Futures Trading

Trade with 1-2-3 Waves and No Waves

The locations are among the most important in trading.  The significant locations include:

  1. VWAP including 1sigma, 2simma
  2. 200 EMA
  3. Fib retracement
  4. The previous day's High, Low, Close
  5. The Current Day's High, Low

However, you can improve the odds of success by counting the waves.  Typically after 1-2-3 formation, it is more likely (not 100%) that the market would turn around at least for a short term.

Wave 1-2-3 with Different Location Example

Nasdaq 1 min Chart

After the market trades +2sigma area, it dipped to +1sigma after wave 2.

Even though +1sigma could be a good support area, it is not a good idea to buy because the wave 3 is not formed.

After wave3 was formed, it rallied back to +1 sigma,  but the wave 3 completed at noman's land between Vwap and +1sigma.  So, it is not a good location to initiate a trade.

Then, the wave 4 was formed at the confluences of different support, VWAP, the previous day's low, 200EMA.  You can take a trade with flip pattern.

The bottom line is:

  1. that you should not take a trade after wave 1 or wave 2. 
  2. that you need to wait till wave 3 or more is formed.
  3.  that you should not take a trade at noman's land.

Gold 1 min chart

 

Just like Nasdaq, the gold market trades near +2sigma and sold off to +1Sigma area.  But it is different from Nasdaq chart.

In Nasdaq, when it dipped to +1sigma, only the wave2 was completed.  You should not go long there.

When the wave3 was formed in gold market, the market was in noman's land.

However, in Gold, the wave 4 was completed by the time +1sigmal was reached.  Since at least wave 3 was done there, you can look to go short on flip.

 

Pay attention to the locations and the wave counts.  If you watch the locations only, you will be likely to get stopped out more often that not.

 

Crude 1 min Chart

 

Just like Nasdaq, the crude market reached VWAP after the 4th wave.

The market traded +2sigmal then pullback to +1sigma on the 2nd wave.  

The 3rd wave tested 200ema and it didn't form a flip pattern.

The 4th wave reached VWAP and formed a flip pattern.  The trade would have made 2X easily.

 

Conclusion - Locations and Wave Counts

It is not just a location that is important, but how it get there is more important.  

Always pay attention to the wave counts made to the support and the resistance area.

 

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