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I would like to begin by first quoting Sun Tzu in "The Art of War" "The general who wins a battle makes many calculations in his temple before the battle is fought. The general who loses a battle makes few calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat; how worse no calculations at all! It is by attention to this point that I can foresee who is likely to win or lose." Therein is the basic thought in this profitable approach to trading. Sure, you're thinking to yourself, "Everyone knows to calculate their risk before investing in futures" You're right in this thought. Where the problem comes in at is that most people (the majority who lose to the few who win), don't know how to properly calculate the markets. They use the wrong indicators or read the right indicators wrong. It's easy to become confused in picking a trade when you're two favorite advisory services is opposed to each other. One is telling you to buy Soybeans, when the other is telling you to sell Soybeans. When we as traders have a trading codependency that is founded in the minds of self-titled market gurus and specialist… this is VERY unhealthy for our financial wealth and success in the markets. Don't get me wrong. There's nothing wrong with listening to the recommendations of those whom you trust as profitable traders, while at the same time you YOURSELF are learning to become self-sufficient in trading futures. As well, if you're using Tradestation, Metastock or any of the numerous trading software packages, you have dozens of technical indicators to choose from. With all of these technical indicators, IF they really worked, why are most people STILL losing their money? Being that the futures market is a ZERO SUM game. Their money lost is someone else's gain. So, how is it, that with all of the modern technology, and dozens of technical indicators, and fundamental news sources, can MOST people who trade futures be so consistently wrong? The answer to that question is another topic within itself. So, instead of addressing the answer to that question head on. What I will do is propose a solution to you that will allow you to begin winning in the futures markets. I won't just throw out some philosophical or theoretical solution to you expecting you to bite and run with it. I'm not into insulting people's intelligence. I both respect and admire you for being on my team. On the team of speculators who so daringly dare to believe that we can go beyond success to MASSIVE SUCCESS and create personal wealth from futures trading. I know that there's enough success to go around. I know that there's enough money being lost to so few winners, that certainly there's space for you and I in the winner's circle. Hey, in a $3 TRILLION DOLLAR A DAY marketplace, we don't want the whole thing… just give us a few thousand dollars a day and we'll be happy, right? Well, you can finally exhale and begin to smile, because I'm going to introduce to what I consider to be the most accurate and precise way to trade the futures markets. MAKING THE CALCULATION When calculating my trades (and what trades you will take), there are TWO very specific things to take into consideration. Those two things are PATTERN and PRICE. You may have heard that before. If so, that's good. Because no matter how you slice it, the ONLY THING THAT REALLY MATTERS is PATTERN and PRICE. The PATTERN is the result of the PRICE and the PRICE is the result of EVERYTHING you can possibly think of. From API and USDA reports through the traders trying to pick tops and bottoms all the way to the traders buying support/selling resistance and trading off of Bollinger Bands and Stochastics and every indicator that can be found around the world. THE ORGIN OF THE PATTERN Ralph Nelson Elliott discovered the Elliott Wave principle in the late 1920s. He has discovered that there is no chaos in the markets, but that markets move in repetitive cycles, which reflect the actions of humans caused by their emotions or mass psychology. Elliott contended that the ebb and flow of mass psychology always revealed itself in the same repetitive PATTERNS, which subdivided in so called waves. In part Elliott based his work on the Dow Theory, which also defined price movement in terms of waves, but Elliott has discovered the fractal nature of market action. Therefore Elliott could analyze markets in greater depth, identifying the specific characteristics of wave patterns and making detailed market predictions based on the patterns he had identified. Fractals are mathematical structures, which on an ever-smaller scale infinitely repeat themselves. The patterns that Elliott discovered are built in the same way. An IMPULSIVE WAVE, which goes with the main trend, always shows five waves in its pattern. On a smaller scale, within each of the IMPULSIVE waves of the before mentioned impulse, again five waves will be found. In this smaller pattern, the same pattern repeats itself ad infinitum (these ever-smaller patterns are labeled as different wave degrees in the Elliott Wave Principle) Only much later fractals have been recognized by scientists. In the 1980s the scientist Mandelbrot proved the existence of fractals in his book "the Fractal Geometry of Nature". He recognized the fractal structure in all sort of objects and life forms, a phenomenon Elliott already understood in the 1930s. In the 70s the Wave Principle gained popularity through the work of Frost and Prechter. They published a legendary book (a must for every wave student) on the Elliott Wave (Elliott Wave Principle… Key to stock market profits, 1978), wherein they predicted, being in the middle of the crisis of the 70s, the great bull market of the 1980s. Not only did they correctly forecast the bull market but also Robert R. Prechter predicted the crash of 1987 in time and pinpointed the high exactly. Only after years of