PREDICTING THE END OF WAVE
5 USING A TREND CHANNEL
Figure 3-2 Upper line of the trend channel is
penetrated.
drawn across the highest point of
wave 3 (Figure 3-2). When the five waves are complete, there are a number of
options for entering the market. The following cases show the different
possibilities for investing at the time wave 5 ends.
Case 7
"Usually wave 5 will end
approximately at the parallel line, when an arithmetic scale is used" (Elliott,
p. 60).
If a trade is entered when the upper line of the trend channel
is touched, it runs the risk of the market going even higher. Elliott never gave
a solution for protecting an investment against the risk of a wrong analysis.
Case 2
"If wave 5 exceeds the parallel
line considerably and the composition of wave 5 indicates that it has not
completed its pattern, then the entire movement, from the beginning of wave 1,
should be graphed on a semi-log scale. The end of wave 5 may reach, but not
exceed the parallel line" (Elliott, p. 60).
If the market price reaches the trend channel of a semi-log
chart (Figure 3-3a), it is positioned at a very good point to invest, but only
when combined with the conservative entry and exit rules introduced later. The
only problem is that this situation is very rare and not likely to be reached.
Waiting until the price touches the upper trend line runs the risk of missing
the move entirely (Figure 3-3b). (FOREX 101)
Forex Art Of Fibonacci (Forex 101)
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Forex Art Of Fibonacci (Forex 102)
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