Summer School Flashcards
What are Fractals?
fractals are structures that can be split into parts, each of which is a very similar copy of the whole. Mathematicians like to call this property “self-similarity”.
Mr. Elliott showed that a trending market moves in what he calls a?
5-3 wave pattern.
The first 5-wave pattern is called?
impulse waves.
The last 3-wave pattern is called?
corrective waves.
Waves 1, 3, 5 are?
motive, meaning they go along with the overall trend
Waves 2 and 4 are?
corrective
There are three cardinal rules in Elliott Wave Theory when labeling waves:
Rule Number 1: Wave 3 can NEVER be the shortest impulse wave
Rule Number 2: Wave 2 can NEVER go beyond the start of Wave 1
Rule Number 3: Wave 4 can NEVER cross in the same price area as Wave 1
For both the bullish and bearish versions of the ABCD chart pattern, the lines AB and CD are known as the?
legs while BC is called the correction or retracement.
If you use the Fibonacci retracement tool on leg AB, the retracement BC should reach until the?
0.618 level. Next, the line CD should be the 1.272 Fibonacci extension of BC.
Name a couple more rules for a valid ABCD pattern?
The length of line AB should be equal to the length of line CD.
The time it takes for the price to go from A to B should be equal to the time it takes for the price to move from C to D.
The three-drive pattern is a lot like the ABCD pattern except that it has?
three legs (now known as drives) and two corrections or retracements.
The Gartley “222” pattern is named for the page number it is found on in?
H.M. Gartleys book, Profits in the Stock Market.
Gartley patterns normally form when a?
correction of the overall trend is taking place and look like ‘M’ (or ‘W’ for bearish patterns).
A Gartley forms when the price action has been going on a
recent uptrend (or downtrend) but has started to show signs of a correction.
What makes the Gartley such a nice setup when it forms is the?
reversal points are a Fibonacci retracement and Fibonacci extension level. This gives a stronger indication that the pair may actually reverse.
The “perfect” Gartley pattern has the following characteristics:
Move AB should be the .618 retracement of move XA.
Move BC should be either .382 or .886 retracement of move AB.
If the retracement of move BC is .382 of move AB, then CD should be 1.272 of move BC. Consequently, if move BC is .886 of move AB, then CD should extend 1.618 of move BC. Move CD should be .786 retracement of move XA
The “perfect” crab pattern must have the following aspects:
Move AB should be the .382 or .618 retracement of move XA.
Move BC can be either .382 or .886 retracement of move AB.
If the retracement of move BC is .382 of move AB, then CD should be 2.24 of move BC. Consequently, if move BC is .886 of move AB, then CD should be 3.618 extension of move BC.
CD should be 1.618 extension of move XA.
Come 2001, Scott Carney founded another Harmonic Price Pattern called?
the “Bat.”
The Bat is defined by the?
.886 retracement of move XA as Potential Reversal .886 retracement of move XA as Potential Reversal Zone.
The Bat pattern has the following qualities:
Move AB should be the .382 or .500 retracement of move XA.
Move BC can be either .382 or .886 retracement of move AB.
If the retracement of move BC is .382 of move AB, then CD should be 1.618 extension of move BC. Consequently, if move BC is .886 of move AB, then CD should be 2.618 extension of move BC.
CD should be .886 retracement of move XA.
Created by Bryce Gilmore, the perfect Butterfly pattern is defined by the?
.786 retracement of move AB with respect to move XA.
The Butterfly contains these specific characteristics:
Move AB should be the .786 retracement of move XA.
Move BC can be either .382 or .886 retracement of move AB.
If the retracement of move BC is .382 of move AB, then CD should be 1.618 extension of move B Consequently, if move BC is .886 of move AB, then CD should extend 2.618 of move BC.
CD should be 1.27 or 1.618 extension of move XA.
There are three basic steps in spotting Harmonic Price Patterns:
Step 1: Locate a potential Harmonic Price Pattern
Step 2: Measure the potential Harmonic Price Pattern
Step 3: Buy or sell on the completion of the Harmonic Price Pattern
There are six harmonic price patterns:
The ABCD Pattern
The Three-Drive Pattern
The Gartley Pattern
The Crab Pattern
The Bat Pattern
The Butterfly Pattern“Heikin Ashi”, also known as “Heinlein-Ashi” or “Heiken Ashi” is a charting technique used to display prices that, at a glance, looks similar to?
a traditional Japanese candlestick chart.
Applying the Heikin Ashi technique to a price chart can help you decide whether to?
stay in the trade or get out.
Heikin Ashi charts make candlestick charts more readable for traders who want to know when to?
stay in a trade and ride a strong trend and when to get out when the trend weakens.
Basically, Heikin Ashi is a modified candlestick charting technique that rearranges how the?
price is displayed so trend traders can have a higher confidence level when deciding whether to remain in a trade or exit.
Heikin Ashi means the?
“average pace of price”.
If you look closely at the Heikin Ashi chart, you’ll notice that each of the Heikin Ashi candlesticks start from the?
MIDDLE of the candlestick before it, and not from the level where the previous candlestick had closed.
In a Heikin Ashi candelstick the open =?
Open = [(Open price of previous candle) + (Close price of previous candle)] / 2
The CLOSE of each Heikin Ashi candlestick equals?
the average value between the four parameters: open, close, high, and low: Close = (Open + High + Low + Close) / 4
The HIGH of a Heikin Ashi candlestick takes the actual high of the period. This could be the?
highest shadow, the open, or the close. Whichever is the highest. High = Maximum Price Reached
The LOW of a Heikin Ashi candlestick takes the actual low of the period. This could be the?
lowest shadow, the open, or the close. Whichever is the lowest. Low = Minimum Price Reached
The main thing you want to look for on a Heikin Ashi chart to determine trend strength is?
shadowless or wickless candlesticks opposite the trend.
When compared to the traditional Japanese candlestick chart, Heikin Ashi?
slows down the speed of the market, eliminating unnecessary false signals.
