Dynamic wave analysis of the AUD/USD (update)

Fortunately, the interpretation I did last week was correct and the price turned just few hours before the time projection for w.C terminal. The price action confirmed my expectation. Firstly, the price touched a:A - b:B trendline and secondly, w.C channel breakout occurred and the support line of the channel turned into resistance line(yellow circle).

Now I'm not sure whether the decline which is in progress is an impulse or a correction. More information is required for a reliable conclusions to be made.

But one is obvious i think. The price momentum is getting wеаker according to some signals appeared in the chart. As long as the next price pattern doesn't come out a reasonable analysis for the decline from w.C high couldn't be made.

aud/usd, 30min

Dynamic wave analysis of the aud/usd currency pair



aud/usd, 30 min



A correction move is supposed to follow an impulse wave according to Elliott theory. ( An impulse move is supposed to be following by a corrective phase according to Elliott theory) The chart represents a decline subdivided in 5 waves followed by corrective pattern A-B-C. The idea is to recognize the end of that correction and to open a trade in the direction of the recent downtrend.

Dynamic wave geometry analysis requires several trend channels to be constructed. The first channel is to include wave A. Because wave b:A does 61.8% internal retracement of wave a:A then I drew 0-b trendline first and carried a parallel trendline to it over to the wave a:A high. This is the black channel. The theory clearly says a corrective pattern has got only three points of contact to the channel it is included in. I marked these points with black circles. By the way let me define the black colour on the chart as intermediate analytical degree. There are two degrees left to define – major which I’m going to describe as blue colour and minor as yellow colour. Further the correction makes its B wave which itself represents irregular corrective pattern. Then the price action turns and makes new high to confirm wave B bottom. I carried 0-B trendline over to wave A high in order to construct another channel exactly as I made the first one but this time I used blue colour. The pattern included in the second channel has already got three points of contact drawn as blue circles. As soon as the price touches the channel for the fourth time a breakout is most likely to occur.
In order to find wave C terminal in terms of price and time I've made several projections:
1. 161.8%  alternate price projection of wave A gives a typical price target for wave C;
2. 100.0% time cycle ratio of the wave A bottom to the wave B bottom(these are 230 trading bars) is projected from the intervening high for the wave C high;
3. 161.8% alternate time projection of wave A( these are 178 trading bars) from the wave B bottom;

Trade for profit, make forecasts for glory

Last time I made some precious conclusions about how to utilize Dynamic trading in profitable trading strategy. Although there is a difference between trading and making forecasts, it is not quite obvious. That’s why I’m going to explain things once again.

Forecasting by technical analysis methodology is concerned with using historic data in order trader to be able to predict future prices or market behavior in terms of pattern kind.  The aim is identifying a place in the future where trader could put on a reasonable trade or where to exit a trade with an acceptable profit. This is a risky job.

Making forecast, trader already has an expectation about next market activity. This expectation often goes into a conviction. And here is the first mistake. The first trading rule is broken.  Traders can afford to have an opinion about market activity, but they must not be convinced. It is best said by John Keynes:

“The market can stay irrational longer than you can stay solvent”.

My trading experience proves that forecasting has nothing to do with trading. Everyone who tries to trade his or her forecast by means of technical analysis takes huge risk to suffer many unsuccessful trades.  It turns out that forecasting is for academic experts and non-trading analysts.  Traders use technical analysis to collect practical information which helps to spot places at timeline where probability favors greatest opportunity for taking trading profit.

Dynamic trading uses particular technical analysis methodology and its objective is measuring current price position in regard to recent market activity.

It isn’t wise taking action before the events. Only market behavior must leads taking trading decisions.  Trading rule number two describes all of this: trade market behavior, not forecast.

It is crucial trader to cope with his or her greed and ego in order to carry out trading task by taking rational decisions but not emotional ones.  Trading success doesn’t depend on well done forecasting. It’s a question of disciplined execution of a good trading plan.

Unfortunately, no one can tell in advance with certainty when the market will offer a trading opportunity.  It could be difficult presenting my trading strategy live on the blog. So I’m going to describe trades post facto.

There is a question of trading, not forecasting

I haven’t had a post recently not because I gave up or because my trust in Dynamic trading has been shaken. I realized that  I’ve moved away from my purpose to show how Dynamic trading can help a trader to take right decision. I focused in forecasting probable market direction and making predictions about the extent of price movement instead.

Actually, Dynamic trading has power which one can use to make correct forecasts in particular market conditions. The goal is trading, not forecasting. Traders don’t have to care about future market position.  It is only current market behavior traders have to be interested in. Dynamic trading true worth is its market position analyzing technique, in terms of time and price, which allows having trades with greatest probabilities for success.

Robert Miner gives definition of Dynamic trading achievement in that way:

“One of the important objectives of Dynamic trading is to project the extent of trends and the time and price of trend reversals in advance.”

With all respect to the author, I think a definition like this brings back into the field of forecasting and contradict the principle of trading market behavior not the forecast.  The importance of Dynamic trading is concerned with getting opportunity to define current market position in order to find place where to put on a reasonable trade.

In this regard I have been working up a trading strategy based on Dynamic trading concept about three dimensions of market activity – time, price and pattern. Taking projection techniques with other technical analysis methods help identifying right places where to consider a trade.    

I hope to find out proper means to present all this information to people interested in trading financial markets.

Keep tracking next blog articles.