ANSWER:

This is the first question in this forum, of what I hope will be many, focusing on trading instead of wave analysis. The translation issue caused me great consternation for at least the first decade of my career, so I`m sure many of you are grappling with the process.

Due to premium decay present in most futures markets (it is most pronounced in agricultural markets and least pronounced in currency markets), accurate wave analysis requires one use cash charts. If cash structure is far from completing an important, tradable top or bottom, there is no need to keep track of futures data. When cash structure indicates an important turning point is looming (let`s assume for this example a top is forming), begin comparing recent cash highs and lows with those same futures highs and lows. Mark the cash point (in both price and time) that will confirm your count (probably the break of a low in this case). Next, find the same date on your futures chart and notice the price low of that bar. That will be the point in the futures market where you will want to enter your SELL order.

Next, if your position is activated, find the cash point (in price and time) where your trade will prove wrong and then find the same date on your futures chart. Use that future`s bar`s high for your stop.

ANSWER:

Before the release of Version 2.0 of Mastering Elliott Wave, Version 1.0 (called Elliott Waves in Motion) contained a far simpler version of Chapter 3 that was only 10 pages (the new Chapter 3 is 69 pages!). The older Chapter 3 stuck to the basics regarding the determination of whether a monowave is corrective or impulsive based on the behavior of waves that surrounded it. What many people don`t realize is Chapter 3 is a exercise in behavioral logic (i.e., the logical interaction of waves and how the behavior surrounding each monowave determines its internal, hidden nature). Once you understand the logic behind the process, the specific steps in Chapter 3 become unnecessary. Chapter 3 is not intended to be a constant requirement for proper wave analysis, but simply a crutch to help those early in their learning curve until the logical concepts of NEoWave become ingrained. Once ingrained, most of Chapter 3 can be ignored.

Before I can answer the above question, I must point out that :F3`s are a very specific type of correction that usually occur as the first leg of a more complex correction; consequently, I cannot compare the general behavior of :5`s with the specific, and typically lower degree behavior of :F3`s. On the other hand, I can address the differences between :3`s and :5`s of the same degree. In general, :3`s retrace no more (usually less) than 61.8% of a prior monowave (advancing or declining), will consume the same amount of time or more (usually more) as the prior monowave and will exhibit the same complexity (or greater) than the prior monowave.

ANSWER:

This question was posed by Mushtaq Khair of Maharashtra, India. It is a simple question, but the answer is quite complex, requiring some historical background. The first release of Mastering Elliott Wave in 1988 (Version 1.0, called Elliott Waves in Motion) had a very simple Chapter 3 – only 10 pages. When Windsor Books picked up the publishing rights a year later, I insisted Chapter 3 undergo a massive rewrite, expanding that chapter to 69 pages! Chapters 4 & 6 of Mastering Elliott Wave were also expanded for the release of Version 2.0.

The old Chapter 3 was easy to understand and apply, but assumed the reader understood the “logic” of NEoWave, which is subtlely presented throughout Chapters 4-12. When I decided to rewrite Chapter 3, I did not realize I was committing myself to the most complex undertaking of my life. Rewriting that one chapter took 12 months, delaying the release of the book for more than a year (what I now call the infamous rewrite of Chapter 3). The goal of the “new Chapter 3” was to allow a complete novice the ability to piece together a logical wave count during their first attempt. Without the expanded Chapter 3, it could take years for the new student to properly understand and apply all the logical NEoWave concepts presented in Mastering Elliott Wave. Chapter 3 automatically integrates the inductive and deductive reasoning of NEoWave (along with pattern limits and post-pattern behavior requirements) into the wave analysis process so even the beginner could produce bankable forecasts.

Many times since I have questioned the wisdom of presenting such a complex chapter so early in the book. Most who purchase Mastering Elliott Wave fail to heed my warning on page 3-22 and attempt to “read” all the way through Chapter 3; unfortunately, many become so frustrated that they give up, never reaching Chapter 4. Chapter 3 was designed for reference only, where each section applies to a specific arrangement of waves and provides the assistance required to apply proper labels to each wave segment. If you read Chapter 3 from beginning to end, it is similar to reading an entire dictionary just to get the definition of one word.

So, in answer to Mushtaq`s original question, Chapter 3 should be considered your “personal wave analysis assistant” until you internalize all the various NEoWave concepts subtlely presented throughout Mastering Elliott Wave. Once you understand the logic of NEoWave and its associated rules, the tedious process of analysis presented in Chapter 3 becomes unnecessary for producing accurate wave analysis and market forecasts.