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پرسش و پاسخ با گلن نیلی-129

(129) New Tips & Hints

Could you explain the advantages and disadvantages of both futures and ETF’s?

ANSWER:

There are three, primary market trading instruments…Options, Futures and Equities. ETF’s fall under the equity category. Each serves a purpose; the primary consideration with each is your trading time horizon. The longer the time frame (say beyond 6 months) the better it is to trade equity based investments. If your time horizon is 1-6 months, and you want some leverage, futures can be a reasonable approach (as long as you understand the risk involved and manage it properly). If your time horizon is just a few days to 1-month, Options might be your best bet, but they require an even greater level of expertise and discipline than futures to properly manage. Options are the most complex trading vehicles and can take years to understand and successfully utilize. I do NOT recommend options trading for 90%+ of the general public due to their complexity.

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پرسش و پاسخ با گلن نیلی-128

(128) New Tips & Hints

Why is Neely River Theory (NRT) so secret and so expensive…do you ever plan to make NRT public?

ANSWER:

Market opinions are a dime a dozen; trading systems are just as prevalent. What separates the general public from professionals in this business is the recognition that trading success is NOT the result of many accurate market forecasts. It is the result of many precise, well-timed market entries that involve low risk and which are quickly exited when expectations are not met OR are held for long periods while conditions remain favorable. It also requires adapting your own trading style (i.e., market entry, stop placement and exit strategy) based on environment. For example, when a market is trending well, buying into strength and selling into weakness works well. On the other hand, the same “trend following” strategy – when applied to a consolidation environment – will produce a string of losses. For a consolidation environment, selling into strength and buying into weakness (i.e., top and bottom picking) will produce the best results. When a market is under slow accumulation or distribution, an “entering-on-pullbacks” strategy (what I call bargain hunting) is the only way to go. 

Most traders naturally and unconsciously pick only one of the above three trading styles as their primary approach to markets. As a result, they are in sync with a market’s behavior only 1/6 of the time (i.e, three trading styles times two market directions). Based on wave theory, if a pattern takes 60 years to form, 1/6 of that period is 10 years. Your trading may go extremely well for 10, straight years, but when your approach is no longer in sync with the market’s “rhythm,” the next 50 years could be a total disaster. 

So, the secret to successful trading is not only in controlling risk on every trade, but also in adapting your trading style to the market’s current environment on a specific time frame. Neely River theory focuses on understanding and identifying the three primary market trading environments (no matter what time frame) and the best approach to each. With that information you can adapt your trading style to fit a particular environment. The result is a far greater number of profitable or breakeven trades and a far fewer number of losing trades.

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پرسش و پاسخ با گلن نیلی-127

(127) New Tips & Hints

Based on Mastering Elliott Wave, it is my understanding that only wave-E of a Triangle can be a Triangle itself. Your book was written 20 years ago, is that statement still true today?

ANSWER:

Mastering Elliott Wave (MEW) was released in 1990, a few years before I witnessed my first Neutral Triangle. Neutral Triangles are a NEoWave discovery and are patterns in which wave-C is the longest in price (and usually time) of the three “trending” waves (i.e., waves-a, c or e) of the Triangle. 

When new patterns emerge, new behavior follows. Before Neutral Triangles came on the scene, I only saw Triangles appear within larger Triangles in the e-wave position. Starting in the mid 90’s, Neutral Triangles emerged, adding to my knowledge and understanding of wave theory. With these new patterns came new behavior. Contracting, Expanding and Neutral Triangles began to appear as wave-c of larger Neutral Triangles. As a result, I had to revise my thinking on Triangles.

The following information replaces that which is found in MEW. Generally speaking, in an expanding Triangle, wave-e can be a Neutral or Expanding Triangle. In a Contracting Triangle, wave-e can be a Contracting or Neutral Triangle. In a Neutral Triangle, wave-c or e can be a Contracting, Neutral or Expanding Triangle.

