The quote is taken from a letter written to MF by an Academy`s newcomer:
Vjacheslav Vasiljevich, I came to the Academy after 4 years of studying Forex and after losing 5 deposits. As many internet traders I entered the wrong path by first downloading from the Net a pile of e-books on Forex and I was constantly trying to logically connect the classic postulates with each other until I found it impossible to do. Each classic found some separate element (Elder, Williams, Demark, Prechter, Naiman). Each of them tries to pass his discovery (the separate element) for the Holy Grail as they cannot combine the elements/details into a system/entity – what comes of what, where and why does it happen? Where is the reference point? There is no reference point they can show us, only some triangles, pennants, trend channels, divergence and other elements, which allow traders to make profit accidentally, from time to time, what definitely leads to the loss of their deposits.
Give a child dismantled bicycle - a frame, a pump, handlebars, spokes , tires – then show a photo of the bicycle and complacently explain the child (as the classics do) that this is a bicycle, riding which is up to 10 times faster than walking. I spent 4 years (as well as millions of other “children”) assembling (re-inventing) the bicycle by trying to match the spokes and the handlebars, the tires and the saddle.
I failed. This is the main advantage DCs put into use while they advertize the classics of trading and their seminars.
After the mentioned 4 years of sleepless nights with awakening in cold sweat after endless nightmares, after 4 years of headaches and constant quarrels with relatives and close people (“Where is Soros and where are you?” I heard it from my wife after 10 years of happy marriage), while being an object of my friends' malicious and outspoken mockery, I realized that it was a deadlock. At first I decided to go to some seminar arranged by one of “the classics of trading” (What a name you gave them!) and beat him in his complacent mug in front of the public…
I entered your Academy after a friend of mine gave me an extract from the Academy FAQ on the MF reference point… My personal opinion is that all the “classic” books are useless without it… (End of quote)
That was a long quote, wasn't it? (A range of emotional statements are removed from it, which, I hope, the man will soon recall with a smile on his face). The quote depicts the essence of the fundamental drawback of the classic TA, yet it explains the necessity of the “REFFERENCE/STARTING POINT” notion.
This term is not used by any Forex classic. It was introduced for the first time into the new TA by MF. It is used in daily trading practice at the closed part of Masterforex-V Academy.
The essence of the reference point by MF lies in:
· Finding a point, which serves as the start of the determined movement at the controlled Forex market, to gain a conscious profit.
· The consistent movement allows traders to gain a conscious profit as opposed to an accidental success in gaining profit. An accidental success is the way to losing the deposit.
· Some examples are given below – 2 classic reference points and their comparison with the 1st reference point by MF (differences and similarities)
· The 1st reference point – the pattern by Elliot/MF, which makes it possible to discover the regularities of the algorithm that were not discovered by neither Elliot (in the classic WA), nor Charles Dow (in the classic TA). Their followers also failed to do this.
The 2 reference points of the classic WA by Elliot.
The classic WA by Elliot gives us 2 reference points – see the picture below - the world-famous Elliot pattern of a 5-wave impulse
The WA classics – Elliot's followers (Prechter, Fisher, Bill Williams, Balan, Vozny etc.) see 2 reference points – the beginning of a trend and its end.
The 1st wave of an impulse
The 5th wave of an impulse (the end of the trend)
The stop-loss is placed under the base of the 1st wave (at uptrend).
A new graphic representation of the Elliot pattern through the MF reference points.
· The blue and red points show the reference points for upward and downward movements
· Obligatory stops “behind” the base of waves 1 and 5 (below the base for buy/above the base for sell).
At the same time Charles Dow's followers (Murphy, Elder, Shwager, Naiman etc.) defined the same 2 reference points by Elliot in the Chartism of the classic TA, which are called the “Head and shoulders” pattern.