study, Elliott learned to detect these recurring patterns in the markets. Apart from these patterns Elliott also based his market forecasts on Fibonacii numbers (covered in the next section). Everything he knew has been published in several books, which lay the foundation for people like Bolton, Frost, Prechter and professional traders such as you and myself, to make profitable forecast, in all financial, stock, futures and commodities markets. Now, let's take a look at the specific IMPUSLIVE PATTERNS that we look to trade and that can make you a bundle of cash in a short period of time. IDENTIFYING THE PATTERN According to physical law: "Every action creates a reaction". The same goes for the futures and commodities markets. A price movement up or down MUST be followed by a contrary movement, as the saying goes: "What goes up, must come down" (and vice versa). Price movements can be divided in trends on the one had and corrections or sideways movements on the other hand. Trends show the main direction of prices, while corrections move against the trend. In Elliott terminology these are called IMPULSIVE WAVES and Corrective waves. The IMPULSIVE WAVE formation has five distinct price movements, three in the direction of the trend (I, III, and V) The waves that we are only interested in trading… and two waves against the trend (II and IV). Obviously the three waves in the direction of the trend are IMPULSES and therefore these waves also have five waves. The waves against the trend are corrections and are composed of three waves. An IMPULSE wave formation followed by a corrective wave, form an Elliott wave degree, consisting of trend and counter trend. Very important for understanding the Elliott Wave is the basic concept that wave structures of largest degree are composed of smaller sub waves, which are in turn composed of even smaller waves, and so on, which all have more or less the same structure (impulsive or corrective) like the larger wave they belong to. Studying the patterns is very important for correctly applying the Elliott Wave. This is because the pattern of the market action, if correctly determined, not only tells you what levels the market will rise or decline, but also in which way (or pattern) this will happen. PATTERN RULES AND GUIDELINES IMPULSES are always composed of five waves, labeled 1,2,3,4,5. Waves 1, 3 and 5 are themselves each IMPULSIVE PATTERNS and are approximately equal in length. On the contrary waves 2 and 4 are always corrective patterns. The most important rules and guidelines are: · Wave 2 cannot be longer in price than wave 1, so it can't go beyond the origin of wave 1 · Wave 3 is never the shortest when compared to waves 1 and 5 · Wave 4 cannot overlap wave 1, except for diagonal triangles. (Diagonal triangles will be discussed in a later report) and sometimes in wave 1 or A, but never in a third wave. · As a guideline the third wave (also known as the money wave) shows the highest momentum, except when the fifth is the extended wave · Wave 5 exceeds the end of wave 3 · As a guideline the internal wave structure should show alternation, which means different kind of corrective structures in wave 2 and 4 If this were going to be an extensive look into the entire Elliott Wave structure, we would have to also discuss the rules and guidelines for Extensions, Diagonal triangles (types 1 and 2), Failures or Truncated 5ths, Zigzag corrections (which can double and triple), Flats, Expanded Flats and Irregular Flats, Triangles, WXYs, Running Flats, X waves, and even more. However, to trade the IMPULSIVE WAVES 1, 3 and 5 successful as we do on a daily basis, you don't have to have a complete understand of the Elliot Wave. I do encourage you to further your studies, as it can prove to be far more profitable to understand Elliott in its entirety than in part. However, let me state again. You DO NOT have to have a complete textbook understanding of the entire Elliott Wave to successfully trade the IMPULSIVE WAVES 1, 3 and 5. Ever night prior to the next days trading session the "What's New" area of this web site is update with the most profitable trades of all the markets we watch. These trades are select based on PATTERN and PRICE. As well, these trades have the highest winning probabilitgy and the lowest risk attached. You are invite to stop by daily and get these FREE trade updates. You will then see for yourself that we have one of the highest winning trade percentages around. If you are truley looking to make some real profits from the futures and commodities markets, then bookmark this site. The "Impulsive PROFIT$ Trading Journal" will give you precise entries, exits and profit targets for dozens of markets. THE PRICE IS EVERYTHING The Fibonacci series are a mathematical sequence in which any number is the sum of the two preceding numbers. The sequence goes as follows: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 and so on. The properties of this sequence appear throughout nature and also in the arts and sciences. Most notably the ratio of 1.618, the "Golden Mean", is very common, a relationship already discovered in ancient times. This number can be approached by dividing a Fibonacci number by its preceding number as the sequence extends into infinity. Ratios of .618, which is the inverse of 1.618 also, are very prominent when analyzing Fibonacci relationships. Elliott didn't discover the Fibonacci relationship himself, but this was brought to Elliotts attention by Charles Collin. The wave counts of the IMPULSIVE and corrective patterns (5 + 3 = 8 total) are Fibonacci numbers, and breaking down wave patterns into their respective sub waves produces Fibonacci numbers indefinitely. Analyzing Fibonacci relationships between PRICE MOVEMENTS is very important for several reasons. First you can control your wave analysis. The better the Fibonacci rations of your wave count, the more accurate your account