KISS Principle

From Arthur - Snowrider, Thank you for your response. May be I did not pick a good example. Say, today is the bottom of the previous (down) wave (before the establishment of wave 1 and 2), then how is one going to ascertain whether this is a 3-wave correction or a 5-wave progressive wave? Or, do you trade wave 1, 2 at all? Or, you will trade through all the 5 waves (in one hit), riding through the wave 2/4 corrections, a swing trade, or do you get out of wave 1, then position for wave 2, and then wave 3 ...... 4, and then 5.

When we deal with something very complex, a good idea is to simplify the process.  Keep it simple and stupid (KISS Principle).  How to?  We first look at the chart and make a guess (with some imagination) about what the wave structure the market is forming most likely.  With a scenario in our mind, we then *peg* an existing wave by assuming that wave is something.  For example, we make an assertion that the stock market is going to surge tomorrow because the market has finished wave-2 today.  With that assertion, we will need to find out two things:
1. what a correct movement (in favor of us) is, and
2. what market movement will invalidate our assertion
For example, if the market does surge, then our preferred wave count is correct;  if the market goes below yesterday's low, then the wave-2 has not finished yet.

About the second question, we need to understand what purpose each wave segment serves:
wave-1: recover after panic or climax
wave-2: accumulation
wave-3: moving the price
wave-4: distribution
wave-5: panic or climax (false break)So my answer to your second question is that I trade wave-3 only most of the time.

Trade Talk - Trade the Timeframe That We Count the Wave

From Arthur - Snowrider, I have been thinking about your "trade the waves you count, and count the waves you trade". Say, today is the first day I trade in USD/JPY, what is the step you take to ascertain where you are to enable you to trade?

I assume that you are referring to the article "Count Grand Super Cycle Wave or Not?" that mentions:
1. To trade the timeframe that we count the wave, and
2. To count the wave on the timeframe that we trade.

If so, the following lists the steps that I might take to start a trade:

1. Decide what degree (or timeframe) of the wave that you want to trade.  For example, if you want to trade wave-1,2,3,4,5,a,b,c etc., you won't worry about wave-I,II,III,IV,V,A,B,C.  From the preferred wave count as of last weekend (08/11/2012), you knew that a wave-2 has completed and a explosive wave-3 was about to start.  (To trade the timeframe that we count the wave.)

2. Enter the trade to buy USD/JPY (i.e., short sell JPY) on Sunday (or last Friday) to bet that the wave-1 was a correct assumption with Stop below wave-1 (very minimal risk).

3. The market has moved in favor of our assumption today, so we keep counting the wave by estimating wave-3's target and possibly wave-4 etc.  (To count the wave on the timeframe that we trade.)  Note that we don't worry about the wave moment of a higher degree timeframe because that is not our concern.  Our concern is to finish the trade of what we are trading:  wave-1,2,3,4,5!

Today:

Last weekend:

Wave Count

My Trade - 2012-08-W2

I am starting a new thread for the 2nd week of August.  All troops target on long term trading.  All percentages are the dollar amount allocations of each troop.  The following lists my positions as of last Friday:

Big Troop:
- IWM 20% (20%-08/08)
- SPY 45% (10%-07/05, 15%-07/06, 10%-07/11, 10%-07/24)
- Cash 35%

SAC Troop:
- EWS 15% (10%-07/30, 5%-07/31)
- XLF 22% (10%-07/30, 12%-07/31)
- QQQ 24% (24%-08/02)
- Cash 39%

If you have any question about my trading (long term, short term, stock, or FX/Futures), please PM, and I'll be glad to help!

My Trade for last week:
http://perfectew.blogspot.com/2012/08/my-trade-2012-08-w1.html

PLEASE JOIN MY BLOG AS A FOLLOWER.  I WILL PRIVATIZE THE BLOG ONCE WE REACH A SIZEABLE NUMBER OF AUDIENCE.  THANKS!