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Looking at the chart above, you should have noted that it is a double bottom. In terms of an example this is good as it allows me to demonstrate how trades can full short of our expectations and why I believe it is so important to trade with two positions, short-term (ST) and long-term (LT). I think this procedure can make the difference between winning and losing overall. I will explain why further into the Editorial.

For now there are a couple of points I wish to explain concerning the chart above. First, there is the Elliott Count. An Elliott Count is a guide to where the market may be at any given moment. Note, I use the words ‘guide’ and ‘may’. The reason for this is: there is no such thing as a hard and fast count; counts will be validated or invalidated as the market progress.

In fact, you could put three or so Elliott traders in a room, give them the same chart, and each would give you a different count! These counts may range from usable, to ludicrous. This is why Advanced GET has been programmed with a totally objective Elliott Wave count. Evan then, steps have to be taken to verify that the count given by the software is fit to trade.

The other thing I’d like you to note at this stage are the Pivot points on the chart. These are labeled P (primary), J (major) and I (intermediate). The labels are slightly obscured by the Elliott count, but the count can be turned on and off at the touch of a mouse button if this is ever a problem. The important thing to note is that these are important points from witch we can use our drawing tools. You will see this as we progress.

The amount a wave 4 can retrace, and the presents of an ABC correction within the wave 4 varies from sequence to sequence. So we need a practical rule here to keep us from entering the trade too soon. In general, a wave 4 will retrace wave 3 by one of three ratios. Either 38% or 50% are most common. The other ratio is 61.8%, but this is more common in Elliott sequences that become invalidated, and thus lose us money when traded.
If the Wave 4 termination is less than 38% and meets with an Ellipse, at the same time that the 5,35 Oscillator retraces to zero (more on next page), then this is also expectable. (There is no Ellipse in this case.) This tends to happen when wave 4 is a longer sideways movement. The wave 4 should not retrace past the wave 4 channels shown in the chart above. If this happens, the odds decrease for a good wave 5, and again, you are more likely to end up losing the trade. The PTI figure needs to be 35 or greater. Again, this is a measure of the probability for a good wave 5. .

Once again, the Oscillator should retrace to zero without taking out the 40% level. I often refer to this as the –40% level, as it is on the other side of the base line to the wave 3 peak.

There are a couple more price termination checks we can perform. W4.C will often be equal to either a 61.8% or 100% or 162% of W4.a. This is shown on the chart where W4.C = 100% of W4.A. The other is to draw a MOB from W4.A. In most cases this will catch the W4.C termination.

Time is also another important consideration in trading, although this tends to be less precise when compared with price. The best tool I’ve ever seen for accurately predicting price is Advanced GET’s Ellipse. But as stated, there is no Ellipse here. Regardless of the Ellipse, the minimum time for a wave 4 retracement to complete is 38.2% of wave 3. The typical amount is between wave 38.2% and 61.8%. Past this, again things become less predictable.

When this level is penetrated, you are automatically placed in the trade. The MOB shown on the chart above shows the first resistance area that presents a fret to the progression of our trade. When the market is nearing it we want to move our ST stop-loss into the profit side of our entry, but keep it away from the price action by placing it a tick or two above a high several bars back from the current at that time. This would be at around 93-20. Depending on ones trading style, the LT position stop-loss can be moved to break-even, 94-09, or left at 94-30. Once the market hits the MOB, support is expected, so one covers the ST position to maximise its profit. Do not forget to cancel the ST stop-loss at this time. This occurs at around 92-30. We have now put some money in the bank (around $1343 per contract) and we can try and take advantage of any further movement down with the LT position.
This is not guaranteed, and in order to allow for the market to go down further, we also have to keep the LT stop-loss wound back allowing the market to move back up some without being stopped out. The market in all likelihood will move up again in reaction to the resistance depicted by the MOB, before moving back down further. This is why two positions is best; as seen in this chart, first resistance has the market running sideways to up. 

It is only when first resistance is archived and the market begins to move again towards the downside, that a sensible trend channel can be dawn to contain the wave 5. This trend channel is used to exit the LT position when the market breaks the upper channel (blue). 

Now this, being a double low, is a good example of trading two positions. Note I say positions not contracts. Each position can be a number of contracts depending on the amount of capital one has to trade with. I know this is obvious to most, but I have to cater for those who are new to trading as well. 

The market breaks the trend-channel at around 93-12. This is where we cover the long-term position, netting a further $437 dollars per contract. Note we made less with the LT position, not more! This is the advantage of trading ST and LT positions, as trying to allow for resistance and new lows with one position can make the whole trade a break-even trade, or worse still a loss. I hope you have enjoyed this first editorial. Good Trading 
Derek Pell 
UK – Advanced GET Rep.