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Rakesh-
That is a tall order but I will try to define the basics.
The 5/35 oscillator (displayed as a histogram at the bottom of the charts)
is merely two simple moving averages that will show the rate of increases
(or decreases) in prices.
Since wave 3 is always the strongest of the three impulse waves (wave 1,
wave 3 and wave 5) the other two being corrective, (wave 2 and wave 4, 2
correcting wave 1 and 4 correcting wave 3), the 5/35 is used to identify a
wave 3. Simply stated it will be the largest height-wise on the hill (or
lowest depending on direction). Normally it will also have the most "area"
also. Once the wave 3 is located, the oscillator, 94% of the time will
return to zero (or within 10% of the wave 3 height) (You will also note that
on some charts that the wave 2 frequently brings the oscillator back to zero
(but not always) as do minor wave 2's and wave 4's (again not always)).
The setup once the wave 3 and wave 4 is identified (called a Type 1 trade)
is to buy (or sell if down) a wave 4 to wave 5 using a break of regression
channels or 6/offset 4 ma channels (off the high and off the low) or a
retracement of the signal. As wave 5 proceeds it's 5/35 oscillator should
show divergence to wave 3, meaning it should have a slower rate of change
and that the move is ending for the moment. At that point you are looking to
sell (or buy depending on direction) a wave 5 using again regression or ma
channels. If successful you will be in at the start of a new 5 wave movement
or correction (ABC) of the prior 5 wave movement..
It is basically a fear and greed cycle that reoccurs frequently in the
markets. Once a change of trend starts there are a few people on board and
the trend has not been identified by the larger group of investors/traders
(Wave 1). There is profit taking early on this move but prices fail to reach
a new low (or high) which is wave 2. Profit taking ends and the buyers come
back in and as prices make a new high above the previous wave 1 peak (new
low) the trend becomes more recognizable (wave 3 begins) and larger and
larger quantities of investors/traders get on board which causes the
greatest rate of change and normally price movement, the move is in full
force now. As it reaches specific targets (between 1.618 expansion and
2.618) once again profit taking sets in, most recognize there may be little
left in the trade at that point (wave 3 ends) and a second round of profit
taking sets in for this larger group, normally in three waves (ABC
correction wave 4 and 5/35 oscillator returns to zero), but the profit
taking if orderly and not to severe (deep) slows (end of wave 4), and the
buyers come back in (wave 5 begins) and prices move once again in the
impulse direction. This move has less strength than the previous wave 3
(lower 5/35 oscillator, representing divergence) and the move eventually
ends and reverses, prices have become too expensive (or cheap depending on
the direction) and supply and demand takes over.
If you wish to see this illustrated go to www.tradingtech.com and download
the free demo (not promoting anything here folks). Open the Elliott trades 1
& 2" is shows the above in visual form. There are numerous %'s you might
also find useful regarding 5 wave sequences, double tops and failed 5th
waves. There are also other setups illustrated, like 5/35 breakout/down
bands, MOB, Ellipses, PTI (measurement of whether a new wave 5 high (low)
will happen) etc. you have seen referred to in previous posts. A good
primer.
Lastly it is not as simple as the above and there are two other oscillators
used to analyze where one is in the sequence ( the 5/17 and the 10/70 that
are used in particular areas)
One rule of thumb is to try to trade in the direct the oscillator is moving
(in a wave 4 do it after an ABC).
Good luck and good trading all.
don ewers
----- Original Message -----
From: "Rakesh Sahgal" <rsahgal@xxxxxxxx>
To: "Real Traders" <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, February 11, 2001 9:16 PM
Subject: [RT] 5-35 Osc. and Elliot Wave
> Could Don or any of the others who use this particular oscillator for
> detecting wave changes please throw some light on the rules for using this
> methodology? Thanks in advance,
>
> Rakesh Sahgal
>
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxx
>
>
>
>
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