Estrategias de los distribuidores en relación con la MDD

Okay in this section, I’m going to begin showing you WHAT we are looking for, and WHY. Inherently this all works because human beings are herd creatures (feel safer in greater numbers). Whether we are talking about trends in shoes or clothing, or a great new song on the radio, we are more comfortable going with what is “popular.”

So it is just human nature to go with the trend.

Many years ago, I noticed that when price made a “strong move” in a direction, it liked to pull back and then make another push in that direction.

Later I studied Elliot waves and saw the same pattern right in the middle of the Elliot wave pattern.

But let me show you the pattern that Mr. Elliot observed all those years ago.

Elliot Wave

As you can see, there are five waves that move price up (or down), and then three correction waves. You can always get the book, Elliot Wave Principle if you would like to study more. But I’m going to show you the direct correlation between what I do, and what Elliot observed.

In this picture, you see the 1 wave makes a move up, followed by the 2 wave moving back. Then there is a very strong wave, which we call the 3 wave. This is followed by the 4 wave that pulls back, and then a 5 wave that makes a new high. Then the correction waves begin with A coming back down, followed by B testing the former high, and C correcting to 50- 61.8%.

Obviously this is an “ideal” picture. It almost never looks exactly like this. But let me tell you the part of this which you can see repeated over and over again, and it not that difficult to see at all.

Notice that I did not include the entire 5 wave. I only included 3, 4, and part of 5. This part of the pattern is what my work, and Elliot Wave Principle have in common.

So one way you could describe my pattern is this way: 3, 4, 5, or just 345.

We don’t really know what a 1 wave is until we see the “strong move” or 3 wave. It is not a high probability that wave 5 will move higher, not at all – not in Forex trading, anyhow. If the 5 wave is hitting an obvious area of seller interest, then there might not be a wave B or C. Wave A just might correct all by itself. I’m just pointing out that the high probability waves are 3, 4, and most of 5.

The human psychology is easy to see. Traders see price making a good move (3), and want to get in that trend. When they do get in, as the 5 wave starts to the former high (of wave 3), they begin to wonder if it is actually going to go higher. After all, they encountered selling in that area before (which is what created the 4 wave). So they just don’t have the conviction to go higher.

So here’s what we know about this pattern. Traders want to trade in

the direction of the strong move (3). Price is likely to pull back at some point (4), and then price is likely to test the former high (5).

Pretty much any information can be

confusing and interpreted in many different ways “if you lack a context in which it is being viewed.”

So let me give you a couple of pieces. First of all, we are looking at this pattern “in the context” of the daily/weekly story, or vision. If you recall, there is a certain amount of money that is being moved based on what investors decide about “today” and “this week.”

It is easy to follow that balance of money moving up and down on the 30 minute

chart, with the 21 and 55 EMAs.

If we also add that “price must be advancing,” we will have a pattern that is very predictable. Some will say that moving averages are unreliable because they are “lagging.” This is true. But it is also true that if you look for the position of the moving averages ONLY when price is “advancing,” suddenly the MAs become EXTREMELY reliable.

If you think about it, if the MAs are showing that the buyers have an advantage, AND price is advancing up, they cannot be telling you a lie. Using those rules, they are 100% reliable. I want to remind you about what we are really doing here. 1. Seeing a buyer/seller

advantage 2. Gauging the strength of that advantage 3. Placing entry and exit orders such that our risk is managed well.

Said in shorter form, we are seeing an advantage and managing our risk.

Okay let’s take a peek at this pattern we are looking for on an actual chart.

In this picture, it is inverted, showing a selling trend. But you can see the pattern.

In this next picture, I am only

illustrating the actual pattern we are looking for. Very strong move down, a pullback, and then a “test” of the former low.

I think it is important to stick with only the highest probability “stuff” until you are fully skilled. As you

gain experience, you will come to see, “from experience” when price is likely to continue lower.

What is a Trend?

Now take another look at the gray 21 and 55 EMAs (above). When the 21 (faster moving one) is below the 55, the trend is down. That’s what we see in this picture. So while trends can be defined in many different ways, in our context, a trend is defined by the position of the 21 and 55 EMAs on the 30

minute chart.

Ranges

Here are a couple of examples of price in a range. This most often happens 1. Where there is an unusually strong move. 2. Trends begin to show exhaustion 3. When the currencies markets are closed. For example, GBP/USD at 5PM ET. Both the US and UK

markets are closed.

In these small ranges, during good market hours, we will look for price to break these levels (green). I refer to these price levels in green as “key levels.”

Market Cycle

What some call an Elliot wave pattern, I call a “market cycle.” There is a strong move, a test of that high/low, and then a correction of 50-61.8%.

I care little for a newly forming trend or the correction waves (yellow left) when looking for a trade. If I see that price has already tested the previous low, there is no trade for me. At that point, the balance between the buyers/sellers becomes much closer, making any trade a lower probability outcome.