The trend reversal after the end of wave 5 in the classic TA is represented by chartism - the “Head and shoulders” pattern (the “inverse Head and shoulders” pattern) without explaining the algorithm of waves and sub-waves. You can find the details in chapter 3 of book 2 called “Chartism as the deadlock of the classic TA. The way out of the deadlock in Masterforex-V TS.”
Their recommendations for traders - to trade with the trend
· The main buy position is opened from the 1st Elliot wave (inverse Head-n-shoulders)
· The main sell position is opened from the 5th Elliot wave (Head-n-shoulders)
Is it easy?
Then, why does the percentage of losers among those traders who use classic WA remain the same as for all the rest traders in the world (97-99%)? What needs to be added and corrected to make even these 2 reference points alone bring profit?
That is the way we follow to discover the pattern by Elliot/MF by adding to the classic WA the things that neither Elliot nor his followers (Prechter, Fisher, Balan, Nili etc.) paid any attention to.
The basic drawbacks of the 2 reference points of Elliot WA.
Somebody's drawbacks can be criticized in public only when the algorithm of correcting these drawbacks can be offered instead. This is the way a scientific discovery is born, including:
· admitting the fact that the great and the brilliant were discovered before you
· stating the associated drawbacks and the puzzles UNSOLVED by the classics
· offering one's own way to solve these UNSOLVED problems
It is a pity that such an approach is very rare at Forex. You can find to types of testimonials and opinions on the classic Elliot WA on the Net without any difficulty:
· Either negative ones left by the 97-99% of traders who lost their money using the mentioned 2 reference points by Elliot and who didn't manage to find the ways to gain profit from the drawbacks of Elliot points
· Or enthusiastic ones left by analysts who cannot admit that there are no distinct criteria of defining only 2 reference points in the classic WA, otherwise some questions (unpleasant for them) will arise:
ü How and why do traders make use of the trading services offered by those dealing centers and broker companies that the analysts work for?
ü Where else do wise investors invest their money but in Forex trading (opening a real trading account) if the “science” called Forex makes use of only 2 arithmetic operations?
ü Can you imagine Math being based on only 2 arithmetic operations, which work only from time to time)? Or can you imagine an investor investing money in building such houses that would collapse within a year? (Maybe that is the reason why women (being more intuitive by nature) try to stop their husbands from choosing the career of a trader?)
ü Why does one need to buy and read hundreds of books on Forex… to spot just 2 starting points when trading? (visit the largest free online library on Forex.)
The honest answers to these questions interfere with the interests of very big business.
Those who decided to become a trader have to see the problem from the objective side, to calm down and find its solution before opening a real trading account, not after losing 5 ones (like in the letter above).
Why do most traders quit using the classic WA by Elliot and the trading systems based on it?
It happens because the form of the classic WA presented by Elliot, Prechter, Fisher, Nili, Vozny, Bill Williams is imperfect.
· Instead of discovering the algorithm… the classics followed the way of chartism, giving dozens of patterns (zigzag, double zigzag, irregular correction, triangular correction), which can be seen only post factum.
The Pattern by Elliot/MF is introduced to solve the UNSLOVED problems.
The 1st difference between the Pattern by Elliot/MF and the 2 reference points by Elliot: one point instead of two.
The Pattern by Elliot/MF. Instead of 2 reference points offered by Elliot only one reversal pattern is used in the new WA by Masterforex-V. It is called a Fractal-Zigzag Reversal (FZR) – a geometrical pattern – the algorithm of any reversal at Forex. As a result, the direction of the trend is changed to the opposite one within the framework of the wave level of the TF under consideration.
Pic. a FZR
Any FZR consists of:
· A wave of the senior TF in the opposite direction (wave 1 or A under Elliot)
· A pullback – a correction without breaking through the base of wave 1 (wave 2 or B under Elliot)
· An impulse - wave 3 or C with the breakout of the peak of wave 1.
FZRs as MF reference points in the 5-wave pattern by Elliot.
Take a closer look at the picture of the 5-wave impulse pattern. You will understand that wave 1 and wave 5 of trend reversals:
· Consist of 2 FZRs in the opposite directions
· Mirror each other
· Have similar names in the classic TA: Head and shoulders/inverse Head and shoulders.
