Wolfe

[Tasuki]

One thing I'd like to discuss with anyone who'd interested are the differences between Gartleys (or Butterflies) and Wolfe Waves. They definitely share some similarities, but every Gartley or Butterfly pattern I've seen does not work out to be a successful Wolfe Wave, even though they seem to start out similarly. Apparently, the ratios of the swings are different, but I haven't yet discovered the exact differences. If anybody knows (or even understands what the heck I'm trying to get at) then kindly enlighten me!

The attached chart is the best example I can find right now. The "M" shaped pattern in dark green is a "Bull Butterfly" i.e. a butterfly pattern with a bullish expected outcome. If you're unfamiliar with the terms "Gartley" and "Butterfly" I'm sure there's a ton of info on the web.

As you can see from the pattern, it's possible to label the swings of the butterfly pattern as if they were Wolfe Wave swings, and indeed, in this case, if you extend the line segment from 1 to 4 you will actually get to the price that was eventually reached, but not in the time that the Wolfe Wave pattern expected---according to Wolfe, the price target should be reached at about the time when the extended line segments 1-3 and 2-4 meet. Clearly that didn't happen here.

Other examples I've found of Gartleys and Butterflies are even less Wolfe-like, usually alot less so. As I said above, there has to be something about the ratios of the swing highs an lows that's different between Gartley/Butterfly and Wolfe Waves, but as yet I'm clueless as to what the exact differences are. Like I said, if anybody understands this, please post!

[waveslider]

The one you posted is not a true WW, but it does work. Remember that the #2 pt should be a recent new high or low. There is a WW in the chart you posted. Note how precise it is. The volume at pt. #4 was a good indicator.

Tasuki- What you posted is a version of the pattern. It does work often, but not as consistently as if you follow the rules. Post a recent, uncompleted one so that you can watch it play out live.

[waveslider]

Tasuki, the QQQQ chart you posted - I remember that one. I think the #5 pt was too deep to take the pattern seriously. I have watched gartleys trade, but don't believe too much in the fib #s. To me, fibs are too static.

Waves in the market are always changing size and proportion. Fibs can work fine for a methodology with good money management, but so can many things.

One thing - don't take the timing of the WW seriously, it's very flawed. There are better timing methods. Even measuring distance b/w peaks/troughs.

There is a great book by a guy named Suri Duddela that gets deep into butterflies/gartleys. I know his work, but haven't read the book, heard it's good.

[Tasuki]

waveslider, thanks for your replies. Please explain why my first chart (@TU Weekly) was not a true WW. You said that the #2 point needs to be a recent new high or low--was this not a new high? OK, there were higher prices prior to point #1---does that disqualify point #2 from being a "recent" new high? It was higher than the high at the very beginning of October 2006--that doesn't count? Just trying to get the rules clear in my mind.

Ah, one more question--I didn't understand what you meant about the volume at point #4. Is volume analysis part of Wolfe Waves? I don't recall seeing anything about volume on Wolfe's site--maybe I missed it. Many thanks.

[waveslider]

Hi Tasuki, I can tell you what I see, but the more you see the pattern, the more you will get a feeling for not just wolfe waves, but market geometry in general.

Pull up the chart I drew and walk through it with me. The #1 point should occur within a range, not at an extreme. The reason for this is that #2 is a recent high or low and should panic people and cause volume. Above #3 point is where those who entered short will be setting their exits (bearish pattern). #4 point is a higher low putting confidence in longs. #5 point is where shorts cover and breakout traders enter long.

Then volume evaporates and the move fails, causing a quick move back to the 1-4 line.

That's the psychology of the pattern.

The chart you posted does have a pattern, but it is distorted. Imagine if your point #3 was a high instead of a low. Then you'd just have one big wave. What happened instead was a distortion into a mild expanding (broadening) pattern designed also to shake out longs.

I hope you can follow me on that. Post some more charts.

[waveslider]

I don't like the looks on pt #5 on this chart. If that's all we're going to get for a fakeout lower, it looks like volatility is dying in this market.

You want to see some good tails at that #5 location. Looks like the market may sell off a little tomorrow in the a.m. Maybe that will be the scary run for it.

If the # 5 isn't convincingly taken out, then the lower target line is more likely. We'll see.

[Tasuki]

Thanks, waveslider, your description of a proper WW is perfect. Now I have a better idea what to look for--still not sure how to make my eyes see it. I'd give anything for an indicator for Tradestation like I have for Gartleys and Butterflies. There is a WW indicator posted on TradersLab, but comments below it say that it's not close to being correct for a true WW, so I don't want to try it and start seeing the wrong thing.

The best I can figure, your chart is for the Russell emini, something like a 120 minute chart? In future, could you (pretty please) include the X and Y axes in your charts, as well as the contract name? It would really help. Thanks.

I'll post some proper WWs if I can find them. Not as easy as I originally thought!

[waveslider]

Sorry Tasuki, it is an hourly chart. They're trying to make a run at it this a.m.

As far as an indicator, I have never seen a good one. Seems likely there won't be a good one, the pattern can have so many nuances...

Anyway, glad to be of help. Keep looking and you will see them. Look for the #2 point first, it stands out the most since it is a recent high/low. If you see a good one and post it we'll both benefit!

[waveslider]

I think it might be making a move at it, the chop down around 790 is a good indication of the market trying to shake out abunch of participants.
I don't see the market going below 775 if the pattern is valid. Most likely the target is about 781.
This could be setting up a big up day for tomorrow if the pattern holds.

[Tasuki]

waveslider, see attached. This is how I see the pattern setting up on my chart in Tradestation. Since the price has dipped below point 5-----well, where would you put your stop on this trade, or more generally, where does one put one's stop on Wolfe Waves? For a bullish WW, shouldn't it be somewhere below point 5?

The profit target should be up around 840, yes?