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AlphOmega Elliott Waves 5.5

Three Ways to Use Elliott Waves

The AlphOmega set is organized so its use is as simple as possible for a complex methodology. The Experts, Explorations, Indicators, Systems and Templates are divided between daily or normal volatility and intraday or low volatility. All intraday material is either prefixed AOi or contains a small i in its name. All material where the filter is a fixed percentage is provided in versions for each sensitivity (Cycle) and labelled as such. Indicators to be used by other AlphOmega indicators do not appear in the MetaStock® indicator list.

The Expert label names are as descriptive as possible so that when we place the cursor over the label, we see the description. Indicating the percentage for the sensitivity differs from the accepted nomenclature and should not be interpreted as the % of move but as the % of filter. Finally, the indicators are grouped in AlphOmega, AO, AOi, ID, Price and PW, Time and TW and the W group. Because of the formula space available, it was not possible to keep long names that would have singled out the set indicators from your own. However, it was done with the Expert, Explorations, Systems and Templates.

There are three different approaches to Elliott Waves that will yield results that are commensurate to the risk we are willing to accept.

1. The first method is to place our order with the appropriate stop as soon as the wave is identified and to let it run until the wave is exhausted, which is when a wave moving in the opposite direction is confirmed. This method has the merit of letting us ride the wave until all the potential has been deployed. The drawback is that we will loose some of the paper profit accumulated while allowing the reverse wave to build up to the point of recognition. So we need a very strong wave.

2. The second method is to place our order with the appropriate stop as soon as the wave is identified and then use the price projection features and the other indicators to forecast the possible turn points. We would then sell when the price crosses one of our turn points whether the price continues in the same direction or not. Obviously this approach will not let us ripe all the profit that could spring from the wave, but it will give us what we have targeted. The risk is still that the price will not reach our selected turn point and reverses direction. An alternate way to the price projection would be to sell once our profit target is reached even if it is before the marked turn point (For example a fixed percentage profit).

3. The third is the most speculative in that we base both entry and exit on projections of peak and trough. In this case, once a turn has taken place at the projected level, we enter immediately with the appropriate stop even though the signal has not been generated. We exit again based on the projection as soon as the price seems to turn at the expected level. Because there are many levels at which the price can turn around, we take the risk of picking the wrong one for entry; we will then be taken out by our stop. If we picked the wrong one for exit, we will miss on some of the profit. Popular software Advanced Get® uses two set-ups called Type 1 and 2. For our convenience, these set-ups were coded in MetaStock® with the creation of appropriate indicators generating signals similar to AdvanceGet (Their indicators are proprietary). Explorations were also written to take advantage of those set-ups.

Generally, the use of stops once the price is moving along the line will protect some of the accumulated wealth. On the other hand, it may kick us out of a position that has not reached its peak or trough yet. It is all a matter of comfort and we should never get into a situation where our emotions will take over from our judgement. There are ground rules for trading discipline to help us cope with our emotions.


1. We should look at it as running a business and having to make a decision with all the information we can muster. We will not take a risk that could kill our business; we are running a business, not a lottery.

2. Fear and Greed are the two worst enemies.

3. Sticking to our trading plan, no change in midstream.

4. Read the market, do not guess or make it say what we want.

5. Do a minimum fundamental due diligence for the stocks we contemplate buying.

6. Don’t put all our eggs in one basket; spread the risk by sticking to our caps per security.

7. Our trading plan includes: risk and reward ratio, entry and target points, always a stop loss.

Next: Step by step Elliott Waves

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