens to be after an RTB.

I use red for C4s and green for As.

In any C4 there should be a subset of 123 A RTB C4 5 waves.

The internal A and C4 always run counter to the section they are in.

Sometimes they are cleary visible and checkable and sometimes they are not - that's where the examples differ.

If the C4 is to act as a "brick wall", your stop can go just below it.

The entry level depends on where the lowest top of a trusted internal C4 is. (When that goes, the final 5th of..... must be over.)

Looking at the diags and think through how confident you would be if every section passed your test of "OKness". [One man's three is another man's five.]

   

Decide where you would enter ,if at all, and what the reward:risk would be, only roughly by doing a visual check.

Does the maths stack up? In each case are you trading with an edge or not?

Now for the really good bit. Sometimes the market is very very kind and it moves away from the potential C4 in the diagram but doesn't make the new High before coming back again, very close to the "C4" level.

Example: "C4" brick wall at 1000, RTB 1030, market comes back to 1002.
Ignoring spreads to keep maths simple.
Reward=1030-1002=28
Risk=1002-1000=2
Reward:Risk 28:2 or 14:1
Are you confident enough in your analysis, to be able to say that more that 1 time in 15, or ~ >7% of the time; you will have indentified the "C4" correctly in each example?

Beautiful idea? Simple to use? Easy to use correctly?

cheers theory

[theoryman]

Here's an example from the S&P. On that thread I'd previously identified the internal C4 level that it needed to go above to confirm the Pivot was in. (1269.2)

Then it went up and came back down making a close encounter with the level I was using as a "brick wall" (1261).

I'll leave you to do the reward:risk for a variety of entry levels and do your own assessment of how valid a C4 it is, starting from the raw data.

   

cheers theory

[Steely Dan]

Theory, Just a quick observation. Given that a market is clearly trending, it could be worthwhile setting up an indicator to trawl through charts to give candidate 4C's with a high reward:risk ratio. It would not need to count waves, but simply select candidates according to the following sorts of criteria.

1) Clear trending market as defined by moving averages.
2) A correction of a given threshold amount, say 1%. (A wave?)
3) A new high (B wave?).
4) A retrace towards the correction low getting close enough to give a good reward:risk ratio. Possibly filtered by a time threshold between 1st and 2nd correction.

Of course the wave checking would be manual, but if you set an alarm to trigger on multiple markets there would likely be many alarms triggering at a similar time with good pivot opportunities.

[theoryman]

I don't think the relative size bit works, there are some smaller ones which contain real quality As.

My thrust at the moment is along the minimum number of candles needed to achieve something.

A three could be two overlapping candles, whilst a five needs three, a seven needs four and a nine needs five.

Then it's "just" a matter of looking at the OHLC and OLHC for each and how they could fit together to make a wave.

Lots of possibilities in terms of candle colour or relative HLs for consecutive candles - I'll have a play this weekend.

Timings can be altered to x mins by using 1 min candles or each candle could be x tick, built up from the 1 tick level.

On a mental roll at the moment, want to keep going but must avoid burnout at all costs - takes me weeks/months to recover if I push too far.

cheers theory

[theoryman]

SED,
Thought about your 1% retrace idea.

I'd be tempted to try it with ZigZag set on Low and another on High.

If you set them both on same % level and then reduce it, a single move will swap to a three or a five depending on the step size down or a mixture of both i.e. three on one and five on the other.

My instincts are that the best As are those that end up as a five on both and they turn in sync with one another, give or take a candle.

Like wise for a three and in fact any five.

Now what about a seven or nine for the C4? Problem is the seven is sometimes the whole C4 and sometimes just as far as the c of RTB but an internal check should help resolve that to a "reasonably" level of uncertainty.

cheers theory

cheers theory

[3kings]

Theory, I hope you would share this indi if it works. And I like your zigzag ideas which make good sense to me. I watch your discussions with so much interest but admit to not following all of them.

Seems like the A RTB C4 is the tough one to crack, isn't it?. I don't feel so bad if I get stuck since Elliott himself must have scratched his head a few times. He even had to come up with the extensions idea because he didn't have the kind of data we have now. Even with the knowledge of NEWR it still has quite a range of possible formations and can really get tricky fitting itself into every wave.

But I'm GLAD to have the knowledge.

Best of luck on that indicator and all your counts/trades.

3kings

[theoryman]

(01-13-2011 12:58 PM)3kings Wrote:  Theory, I hope you would share this indi if it works. And I like your zigzag ideas which make good sense to me. I watch your discussions with so much interest but admit to not following all of them.

Seems like the A RTB C4 is the tough one to crack, isn't it?. I don't feel so bad if I get stuck since Elliott himself must have scratched his head a few times. He even had to come up with the extensions idea because he didn't have the kind of data we have now. Even with the knowledge of NEWR it still has quite a range of possible formations and can really get tricky fitting itself into every wave.

