Re: Wolf Wave
karthikmarar said:
Thanks Chheda
It was nice of you to explain the wolf wave to us in the chat room. It would be very good if you add that simple explanation on wolf waves in this thread for the benefit of the members. Looking forward to more post from you, my friend...whenever you find time.
warm regards
Karthik
Hi
Explanation of wolf wave (from book Street Smart by Linda Raschke):
1. Number 2 wave is a top.
2. Number 3 wave is the bottom of a first decline.
3. Number 1 wave is the bottom prior to wave 2 (top). Point 3 must be lower than point 1.
4. Number 4 wave is the top of wave 3. The wave 4 point should be higher than the wave 1 bottom.
5. A trend line is drawn from point 1 to point 3. The extension of this line projects to the anticipated reversal point which we will call wave 5. this is the
entry point for a ride to the epa line (1 to 4).
6. The Estimated Price at Arrival (EPA) is the trend line drawn from points 1 to 4. This projects the anticipated price objective. Our initial stop is placed just beneath the newly formed reversal at point 5. It can then be quickly moved to breakeven.
IMPORTANT POINT: You cannot begin looking for the Wolfe Wave until points
1, 2, 3, and 4 have been formed. Keep in mind that point 3 must be lower than point 1 for a buy setup. It must be higher than point 1 for a sell setup. Also, on the best waves point 4 will be higher than point 1 for a buy setup and lower than 1 for a sell setup. This ensures that absolute runaway market conditions do not exist.