An Innovative Elliott Wave Strategy To Trade The FTSE 100

The Elliott wave principle is a powerful tool used to forecast financial markets. I have been using Elliott wave analysis since 1995, first in the FX market, then on the T-bond and later on stocks and stock indexes. I knew right from the beginning that was the right tool to predict the market. I was not as confident in my analysis as I am today but I could see the market moving in cycles of five waves up and three waves down.

Take the stock market, the basic pattern is five waves up followed by three waves down (in a bull market or in an uptrend). In a bear market we have the opposite situation, five waves down followed by three waves up. What actually happens is not always like the basic pattern. There are extensions, triangles, wedges… all sort of variations which makes Elliott wave analysis not as simple as one would think.

Recognizing the pattern is one thing, timing is the other. You see a five-wave rally but where will it end? There is also the scenario where an extension occurs in one of the waves, this results in a longer five-wave move. As you can see just counting the waves does not always tell us when the move will end. I need other tools to help me time the end of a move so I created three types of indicators, a sentiment indicator, a timing indicator and trend reversal indicator (34-day BTI).

e-Yield sentiment indicator

Elliott WaveThe e-Yield sentiment indicator is a directional indicator (indicating the short term trend), I use this indicator to confirm the wave count. There are times when it’s not clear if the FTSE 100 is in a five-wave rally or in a five-wave decline. When the sentiment indicator is rising, it’s bullish therefore the wave count is likely to be five-waves up. And when sentiment is bearish we have the other situation, the trend is probably down and the decline will be in five waves. Statistics show that trading in the direction of the sentiment indicator increases the odds of making a profit, the indicator has a good track record at finding the short term trend.

e-Yield timing indicators

Elliott WaveI developed two timing indicators, they both warn of a short term change of trend. What I mean is that when the timing indicator flashes a signal the FTSE 100 will change direction and the move will last more than a day and less than a week. For example in an uptrend the FTSE 100 does not move up in a straight line, when the largest companies by market capitalisation move up too fast, the pace of their advance will slow and they will pullback for a few days before moving higher. They become overbought and the timing indicator measures how overbought / oversold the top twenty stocks by market capitalisation are. When the blue chips pullback, the FTSE will pullback.

This content is restricted to site members. If you are an existing user, please log in. New users may register below for FREE.

Existing Users Log In
   
New User Registration
*Required field
Thierry
Thierry Laduguie is trading strategist at www.e-yield.com where he helps short term traders profit from the market. His unique style of analysis, based on Elliott wave theory and his own indicators, has produced some exceptional results since he launched his first advisory service for private traders in 2006.
He was finalist for Best Specialist Research at the Technical Analyst Awards in 2010 and 2011. Thierry is a member of the Society of Technical Analysts and holds the Investment Management Certificate. He started to give trading advice in 2002 with Onewaybet.com where he was responsible for the UK Stock Tips and FTSE Intraday services, then with Fleet Street Publications where he was the editor of the Spread Trader tip sheet. He has worked with leading hedge funds as an advisor, has written many articles for publications including Money Week and various research websites and is a guest speaker at trading events including the UK Investor Show.
Thierry on Twitter
Thierry

Thierry

Thierry Laduguie is trading strategist at www.e-yield.com where he helps short term traders profit from the market. His unique style of analysis, based on Elliott wave theory and his own indicators, has produced some exceptional results since he launched his first advisory service for private traders in 2006. He was finalist for Best Specialist Research at the Technical Analyst Awards in 2010 and 2011. Thierry is a member of the Society of Technical Analysts and holds the Investment Management Certificate. He started to give trading advice in 2002 with Onewaybet.com where he was responsible for the UK Stock Tips and FTSE Intraday services, then with Fleet Street Publications where he was the editor of the Spread Trader tip sheet. He has worked with leading hedge funds as an advisor, has written many articles for publications including Money Week and various research websites and is a guest speaker at trading events including the UK Investor Show.

Comments are closed.

Translate »