is, because in some way or the other all waves are related to each other. Secondly you can project realistic targets once you have defined the wave count correctly or you have distinguished different scenarios, which point in the same direction. Since Fibonacci manifest itself in the proportions of one wave to another, waves are often related to each other by the rations of 2.618, 1.618, 1, 0.618, 0.382 and 0.236. This fact can help you in estimating price targets for expected waves. If for example a wave 1 of any degree (or time frame) has been completed, you can project retracements of 0.382, 0.50 and 0.618 for wave 2, which will give you your targets. Most of the time the third wave is the strongest, so often you will find that wave 3 is approximately 1.618 times wave 1. Wave 4 normally shows a retracement, which is less than wave 2, like 0.236 or 0.382. If wave three is the longest wave, the relationship between wave 5 and three often is 0.618. Also wave 5 equals wave 1 most of the time. Fibonacci will help you to solve the rhythm of the markets. PRICE TARGETS For the sake of time and space, I will only touch on the price targets for the IMPUSLIVE waves 1, 3 and 5. · Targets for Wave 1: The first wave, a new IMPULSIVE price movement, tends to stop at the base in the previous correction, which normally is the B wave. This often coincides with a 38.2% or a 61.8% retracement of the previous correction. · Targets for Wave 3: Wave 3 minimally is equal to wave 1, except for a Triangle. If wave 3 is the longest wave, it will tend to be 161% of wave 1 or even 261%. · Targets for Wave 5: Wave 5 normally is equal to wave 1 or travels a distance of 61.8% of the length of wave 1. It could also have the same relationships to wave 3 or it could travel 61.8% of the net length of wave 1 and 3 together. If wave 5 is the extended wave it mostly will be 161.8% of wave 3 or 161.8 of the net length of wave 1 and 3 together. THE 5, 8, 13 THREE LINE MOVING AVERAGE As a simple indicator to determine the rhythm of each market you can set up a three line moving average with the settings of 5, 8 and 13. Using this is simple. When the price bars are above the three lines, only take long signals. When the price bars are below the three lines, only take sell signals. Use the 5 or 8 line moving average as your protective stop on a stop-close-only basis. When the price bars are twisted within the three lines, be flat the market and wait for a breakout in one direction or another. You see. We don't care if the market is going up or down. We just take what the market gives. We are not bullish. We are not bearish. We want whatever the market wants. This indicator is used along with some other accurate indicators that we have programmed. The combined system that we use for intraday and position trading as proven accurate over 75% of the time. This is a remarkable accomplishment. We know the proof is in the pudding. That's we you are invited to stop by on a daily basis and follow or trades FREE OF CHARGE and see for yourself how profitable you can be by trading with us. CLOSING COMMENTS The Elliott Wave provides us as traders with the most objective and disciplined method available for trading. Only a handful of patterns exist, sometimes easy to recognize especially in the strong IMPULSIVE waves, which is what we specialize in trading. The available patterns tell us where the market is heading, in what way (or structure) this will happen and under what circumstances the pattern gets stronger probability. Also, the pattern will tell us when it's no longer valid because of the occurrence of an intolerable price action. This makes it possible to exactly determine our entry and exit points, which is an outstanding characteristic of the Elliott Wave. The key to forecasting markets with the Elliott Wave lies in determining the probabilities of alternative scenarios. If we find several alternative counts pointing in the same direction, we have found an excellent trading opportunity. Some people, mainly those who could not successfully apply the Elliott Wave themselves, will tell you either it is too complex and subjective or that the waves don't exist at all, suggesting the market follows a random pattern. Obviously the Elliott Wave can get very complex, especially in corrective waves since you will have to look for patterns, which contain patterns, which contain patterns, etc. etc. But it never loses its objectivity if you apply the rules and guidelines. The only problem is that sometimes it is not totally clear if the internal structure of a wave is a wave 3 or a wave 5. In that case we will have to determine alternatives for both internal wave structures and look for other confirmations such as channels and Fibonacci ratios. PUTTING IT ALL TOGETHER Don't be afraid to take a loss if your stop gets hit. This means you will have to admit you were wrong on that trade. Don't be afraid of loosing the (little) profit you have made, only exit IF the wave analysis tells you to. Follow the rules of the Elliott Wave and don't second-guess the market. Believe what the Elliott Wave tells you, your stop will protect you. Of course there will be loosing trades, a 100% score is impossible. But if you limit your losses (by executing your stop) and let your profits run, you can be very successful. You can experience the overflowing joy of extracting consistent profits from a market that is most generous to those who understand it and flow with its rhythm. So, maintain your discipline and learn from all trades. Make sure you get your free subscription to Impulsive Profits! Your Friend, Stephen A. Pierce, CTA 
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Please email spierce@rapidfireswingtrading.com or call 734-741-8392 if you have any questions.-
Futures Trading Commodity Trading.com
Please email spierce@rapidfireswingtrading.com or call 734-741-8392 if you have any questions.-