GET
Applying Technical Analysis
Applying Technical
Analysis
Updated Feb 99
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GET
Applying Technical Analysis
TRADING TECHNIQUES, INC.
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The information presented in this manual is con-
Past performance is not a guarantee of future re-
fidential and proprietary to Tom Joseph and Trad-
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specific trading recommendations in any of the above
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The material represented in the GET computer
and addenda. All investments and trades carry risk,
software, the GET User’s Guide, Technical Sec-
and all trading decisions of an individual remain the
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responsibility of that individual.
are believed to be accurately presented. How-
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The client acknowledges and agrees that neither Tom
pleteness, and is subject to change without no-
Joseph nor Trading Techniques, Inc., (or their re-
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spective heirs or successors) makes any representa-
systems, trading techniques, trading methods, in-
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niques described in the above mentioned products
this manual will result in profits, or that they
marketed by Tom Joseph or Trading Techniques,
will not result in losses. It should not be as-
Inc., or regarding how it may perform in the future;
sumed, or is any representation made, that the
regarding client’s ability to utilize the information
methods presented in the GET Software or User’s
and techniques described in the above mentioned
Guide, any additions, revisions, and addenda, can
products; or regarding client’s likelihood of success
guarantee profits in the Futures or Stock Mar-
in attempting to utilize same. In the event that any
ket or any other financial market instruments, or
liability is alleged or awarded in any forum notwith-
that future performance will equal that of the
standing the above, such liability shall be limited to
past.
the price paid by the client for the aggregate of all
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The Expert Trend Locator (XTL) is NOT a mechanical Trading System. The XTL is one of the many Studies (methods) available in Advanced GET.
The hypothetical computer simulated performance results provided are believed to be accurately presented.
However, it is not guaranteed as to accuracy or completeness and is subject to change without any notice.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed, the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.
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GET
Applying Technical Analysis
Technical Table Of Contents
Elliott Wave Technique …………………………………………………………………………………… T-5
Impulse Patterns ……………………………………………………………………………………………………….. T-6
Indicator To Provide Elliott Wave Counts ………………………………………………………………….. T-9
Elliott Oscillator: Step-By-Step Illustration ………………………………………………. T-11
Minimum Pull Back Required ………………………………………………………………………………….. T-15
Maximum Oscillator Pull Back ………………………………………………………………………………… T-16
Using The Elliott Oscillator in Wave Three ………………………………………………………………. T-17
Using The Elliott Oscillator in Wave Four ………………………………………………………………… T-18
Using The Elliott Oscillator in Wave Five …………………………………………………………………. T-19
Oscillator Breakout Bands ……………………………………………………………………………………….. T-20
Adding PTI (Profit Taking Index)………………………………………………………………. T-21
Adding Wave Four Channels ……………………………………………………………………. T-23
Profit Taking Index & Wave 4 Channels ……………………………………………………. T-24
Adding Displaced Moving Average (DMA) ……………………………………………….. T-25
Elliott Wave Rules & Guidelines ……………………………………………………………….. T -26
Elliott Wave Corrections …………………………………………………………………………… T-27
Alternation Rule ……………………………………………………………………………………………………… T-31
Wave Measurements & Ratios ………………………………………………………………….. T-32
Ratios For Wave Three ……………………………………………………………………………………………. T-34
Ratios For Wave Four ……………………………………………………………………………………………… T-34
Ratios For Wave Five ………………………………………………………………………………………………. T-35
Elliott Channels For Top Of A Wave Five…………………………………………………………………. T-36
Statistical Analysis of Wave Two Ratios ……………………………………………………………………. T-37
Statistical Analysis of Wave Three Ratios …………………………………………………………………. T-38
Statistical Analysis of Wave Four Ratios …………………………………………………………………… T-40
Elliott / Fibonacci Ratios ………………………………………………………………………………………….. T-42
Elliott / Fibonacci Ratios For Wave 5 ……………………………………………………………………….. T-43
Rules: Type 1 Trade ………………………………………………………………………………………. T-44
Rules: Type 2 Trade ………………………………………………………………………………………. T-45
Examples Of Type One & Type two Trades ………………………………………………………………. T-46
Type One Buy Setup ………………………………………………………………………………………………… T-47
Type Two Buy ………………………………………………………………………………………………………….. T-48
Type Two Sell Setup …………………………………………………………………………………………………. T-49
Forecasting A Double Top ………………………………………………………………………………………… T-50
Fifth Wave Failure Setup …………………………………………………………………………………………. T-51
Power of 60 Minute Charts ……………………………………………………………………………. T-65
