 What is a TS3 trade set-up ?
A simple ABC pattern
is where the market makes a correction to its trend that sub-divides into
a 'zig-zag' pattern containing 3 waves - A, B and C. In the MTPredictor
software, the Wave C in this ABC pattern must exceed the price extreme
of the Wave A.
>> This set-up is driven by investor psychology in buying and selling
waves. It is extremely important for traders because when such an ABC
correction is complete, the market should continue in the original trend
direction. Therefore, the end of the simple ABC correction is the ideal
place to consider entering a new trade - in order to both maximize
profits as the main trend resumes and keep the initial risk of loss small.
When checking for trade set-ups on charts individually (though most traders
will use the Trade Scanner
on a group of markets), once the chart is loaded simply click on the Trade
Set-up 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, in the chart below, the software has automatically identified
this ABC correction up against the downtrend in SPY (S&P Depository
Receipts which track the S&P 500 Index):
However, this powerful module does not finish its work here - it also
automatically identifies the narrow support or resistance zones where
the Wave C trade set-up is most likely to end (the pink
rectangle on the chart below). To achieve this, select in the
'Show' function the Typical Wave C WPT (Wave Price Target).
Furthermore, the same module is also able to display
colour-coded reversal bars, blue for buy
and red for sell (tick Trade Setup, again
under Show):
Note that, if using the Trade Scanner to find set-ups in a group of charts,
these two features are pre-ticked on its main page, giving the same display.
>> A valid trade set-up occurs when a blue
or red reversal bar unfolds at a WPT zone
eg. the pink Typical Wave C zone below. This
is how the combination looks on a chart:
MTPredictor has not only identified this potential ABC correction, but
also the narrow price zone (in pink ) where
the Wave C is, typically, most likely to end. In addition, the red
(sell) reversal bar suggests the high is complete. A new short trade can
be considered if this market trades below the low of the red
(sell) reversal bar.
However, no trade should ever be taken before evaluating its risk outlook.
In another vital feature, the Trade Set-up
module in MTPredictor can also 'analyze'
the current trade set-up (whether found manually or by
using the Scanner) simply by ticking the Analyse
function in the window.
This will give the most likely future price targets and, more importantly,
the associated Risk/Reward ratios at all these key levels:
It is a simple but powerful process to automatically calculate, then
display on the
chart, all the future WPT (Wave Price Target) zones, including their related
Risk/Reward ratios.
In addition, the analysis provides two extra, critical price levels for
Risk evaluation - the price at which the trade will have returned 100%
of the Initial $ Risk needed to take the trade and the price at which
2-3x the Initial Risk has been made.
Here, it can be seen instantly that if SPY declined into the
first profit zone, the minimum Wave C WPT (orange
zone below), it would mean a potential profit
of just over 8x the initial $ risk required
to take the trade. All this critical information is available
before deciding to take the trade. Here, this would be an excellent
R/R trade.
Displayed on the chart, the information looks like this:
And this is how the trade turned out:
The high on Aug 22 2003 was the exact end of this Wave C correction,
just before SPY continued to decline to new lows - this TS3 trade set-up
identified an ideal point to enter short. In fact, SPY continued to fall
and then reversed precisely at the first projected profit target, the
orange minimum Wave C WPT (as projected on
Aug 22). This produced a profit of approximately
7.5x the initial $ risk (ignoring slippage and commission).
The TS1, TS2 and TS3 trade set-ups are specifically designed to identify
the end of a correction against the main trend. As a result, they represent
the best opportunity to accomplish two 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, the 3 key trade set-ups will
be identified out of the database by using the Trade
Scanner, as mentioned above, saving the trader precious
time for the Risk/Reward analysis process.
Does your current futures trading system, stock trading system or commodity 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 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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