 What is a TS1 trade set-up?
A TS1 trade set-up
is where the ABC correction forms as the first correction to the first
move off an important high or low. In Elliott wave terms, this means a
Wave 2 or B correction.
Why is identifying this set-up so important ?
>> Because the next swing off a potential Wave 2orB high or low
has the potential to turn into a Wave 3 type swing. As Wave 3
is usually the strongest and longest of all the Elliott waves, it carries
the highest profit potential.
Therefore, identifying the very end of a potential Wave 2orB correction
allows a small, controlled risk to be taken whilst maximizing profit potential
as the trend resumes.
The legendary trader W.D. Gann held that "the safest place to look for
a new trade is at the end of the first correction to a new swing". This
is exactly what the TS1 trade set-up is designed to identify.
When checking charts individually for trade set-ups (though most traders
will use the Trade Scanner on
a group of markets), once the chart has been loaded simply click on the
T module button. The software will analyze the last part
of the data file to check whether a TS1 (Wave 2orB), TS2 (Wave 4) or TS3
(Wave C) trade set-up is present. Here is an example, on (Nov) 2001 Soybeans:
As can be seen in the chart above, the low of June 25 2001 has been
identified as a potential TS1 buy set-up.
However, this powerful module does not finish its work here. It is also
able to automatically identify the narrow support or resistance zones
where the TS1 trade set-up is, typically, most likely to unfold (the pink
rectangle below). To do this, select in the 'Show'
function the 'Typ WPT'
(Typical Wave C Wave Price Target). In addition, this crucial module is
able to display
colour-coded reversal bars, blue for buy
and red for sell (tick
'Trade Setup', again under 'Show'). If using the Trade
Scanner to identify set-ups on a database, these two features are pre-ticked
on its main page:
A valid trade set-up occurs when a blue
or red reversal bar unfolds at a WPT zone
eg. the Typical pink
rectangle below. This is how this combination looks on the chart:
MTPredictor has not only identified the potential TS1 trade set-up,
but also the narrow price support area (in pink)
where this TS1 trade was most likely to unfold and the blue
(buy) reversal bar. A new long trade can be considered if this market
trades above the high of the blue (buy) reversal
bar.
However, no trade should ever be entered before evaluating its Risk/Reward
outlook. The same Trade set-ups module in MTPredictor can also analyze
the current trade set-up (whether displayed manually or found using the
Scanner) to give the most likely future support and resistance zones and,
more importantly, the associated Risk/Reward ratios at all these future
levels. This is achieved by ticking the Analyse
function in the window:
It is an easy but powerful process to automatically calculate, then
display on the
chart all the future larger-degree Wave C and Wave 3 WPT resistance
zones, including the related Risk/Reward ratios at these levels. In addition,
the Analyse function provides two extra, vital pieces of information -
the price at which the trade has returned 100% of the Initial $ Risk to
take the trade and the price at which 2-3x the Initial Risk has been made:
It can be seen instantly that if Soybeans rallied into the typical
Wave 3 WPT resistance zone, it would mean a potential
profit of approximately 4.4x the initial $ risk required to take
the trade and approximately 9.4x at the maximum Wave 3 WPT. All this information
is available before deciding to take the trade.
Displayed on the chart, the information looks like this:
And this is how the trade turned out:
The low on June 25 was actually the end of the first correction just
before Soybeans rallied strongly, so this trade set-up did identify the
safest place to enter a long position. In fact, Soybeans continued to
rally, only finding resistance at the maximum Wave 3 WPT resistance area,
for a profit of approximately 8x the initial
$ risk required to take the trade. The slightly lower
final profit figure was due to slippage on the trade entry as Soybeans
gapped up on Jun 26, trade entry day.
The TS1, TS2 and TS3 trade set-ups are designed precisely to identify
the end of a correction against the main trend. As such, they represent
the best opportunity to accomplish two main aims:
- Maximize profits by trading in the direction of the main trend and
- Keep losses small when the trade goes wrong.
These are the two most important elements in a successful trading approach
to the markets.
When monitoring a portfolio if markets, these 3 key trade set-ups will
be identified within the group by the Trade
Scanner, as mentioned above - saving the trader precious
time for the Risk/Reward analysis process.
Does your current currencies trading software, stock market trading software or daytrading system allow you to scan for, identify, evaluate
and manage such important trade set-ups ?
If not, then it is time to invest in the MTPREDICTOR 4.0 series!
Risk Disclaimer and Disclosure Statement
Trade at your own risk. The information provided here is of the nature
of a general comment only and neither purports nor intends to be, specific
trading advice. It has been prepared without regard to any particular
person's investment objectives, financial situation and particular needs.
Information should not be considered as an offer or enticement to buy,
sell or trade. You should seek appropriate advice from your broker, or
licensed investment advisor, before taking any action. Past performance
does not guarantee future results. Simulated performance results contain
inherent limitations. Unlike actual performance records the results may
under or over compensate for such factors such as lack of liquidity. No
representation is being made that any account will or is likely to achieve
profits or losses to those shown. By purchasing the MTPredictor program,
you acknowledge and accept that all trading decisions are your own sole
responsibility, and MTPredictor Ltd, MTPredictor.com or anybody associated
with MTPredictor Ltd including S. E. Griffiths and A. P. Beckwith cannot
be held responsible for any losses that are incurred as a result
|
