 What is a TS2 trade set-up ?
A TS2 trade set-up
is where the ABC correction forms as a correction when the main trend
is already well established and has already had an earlier correction.
In Elliott wave terms, this is a Wave 4 correction.
>> This is also an extremely important set-up
because when a Wave 4 correction is complete, the Wave 5 swing is the
last impulsive trend move before the entire Elliott sequence is completed.
Therefore, the move off a completed Wave 4 correction
also presents the trader with the opportunity for a small, controlled
risk in return for a maximized profit potential with the main trend.
When checking for trade set-ups on individual charts (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, TS2 or TS3 trade set-up is present:
As an example on the chart above, the high of July 8 2002 has been identified
as a potential TS2 sell set-up in DIA (unit investment trust based on
the Dow Jones Industrials index).
However, this module does not finish its work here. As seen on the chart
above, it is also able to automatically identify the narrow support or
resistance zones where the TS2 trade set-up is most likely to unfold (eg.
the pink rectangle above). For this, select
in the 'Show' function the
'Typ WPT' (Typical Wave
C Wave Price Target). In addition, this module in MTPredictor 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
on a group of charts, these two features are pre-ticked on its main page:
A valid trade setup 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 a chart:
MTPredictor has not only identified the potential TS2 trade set-up,
but also the narrow price resistance area (in pink
) where this TS2 high was most likely to unfold and the red
(sell) reversal bar. A new short position can be considered if this market
trades below the low of the red (sell) reversal
bar.
However, no trade should ever be entered before evaluating its
Risk/Reward outlook. The T module can also analyze
the current type 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 (the Analyse function
in the window):
It is a simple but powerful process to automatically calculate, then
display on the chart all the future Wave 5 WPT resistance zones, including
the related Risk/Reward ratios at these levels. In addition, two extra
price levels are calculated and shown on the chart - the price at which
100% of the Initial $ Risk is covered and the price at which 2-3x the
Initial Risk is made (crucial for long-term success):
It can be seen instantly that if DIA declined into the maximum
Wave 5 WPT support zone, it would mean a potential profit of approximately
9.6x the initial $ risk required to take the trade (and 5x initial risk
at the pink Typical Wave 5 WPT). All this
information is available before deciding to take the trade. Here,
this would be an excellent trade to consider.
When displayed on the chart, the information looks like this:
And this is how the trade turned out:
The high on Jul 8 was the very day this Wave 4 correction ended, just
before DIA continued to decline to new lows in a Wave (5) type move. So,
this TS2 trade set-up identified an ideal place to enter short. In fact,
DIA continued to fall, then reversed precisely at the maximum Wave 5 WPT
(as projected on Jul 8) on Jul 24, for a
profit of nearly 8x the initial $ risk (ignoring slippage
and commission).
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 of markets, these 3 key trade set-ups will
be identified out of the group by the Trade
Scanner, as mentioned above, saving the trader precious
time for the Risk/Reward analysis process outlined.
Does your current trading system for Elliott wave, online forex trading program or options trading software 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.
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