Cross-Referencing to Weekly Data ………………………………………………………………… T-80
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GET
Applying Technical Analysis
Alternatives In Elliott Wave Analysis …………………………………………………………….. T-84
Locallized Elliott Wave Counts: ……………………………………………………………………………….. T-84
Alternate Counts ……………………………………………………………………………………………………… T-84
Alternate 3 (Long Term) …………………………………………………………………………………………. T-85
Alternate 2 (Short Term)…………………………………………………………………………………………. T-86
Alternate 1 (Aggressive) ………………………………………………………………………………………….. T-87
Gann Techniques ………………………………………………………………………………………….. T-90
Gann Angles And Lines …………………………………………………………………………………………… T-91
Using Gann Angles With Elliott Waves …………………………………………………………………….. T-95
Optimized Gann Angles …………………………………………………………………………………………… T-97
Gann Box Analysis ………………………………………………………………………………………………….. T-98
Regression Trend Channels ………………………………………………………………………… T-105
T.J.’s Web Levels ………………………………………………………………………………………… T-107
Fibonacci Time Clusters………………………………………………………………………………. T-112
Fibonacci Extension Price Clusters ………………………………………………………………………… T-115
Fibonacci Retracement Price Clusters …………………………………………………………………… T-117
Andrews Median Lines………………………………………………………………………………… T-120
Extended Parallel Lines …………………………………………………………………………………………. T-123
Extended Parallel Lines …………………………………………………………………………………………. T-124
Combining Median Lines With Wave 3 ………………………………………………………………….. T-127
Automatic Regression Trend Channels ………………………………………………………… T-129
Expert Trend Locator – XTL ……………………………………………………………………….. T-132
Designated Use For XTL ……………………………………………………………………………………………… T-135
Settings For XTL: ………………………………………………………………………………………………………. T-135
Taking Profits: ……………………………………………………………………………………………………………. T-139
Trade Continuation: ……………………………………………………………………………………………………. T-140
Guidelines for Trade Continuation ………………………………………………………………………………. T-141
Using Different Settings for XTL …………………………………………………………………………………. T-142
MOB (Make or Break) ………………………………………………………………………………… T-147
Bias Reversal ………………………………………………………………………………………………. T-156
Elliott Wave Trigger ……………………………………………………………………………………. T-158
T.J’s Ellipse…………………………………………………………………………………………………. T-160
Ellipse Projection (Shadow): ………………………………………………………………………………….. T-163
The Joseph Trend Iindex (JTI) …………………………………………………………………….. T-167
How Can JTI Be Used ……………………………………………………………………………………………. T-172
Cycles …………………………………………………………………………………………………………. T-173
Trade Pofile ……………………………………………………………………………………………….. T-176
Applying Technical Analysis Index ………………………………………………………………… T179
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GET
Applying Technical Analysis
Elliott Wave Technique
The Practical Approach— In Conjunction With GET
Elliott Wave is a collection of
complex techniques. About
60% of these techniques are
clear and easy to use. The
other 40% are difficult to
identify, especially for the
beginner. The practical and
conservative approach is to
use the 60% that are clear.
When the analysis is not
clear, why not find another
market which is conforming to an Elliott Wave pattern that is easier
to identify?
From years of fighting this battle, I have come up with the following
practical approach to using Elliott Wave principles in trading.
The whole theory of Elliott Wave can be classified into two parts: (a)
impulse pattern and (b) corrective pattern. We will discuss the impulse pattern and how to use the Elliott Oscillator to identify these
impulse patterns. We will then discuss some general rules and guide-
lines followed by numerous examples.
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Applying Technical Analysis
Impulse Patterns
The impulse pattern consists of five waves. The five waves can be in either direction, up or down. Some examples are shown below.
Wave 5
Upward
Downward
Wave 2
Wave 3
Impulse
Impulse
Action
Action
Wave 1
Wave 4
Wave 4
Wave 1
Wave 2
Wave 3
Wave 5
The first wave is usually a weak rally with only a small percentage of the traders partici-pating. Once Wave 1 is over, they sell the market on Wave 2. The sell off in Wave 2 is very vicious. Wave 2 will finally end without making new lows and the market will start to turn around for another rally.
Vicious selling
1
in Wave Two
2
Wave Two will not
make new lows
The initial stages of the Wave 3 rally is slow and it finally makes it to the top of the previous rally (the top of Wave 1). At this time, there are a lot of stops above the top of Wave 1.
Traders are not convinced of the upward
trend and are using this rally to add more
1
STOPS
shorts. For their analysis to be correct, the
Top of Wave One
market should not take the top of the pre-
vious rally.
Wave Three in
2
initial stages
Therefore, a large amount of stops are
placed above the top of Wave 1.
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Applying Technical Analysis
The Wave 3 rally picks up steam and takes the top of Wave 1. As soon as the Wave 1
high is exceeded, the stops are taken out. Depending on the amount of stops, gaps are left open. Gaps are a good indication of a Wave 3 in progress. After taking the stops out, the Wave 3 rally has caught the attention of traders.