Friday, June 26, 2015

Binary Options: Draft rule change

The draft rule set for day trading that I discussed a few days back specified which the Elliott waves I could trade. I limited it to the 3rd and C waves at certain levels, typically the most

I'm changing the proposed rules in a way that broadens and generalizes the wave choice.

The rule on wave selection is as follows:

Within the waves that are the top-level components of the primary trend, these rules apply:

  1. Trade only waves that are in the direction of the primary trend (i.e., no counter-trend flips), giving preference to those that are in the top two sub-levels within the waves making up the primary trend. The waves that may be traded are waves 1, 3, 5, A and C.
  2. All waves at the top level within the primary trend may be traded.

I'm eliminating item #3 and placing the expanded wave list within item #1. 

In a primary trend, the odd-numbered waves are in the direction of the impulse, and waves A and C are in the direction of the correction.

It is important to note that within an A or C wave are five numbered subwaves, and among those subwaves the same rule applies: Waves 1, 3 and 5 can be traded, and waves 2 and 4 cannot.

On the current S& 500 chart, the end of the present wave 5 {-2} -- signaled by the end of wave 5 {-3} -- marks the end of wave 3 {-1} within wave A. It will be followed by a counter-trend correction to the upside, wave 4 {-1}. Within wave 4 {-1}, I can trade waves 1 {-2}, 3 {-2} and 5 {-2}.

I'm reluctant to jump back on wave 5 {-2} when it is this far advanced, so I'll wait for wave 5 {-3} to end, and then catch the ensuing wave 1 {-3} of A {-2} to the upside, which will begin, as always, with a Joe Ross hook.

Click on chart to enlarge.
S&P 500 AT 9:55 a.m. New York time
-- Tim Bovee, Portland, Oregon, June 26, 2015


My draft day-trading rules can be read here.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Several web sites summarize Elliott wave theory, among them, InvestopediaStockCharts and Wikipedia.

See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.

The website of Joe Ross, who defined the Joe Ross Hook, may be found here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at s ss'ss

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