But I'm GLAD to have the knowledge.

Best of luck on that indicator and all your counts/trades.

3kings

3kings,

The problem is that Steely and I have been exchanging posts before he pointed me in the direction of NEWR and this site. So I tend to write for him plus USD and if anyone else happens to read it then no problem.

If at any time you want clarification of any point, please ask. The act of having to explain my thinking processes serves as a trigger for yet more thoughts, so if I have time I'll do it.

When it comes to sharing the indi, I certainly will. Our target is to make it semi-automatic. It finds the most likely wells and then our brains take over and we drill down hoping to find a gusher. It's really about focussing our efforts in areas that will make the best return for the time taken.

Basically, why fight a battle on the FTSE when the S&P has been behaving so well?

Why stay with wringing out what might be the last few points from the S&P, when the trade Tom has pointed out exists on Euro/£?

cheers theory

[Steely Dan]

(01-13-2011 04:36 AM)theoryman Wrote:  SED,
Thought about your 1% retrace idea.

I'd be tempted to try it with ZigZag set on Low and another on High.

If you set them both on same % level and then reduce it, a single move will swap to a three or a five depending on the step size down or a mixture of both i.e. three on one and five on the other.

My instincts are that the best As are those that end up as a five on both and they turn in sync with one another, give or take a candle.

Like wise for a three and in fact any five.

Now what about a seven or nine for the C4? Problem is the seven is sometimes the whole C4 and sometimes just as far as the c of RTB but an internal check should help resolve that to a "reasonably" level of uncertainty.

cheers theory

cheers theory

I see what you are saying Theory. I would add that I was sloppy in my first post putting presumed wave labels such as A or C to the behavior I was describing. You get close tests of an A wave extreme from a 4C but you equally do with a 4C of lesser degree testing the 4C of higher degree. My point is that markets tend to alter counts at similar times to each other, so alerts on multiple markets would need human perusal but would perhaps give a heads up.

Last night we had FTSE 5595 vs 5591 and S&P 1280.2 vs 1279.8 occurring at close to 20:30 UK time. If you are at the trenches deciding whether you have a significant level to defend coincident alerts would imho be of interest.

[RayH]

(01-11-2011 06:33 AM)theoryman Wrote:  Thought it might be a good idea to move this discussion from the S&P thread.

Once you have any completed C of 4 then the next wave is a 5th which cannot fail and it's not allowed to retrace beyond its start, hence the concept of a brick wall.

So the problem now becomes "Is it a C of 4?" and "How certain am I it is completed?"

If I am wrong, what is the max cost/risk to bank?

If I am right, how much is the minimum reward given that the 5th cannot fail?

Have a look at these four examples, all based on the same possible C of 4, which just happens to be after an RTB.

I use red for C4s and green for As.

In any C4 there should be a subset of 123 A RTB C4 5 waves.

The internal A and C4 always run counter to the section they are in.

Sometimes they are cleary visible and checkable and sometimes they are not - that's where the examples differ.

If the C4 is to act as a "brick wall", your stop can go just below it.

The entry level depends on where the lowest top of a trusted internal C4 is. (When that goes, the final 5th of..... must be over.)

Looking at the diags and think through how confident you would be if every section passed your test of "OKness". [One man's three is another man's five.]



Decide where you would enter ,if at all, and what the reward:risk would be, only roughly by doing a visual check.

Does the maths stack up? In each case are you trading with an edge or not?

Now for the really good bit. Sometimes the market is very very kind and it moves away from the potential C4 in the diagram but doesn't make the new High before coming back again, very close to the "C4" level.

Example: "C4" brick wall at 1000, RTB 1030, market comes back to 1002.
Ignoring spreads to keep maths simple.
Reward=1030-1002=28
Risk=1002-1000=2
Reward:Risk 28:2 or 14:1
Are you confident enough in your analysis, to be able to say that more that 1 time in 15, or ~ >7% of the time; you will have indentified the "C4" correctly in each example?

Beautiful idea? Simple to use? Easy to use correctly?

cheers theory

Hi Theory,

Thanks for your insight. Your description is very detailed but unfortunately I get a bit lost with some of the terms. Could you please clarify a couple of things for me?

1) When you say that a 5th following a RTB+4C "cannot fail", what exactly do you mean by this? Is is that it must extend beyond the level of the RTB (of the preceeding 4th, not any lower level C4)and cannot truncate?
2) A 5th cannot retrace beyond its start. By this you mean that it cannot retrace >100% before first exceeding the preceeding RTB?
3) I am a trying to get my head around your example illustrations. Are you depicting 4 stages of a C wave unfolding? If so then I think I get it.
4) In your chart from post #2 are you saying that a retrace above 1269.2 proved that wave 5 was underway; so entry is long with stop below 1261 because 5th cannot retrace below that? What follows thereafter is the beginning of the next 5 waves upwards?
5) What could you use to calculate the projected termination point of wave 5 so we know what our potential reward is?

also one final question open to everyone I guess; What is the consensus on where 4C's usually terminate. Is it before or beyond the preceeding A? Does it depend on which wave you are inside at the next higher level?

