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AlphOmega Elliott Waves 5.5

Screen Layouts

Using the Simple Screen (From AlphOmega Simple and AOi Simple Templates)

Let’s use an example to start an Elliott Waves candidate analysis. Assume that from the exploration of the previous day, came a signal that a wave III of moderate sensitivity was afoot for AAR. Opening the chart right from the exploration window, we can see that the signal is very early due to the volatility of the price.

Looking at the volume indicator, we get a confirmation that the security is trading more heavily than usual. Even the 50 day average volume is up. The outlook is bearish per the red bear at the right bottom of the chart. The Elliott Oscillator, that is located in the volume window, is still bearish, the gray bars being below zero.

Click to enlarge image

Now looking at the top of the chart, we see three indicators in the same window. The red line is the Demand Index that is usually a leading indicator of the pattern. For now, it is turning slightly bullish and but still is in bearish territory so far. The green line is the STORSI indicator also known as the stochastic of the relative strength index. It is just turning around and heading towards bullish territory.

The gray bars are the time bars since the start of the wave and the red horizontal lines are the time forecast for terminations of wave. When the gray bars will touch the thin red lines, the pattern could reverse or continue until the next. Next indicator is the red line across the price window. Known as the Highlighter, it displays a price projection that is based on the preceding pattern. It is a probability and its accuracy is greatly dependant on the fit of the pattern to the norm.

This calculation only accounts for price constraint and market sentiment exhibited before the projection; many events taking place after could impact the price and impair the accuracy of the forecast. It is very much like a poll and should factor as such. The blue line is another valuable indicator, it is a trend line drawn between the 2 latest peaks or troughs and in this case it is a bearish crossing. A crossing of a trend line as we have here is very significant. Casting a look at the moving averages tells us what is going on in three different time frames (bearish in the three time frames as price is below all three), the color of the candles and the corner indicator at the bottom of our screen provide additional bearish information.

The bottom of the screen completes the picture with the volume moving average (dark yellow), the Relative Momentum Index (thick red line) is definitely bearish as is the Relative Strength Index (magenta line) and the Dynamic Momentum Index (dark blue line).If we had conflicting signals, we would have a choice of moving to a security with none or gauging the overall value of the present security. This one is definitely bearish and a candidate to trade short.

Before rushing in a trade, a few steps should be taken:

1- Check the Fundamentals of the security even if you feel you will hold it only for a short while.

2- Figure out your stop loss and your entry price before the trade.

3- Set your target price so you can:

• a) Cash in some of the profit as you go along.

• b) Move your stop loss so it is tight enough to protect your profit.

Keep in mind that this is not a recommendation to buy or to sell securities. It is educational material and you should do your own due diligence before entering a trade.

The AOi Simple template works exactly the same way and uses similar indicators that are set for sensitivity of 5% as the sensitivity ranges from 1% to 8%. The template is used for Indices or low volatility equities (where the price changes very little when expressed as a percent of the security price). Explorations for intra day securities should be restricted to a small number of candidates as we run it off the quotes server (unless your provider allows you to download intra day data).

The expert used in AOi Simple is the AlphOmega Elliott Waves LV where LV stands for Low Volatility. This expert can be used with Indices, low volatility security or intra day data. The expert does not care about the end use but is very sensitive to price changes. If we use it with the wrong level of sensitivity, say a highly volatile stock, it will display too many waves and signals, will not catch the bigger waves displaying instead an LC (Larger Cycle) label.

If it happens all we need to do is call a higher sensitivity expert and attach it to the chart. We do this by either changing template (using AlphOmega Simple) or by clicking on the Expert Advisor©, selecting the NV or HV expert, click on attach and close the expert dialog box. Another possibility that the sensitivity is not great enough if we are trading say futures or commodities, then we would have another option, that is to call the expert designed for that type of trading.

This expert is extremely sensitive; it will detect waves using a sensitivity of 0.3%, one of 0.6%, one of 1% and the last one being 1.6%. We could also use it on intra day securities that have relatively low volatility because as mentioned above, it does not care where it is used (only the percentage of change in price matters).

If you find that when using a template, it takes longer to display properly your chart, you can switch to an Expert that uses fewer calculations to refresh the screen. AlphOmega Elliott Waves Impulse Signals is such an expert. It will only display entry and exit arrows, no wave count. After reviewing a chart with the template expert, you can change the expert to lighten the calculation workload of your chart. See the example below.

Fig 11a

Click to enlarge image

Please note that all indicators, templates, experts, systems or explorations only use peak of high and trough of low; to change this default set-up, you must go to the code. However you can change individually the few indicators where the dialog box gives you the option between C and H&L.


Next: Moving Averages, Trend Lines and Other Indicators

Summary: Index