The experiment I never thought I would begin: Using the Wave the sole entry trigger

I really can’t believe I am writing this, sharing this, thinking about this and perhaps putting it here may be something I will *regret* in a few days.  But for now I know it seems right as many times blogging about what I am thinking helps clarify…plus I get good feedback and that never hurts.

So here goes…

Let me say a few things right of the bat…THIS IS NOT NEW (I discussed this at length in both my books).  This is not proprietary.  You can do what I am going to do here with any decent charting platform.  The ONLY difference is you likely won’t be able to make it look as pretty…meaning the colors I am using to alter the candles.

I have by no means automated the entire trading process which is to say all I am going to talk about here is the entry.  Trade and risk management will come later after I do some more testing.

For now, just play with the setting and idea and see what you come up with…confirmation indicators, trailing stops, profit target placement are just a few things to consider beyond what I will discuss now.

This is basically the Wave/CCI set up and is en entry style that I have been using for almost 15 years.  The difference now is that I am trying to make it more “step by step” with less discretionary items to consider.  e.g. Wave clock angles, price

(gasp!)  I still can’t believe I am doing this…

So you have the Wave:  The 34EMA on the high, the close, and the low.

What I have done, mainly for my own purposed here is replace the Wave with colored candles.  A green candle is a candle that has already closed above the top line of the Wave, the blue candle is one that has closed within the Wave itself, and the red is a candle that has closed below the bottom line of the Wave.

The entry trigger is a candle that breaks up through the top line of the Wave (buy) or a candle that breaks down through the Wave (sell).  Blue candles are alert candles as they are neutral and that would mean they signal that a trigger could be coming.  Blue candles will most typically occur during the sideways market cycle or during a uptrend pullback or downtrend bounce.

So you see the basics are the same ideas that I have used and taught.  I think what makes it’s interesting is that this is completely visual.

I think in the interest of keeping this basic system, well “basic”, is to consider only major and minor psychological numbers which are completely objective or even pivot points which are almost completely objective. (By the way, it’s time that makes pivot points subjective as different traders can use different closing and opening times.)

Enough talk, let’s look at the chart.  I call these chars “GRaB” charts (Green, Red, and Blue)

Notice there is no noise.  None.  The downtrend would look like this on one of my typical charts with the Wave and Lazy Days Lines.

There more info here but that’s also what can take a lot of traders off the fairway and into the tall grass.

The set up is a classic Wave/CCI but the trigger can look cleaner when all you are looking for is the green candle; green again simply indicating that prices have broken the top line of the Wave.

What makes this set up even better is the blue (neutral) candle in between and that’s the pause we would look for in the Wave/CCI set up as the market cycle goes to two to four o’clock.  See, this should already feel a bit familiar.  We’re taking advantage of a breakout to the upside as signalled by price breaking up through the Wave.

Frankly, my eSignal EZ2Trade Software plug in has done this candle coloring since it was first introduces at the eSignal website six or seven years ago.  Obviously it’s just an visual cue…just an aesthetic tool.

Here’s a few that are setting up right now on the 30 minute USD/JPY.  I will say that I like this set up better on longer term (especially daily!) chart versus intraday.  But then again, almost everything works better on end-of-day charts as they are the most psychologically relevant.

And here’s one I am watching…

I’ll be back with more in the coming days and weeks…and that’s if I don’t delete this post altogether!  In which case, this never happened!

- Raghee