FZRs as MF reference points in such reversal patterns as Head-n-shoulders, Double/Triple top/bottom
FZRs as MF reference points and methods of finding the mistakes in the reversal patterns offered by the world's trading champion Larry Williams
Masterforex-V sets a task:
Try to spot on your own Larry Williams' mistakes in reversals by using the 1st reference point by MF
MF tip for the members of MF-V Academy - the special course called Correcting mistakes in Larry Williams' TS through the TA by MF
FZRs as MF reference points and methods of finding the mistakes in the reversal patterns offered by John Bollinger and Arthur Merrill.
Masterforex-V sets a task:
Try spot on your own the mistakes in reversals
MF tip for the members of MF-V Academy - the special course called MF about Bollinger Bands
FZRs as MF reference points and the algorithm of the reversal patterns by Harold Harley
Read the article Classic Forex patterns by Harold Hartley in the magazine for traders called “Market Leader”
MF's tip for Academy members - the special course called MF about the reversal patterns by Harold Hartley and Scott Carney
I can spend days citing examples of well-known classic reversal patterns. All of them include a FZR as the algorithm and an inseparable element of a trend reversal.
MF says: No FZR – no reversal. The trend continues.
The examples of applying FZRs to real-time trading.
The difference between FZRs of the 1st and the 5th impulse Elliot waves
The difference between the FZRs lies in DETAILS – either wave 5 in correctional C or wave 5 in the 5th impulse wave (all the 5th waves are marked with bold font)
MF's recommendation #1 concerning reference points:
Thoroughly examine this Elliot reference point pattern, which is simple only at first sight.
The absolutely right recommendation “to trade with the trend” turns from abstract to real thanks to the pattern, including a clear answer to the eternal question asked by all traders: “Where is the trend going now?”
A simplified explanation for traders of the difference between the 2 variants of reference points (a correctional wave C and a 5-wave impulse)
· A correctional wave C very much resembles the 3rd wave of a 5-wave impulse
· As opposed to correctional C, a 5-wave impulse has a very important extra feature – the 4th and 5th waves of the same MF wave level.
The difference between them is important to know:
Where to “reverse” and start trading with the new trend (I want to remind you that the classics place stop-loss orders “beyond” the base of the potential 1st wave)
For LONG-TERM trends (the next wave levels to the one considered on the picture) the combinations of a 3-wave impulse and a 5-wave correction indicate one of many (a couple of dozens of) potential variants of the trend continuation on the senior TF).
The 2nd difference of the Pattern by Elliot/MF – correcting Charles Dow's mistake…and getting a new profitable technique, not taken into account by the Forex market.
Defining one main point indicating a trend reversal (no classic managed to do it) made it possible to create the new TA by MF, which is based on a completely different definition of a trend. Traders can and should profit from such a trend while trading at Forex.
First let's correct the classic's mistake in defining trends.
Charles Dow's misinterpretation of the trend
Charles Dow wrote that a trend is a directional price movement, each following maximum/minimum of which is higher/lower than the preceding one.
In order to understand Dow's mistake, which results in further practical mistakes made by Bill and Larry Williams, Elder, Demark, Shwager, Naiman and others,… take a look at the 5-wave impulse pattern and you will understand the dead state of their TA.
A candlestick on the daily chart cannot constantly grow during the day at the bullish trend (as well as at the bearish one)
· An upward impulse is sure to be changed by a downward correction.
· The difficulty lies in the following: How can one tell in real time a simple correction from the 1st wave, which signifies a reversal from the old trend to a new one.
Masterforex-V gives his own definition of a trend:
A trend is a directional price movement from one reversal pattern to another one in the opposite direction. Both the patterns must belong to the same wave level. The movement always has the form of a zigzag – each impulse wave is followed by a correction/pullback wave. The impulse/correction correlation shows the direction of the trend.
