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This is an example of a perfect trade setup of the Wolfe wave, which also displays the procedure of trade management.
The trade occurred on the 15min chart and within the time frame that we traded it, I managed to capture some chart images that led to the fulfillment of the pattern.
The bearish Wolfe wave was identified and we took a short entry, as can be seen on the chart.
The advantage of trading the Wolfe wave is that the price objective is precisely defined – the line on point’s ww1 – ww4.
Ideally the entry should have been earlier, as per the rules.
The correct entry gives an excellent Risk-to-Reward ratio for this pattern.
But by the time we identified the setup, price had traveled beyond the entry point and we entered the trade, since this is a very successful pattern.
Price reached the target objective earlier than expected, and at this stage we need to take some profits and still remain in the trade…in case we have further price moves.
As can be seen in the chart, we took some profits here AND shifted our stop to the entry level.
Now we are in a free trade and if price decides to reverse for some reason, our risk is zero and we have taken some profits.
But price did not give further down moves and started forming a bottom. This gave us an indication of the change in momentum and we closed our remaining open positions.
The last lot was closed with somewhat lesser profits, but the most important point of this trade is that we managed it as per our rules…and walked away with stress-free profits.
A perfect example of using the parameters of a chart pattern, to manage the trade efficiently.
Sunil.
you are great master sunil.it’s hard to find a good analysis about this technique.such a great mentor.
hi , its not a ww ……. wave 5 always extends beyond the line 1 - 3 ….. if wave 1-3-5 hits the same trendline without wave 5 extending beyond wave 1 and 3 then its a bearish wedge ( quoting the above e.g.)..
Hi Raja,
The line 1-3 is an appr indication for the wave 5 level. There are times when wave 5 forms precisely at the line 1-3, and times when it forms beyond the line.
The most important criteria for wave 5 is that it should form at the Fib projection 127.2 or 161.8 of wave3-wave4.
The line 1-3 is secondary.
Hope this clears things.
Sunil.
Hi,
why dont u host a webinar on Wolf wave & also normal & hidden divergence & how to trade them.
would be useful to lot.
Regards