Cheers!
Ray

[theoryman]

(01-18-2011 10:45 AM)RayH Wrote:  

(01-11-2011 06:33 AM)theoryman Wrote:  Thought it might be a good idea to move this discussion from the S&P thread.

Once you have any completed C of 4 then the next wave is a 5th which cannot fail and it's not allowed to retrace beyond its start, hence the concept of a brick wall.

So the problem now becomes "Is it a C of 4?" and "How certain am I it is completed?"

If I am wrong, what is the max cost/risk to bank?

If I am right, how much is the minimum reward given that the 5th cannot fail?

Have a look at these four examples, all based on the same possible C of 4, which just happens to be after an RTB.

I use red for C4s and green for As.

In any C4 there should be a subset of 123 A RTB C4 5 waves.

The internal A and C4 always run counter to the section they are in.

Sometimes they are cleary visible and checkable and sometimes they are not - that's where the examples differ.

If the C4 is to act as a "brick wall", your stop can go just below it.

The entry level depends on where the lowest top of a trusted internal C4 is. (When that goes, the final 5th of..... must be over.)

Looking at the diags and think through how confident you would be if every section passed your test of "OKness". [One man's three is another man's five.]



Decide where you would enter ,if at all, and what the reward:risk would be, only roughly by doing a visual check.

Does the maths stack up? In each case are you trading with an edge or not?

Now for the really good bit. Sometimes the market is very very kind and it moves away from the potential C4 in the diagram but doesn't make the new High before coming back again, very close to the "C4" level.

Example: "C4" brick wall at 1000, RTB 1030, market comes back to 1002.
Ignoring spreads to keep maths simple.
Reward=1030-1002=28
Risk=1002-1000=2
Reward:Risk 28:2 or 14:1
Are you confident enough in your analysis, to be able to say that more that 1 time in 15, or ~ >7% of the time; you will have indentified the "C4" correctly in each example?

Beautiful idea? Simple to use? Easy to use correctly?

cheers theory

Hi Theory,

Thanks for your insight. Your description is very detailed but unfortunately I get a bit lost with some of the terms. Could you please clarify a couple of things for me?

1) When you say that a 5th following a RTB+4C "cannot fail", what exactly do you mean by this? Is is that it must extend beyond the level of the RTB (of the preceeding 4th, not any lower level C4)and cannot truncate?
2) A 5th cannot retrace beyond its start. By this you mean that it cannot retrace >100% before first exceeding the preceeding RTB?
3) I am a trying to get my head around your example illustrations. Are you depicting 4 stages of a C wave unfolding? If so then I think I get it.
4) In your chart from post #2 are you saying that a retrace above 1269.2 proved that wave 5 was underway; so entry is long with stop below 1261 because 5th cannot retrace below that? What follows thereafter is the beginning of the next 5 waves upwards?
5) What could you use to calculate the projected termination point of wave 5 so we know what our potential reward is?

also one final question open to everyone I guess; What is the consensus on where 4C's usually terminate. Is it before or beyond the preceeding A? Does it depend on which wave you are inside at the next higher level?

Cheers!
Ray

Ray,
Hope this helps:-

1) A 5th is allowed to truncate i.e. end up level with the preceding RTB in this case, or excede it but never fall short of it - hence minimum reward is guaranteed.

2) A 5th can never retrace back beyond its start which is the end of the 4C in these diagrams - hence the end of the 4C level acts as a brick wall.

3) The 4 diags show four versions of the same C of 4 for which there are varying levels of evidence.

The worst case is a solid A but a weak C4 and it's short (a see the C).

The next is a possible A, solid candidate for a C4 (complex, counts as a seven or nine) but no internal checkable detail.

The next is a solid A, solid 4C (which includes its own A and 4C).

The last is a dream scenario........, reality isn't often like that.

4) Correct

5) There is absolutely NO way that NEWR allows you to predict where it is going, apart from at least truncating with the preceding RTB.

Now for the last general question. The only thing you know about 4Cs is they contain their own 1 2 3 A RTB C4 5 and they can retrace as far as the start of the section they are in but not beyond. As soon as you start to try and analyse their behaviour beyond that, you are IMO reverting to EWT type thinking. NEWR waves are free spirits confined ONLY by rules and not mathematical ratios or shapes.

All IMO and DYOR - just because thinking like this works for me doesn't mean it is transferable.