The details are given in book 2
An example of Bill Williams' delusion (taken from his book “Trading chaos”)… resulting from Charles Dow's wrong definition of a trend.
In “Trading chaos” Bill Williams gave an algorithm. The mistakes of the algorithm result in numerous drawbacks of the following:
· His patterns of fractal analysis
· The Alligator TS - the intersection of 3 EMAs, the AO, the AC etc. (in MT4 it is a built-in indicator)
The essence of defining trends is very simple under Williams:
· One should analyze the last 2 bars
· If they are situated in the upward direction (marked with +) then the trend is bullish (if marked with minus (-) the trend is bearish, if marked with zero (0) it is a flat)
The quote from Trading Chaos
Our "quick and dirty" way to determine the trend is shown in the pairs of bars in Figure 6-7. If the midpoint of the current bar is above the top of the most recent bar, the trend is up and is indicated with a plus sign (+). If the midpoint is inside the range of the previous bar, we designate it with "O" and call it an overlap with no clear trend. If the midpoint is below the range of the previous bar, we mark it with a minus sign (-) to indicate the trend is down.
(End of quote)
The essence is in repeating Dow's mistake
The consequences of Dow's mistake lie in recommendations of how to make profit
· Bill Williams recommends entering the market when t the 3rd bar is broken through
· J. Shwager (in “Tech Analysis. Comprehensive course”) recommends entering the market after consolidating beyond the broken level… in not less than 5 days after the level breakout
· John Murphy (Technical analysis of futures markets) offers to count percents instead of days - you need more than 3% after the breakout to enter the market
The details are in book 2
After such “scientific” recommendations by the mentioned trading classics read the following victorious and laudatory writing for novice traders written by the respected classic B. Williams. Try to do it as if you were a trader who had lost 5 deposits.
The quote from “Trading chaos” by Bill Williams
We now (!!!) have the elements that can (??) take us from ground zero— a losing trader—toward the first level of consistent profits. When you understand this chapter, you will know more about making profits in the market than 90 percent of all the traders do.
Because of the mistake many beginners and skilled traders wait for the confirmation, entering the market only when the preceding maximum is broken through in the direction of the current trend.
They enter the market according to Bill Williams' recommendations and:
· either get the loss (the currency goes down for correction) as at this point all the traders in the world open their positions
· or get a tiny profit by shifting the stop-loss to a non-loss position (at uptrend the stop loss is relocated higher than the price of the market enter). Yet the non-loss position is sure to be caught by the price (“The golden rule of Forex” by MF)
Take a look at the D1 chart and you will see that the classic TS will lead you to the loss even if you are engaged in LONG-TERM trading.
It is possible to profit at the breakout of the maximum. This is one of more than 20 faultless deals by MF. Yet it cannot be applied to any maximum.
Try to find the answer – the distinct criteria of getting a small but confident profit.
A separate Department was founded under the Academy to be engaged in developing the rules of such pipsing (scalping). (The development of techniques and their daily application to real-time trading) - The faculty of SHORT-TERM trading. Magister's Trading Team. They were the first to turn the scalping (pipsing) on m1-m2 into a science.
The 3rd difference of the Pattern by Elliot/MF – Trend characteristics by MF
1. A trend is a directional price movement from one reversal pattern to another in the opposite directions. The patterns must belong to the same wave level.
2. The amount of waves of the trend is not limited (or the elongation)
Pic. The beginning of a bearish trend on w1 of USDCAD – a downward FZR on w1
Pic. The end of the bearish trend on w1 of USDCAD – an upward FZR on w1
3. It is a FZR in the opposite direction on the senior TF that is important for defining the reversal of any trend, not the amount of days that the trend lasts (3 days under Williams, not less than 5 days under Shwager) and not the amount of waves that the trend consists of (5 waves under Elliot).
4. The profit can be made at trends on any TF on condition that you understand MF wave levels by MF and the algorithm of their correlation.