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پرسش و پاسخ با گلن نیلی-126

(126) New Tips & Hints

Regarding market suitability, in MEW you stress “Current value must build on the past and time cannot automatically have a negative effect on value.” What does that mean?

ANSWER:

What I am addressing in that section of Mastering Elliott Wave (MEW) are the characteristics a market should possess before it can be considered a good candidate for accurate wave analysis. 

For example, if you eat an ear of corn, its value drops to zero (i.e., it no longer exists). Then, starting from zero, it has to be grown and harvested again, where it has a temporary value that is eventually destroyed again. As a result, its value does not build on its past, it goes from zero, to valuable, back to zero. Corn, as with all agricultural commodities, automatically decays with time, eventually reaching zero once it has been consumed or is no longer edible or usable. So, that is what I mean by time automatically having a negative effect on value. 

If you want to use wave theory (especially the more logical, highly defined rules of NEoWave) to label and predict future price action of any market, you do NOT want a market where its pricing or value automatically decays with time and where its future price has no connection to the past. You want markets with what I call “perpetual life” (i.e., an item that is not consumed but simply passed around due to its intrinsic value or its exchange value). Some examples of markets that fall into this category are stocks along with currencies and gold (since all three are, for the most part, indestructible, they have “perpetual life”).

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پرسش و پاسخ با گلن نیلی-125

(125) New Tips & Hints

How do you use or interpret fundamentals and does news move markets?

ANSWER:

Contrary to what many Elliott Wave analysts believe, news DOES move markets, some times. Its impact is dependent on the pattern forming and which leg of that pattern is currently unfolding. 

In patterns with an expanding bias, sensational news is most likely to occur near the peaks or troughs of each leg of the pattern. When in a contracting pattern, the news that most impacts price action tends to happen near the middle of each leg of the formation. For Flats and Zigzags, the best or worst news will occur as wave-C comes to an end. In impulsive uptrends, good news begins around the middle of wave-3 and continues through the end of wave-5. 

To complicate matters, the degree of the pattern forming plays a BIG part in how the news impacts its development and whether it is of any use for trading. If wave-E consumes a week or two, the above discussion might easily apply. If wave-E takes 1-2 years, you will get weeks or months of positive news (in an uptrend) before “the top” is made, which makes the positive news virtually useless for picking a top. In such an uptrend, the final high is likely to create a violent, upside gap opening that may appear as an “island top” on a daily, weekly or monthly chart. As a result, the larger the pattern forming, the less news can be used to “confirm” a counter-trend entry point. 

Based on the information above, news should never be considered in absolute terms, but must be contextualized to understand its significance and usefulness.

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پرسش و پاسخ با گلن نیلی-124

(124) New Tips & Hints

You don’t seem to care much whether your forecasts come true. You change your mind at the drop of a pen if the market does the slightest thing wrong. How can you trade like that?

ANSWER:

When it comes to markets, you have to decide between one of two things; do you want to make money or do you want to be right? Most prefer to be “right” not realizing that such a decision actually gets in the way of making money. Most focus on big forecasts and “dreams of riches” instead of the capital being lost. Your focus must be on safe entry points where risk can be controlled and on getting out quickly when the market does something unexpected. 

Forecasts shift your focus from the losses being taken by distracting you with the fantasy of large, future returns (sounds like Vegas, doesn’t it). A market forecast can create similar emotions to those generated within a casino. When at a slot machine, every time you pull the lever, you can focus on the money you MIGHT make OR you can focus on the money you are continually losing. Focusing only on the million dollars you might make will distract you – potentially long enough – from the fact you are throwing money away every time you pull the handle (exactly what the casinos want). 

So, to answer your question, I ultimately don’t care whether my forecasts turn out right. What I DO care about is helping my clients make money and working very hard to make sure they lose money as seldom as possible and as little as possible when losses are taken. That way, when good trades come around, we are not spending most of our time simply trying to get back to breakeven, but actually making new “high ground” headway with our account balances.

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