5. Out of dozens of correctional waves it is necessary to distinguish in real time the wave of the senior TF at the correction, which can turn into the 1st reversal wave. The trend reversal is possible (not obligatory) only if the 1st wave shows up.
6. The Zigzag indicator (standard settings in MT4) is one of the criteria of defining any wave of the senior TF
Note: At least several criteria must be added to Zigzag. You will lose if you use only Zigzag. You can find the details in the article of the “Market leader” magazine called “Technical and wave analysis. Tasks for professionals and beginners: Is the Zigzag indicator an enemy or an ally?”
Under MF the beginning of any trend is the end of the current trend and its reversal in the opposite direction.
The Pattern by Elliot/MF
The Pattern by Elliot/MF is any real-time combination of 3-wave and 5-wave patterns between 2 FZRs in the opposite directions.
Everything as in the LEGO toy construction set – you have 3-wave and 5-wave construction patterns.
It is necessary for you to learn to combine them in real time in such a way that you could understand each Forex movement. Thanks to such skills you will be able to make a stable profit at Forex basing on conscious decisions.
Is it obligatory to be good at higher mathematics to understand and use the WA by MF?
This question is asked in each 3rd letter to me.
I answered in this chapter. It is sufficient:
· To be able to count from 3 to 5
· To be able to combine wave levels introduced by MF, which no classic managed to discover.
· To know MF's criteria of the senior TF to distinguish one correctional wave among dozens of them.
· This is what we teach our students in real time, giving each other tips during the current trading.
It is impossible to become a successful trader without it (One of over 100 discoveries made by MF was explained above. It is necessary to master this discovery (tool) through daily practice and the tips of more experienced traders and learn to put it into daily trading practice).
The FZR pattern and the Pattern by Elliot/MF are the basis of the new TA and WA by MF.
The aim of the new TA and WA by MF is to use to the full extent at least 3 advantages over the market
1. To discover the untapped reserves (the puzzles unsolved by the classics) means to put into practice what is still not taken into account by the Forex market.
2. The work of over 20 Departments of the Academy in different fields of the new TA and WA created by MF made it possible to make more Forex discoveries… than all the rest of analytic centers in the world (the analysis of new TSs, indicators, tips, tasks/riddles are published in each issue of the free illustrated magazine “Market leader” )
3. To utilize the team-trading method in combination with the new TA and WA by MF, to give each other online tips during daily (annual) trading practice.
The FZR pattern is just the 1st reference point by MF, which allows Academy students to come up to the level of the new technical and wave analysis by Masterforex-V. This level is much higher than the classics' one.
By using the pattern we will show you in the next chapters how one can easily do the following:
· Do an objective analysis of the treading systems by the classics including the detection of the beginning and the end of any trend (we will discover even more surprising regularities of trend reversals and continuations, which were not noticed by the WA classics)
· To understand the algorithm of how each classic makes profit (including the things that were not explained in the books to a wide range of traders because of the well-known reasons)
· To find their UNSLOVED problems and correct their mistakes
· To consciously profit from movements not only on big TFs, but at any of over 20 MF wave levels (even on the tick chart and m1)
· How to find over 20 reverence point within a 5-wave impulse instead of 1 (2 –officially) reference points.
All this and other stuff you can find in the following chapters of the book written by Masterforex-V.
You can discuss the chapter with the Academy members who study the SBP techniques created by Masterforex-V by following the link
Part I - Delusions of Forex Market (typical error 97% losers traders: how and what to change on the way to success in Forex) >>
Read more
Chapter 6 - Technical levels of support and resistance in Masterforex-V Trading System. >>
Chapter 7 - Moving averages: The basic Forex indicator. >>
Chapter 9 - Trading on news. Features of trader's work on Friday at American session. >>
Part 3. Forex investment funds >>
Book 2. Technical analysis of Forex in the Masterforex-V Trading System >>
Book 3. Masterforex-V “Points of opening and closing of positions at the Forex market (basic course)" >>
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