Module 3

Alpha Wave Trader Module 3v2.4

Alpha Wave Methodology

Module 3

Alpha Trade EntryThe Alpha Trade entry is designed to catch the trend at its inception utilising a secondary price trend. As the prior Primary trend begins to dissipate we look to capture the initial move at the start of the next Primary move by breaking out from the last Price Pivot Point created by a secondary trend.

In the above example we can see that the Initial Primary Trend is down. The secondary trends within the primary trend are creating price pivots with Lower Lows and Lower Highs.

As the Primary trend begins to dissipate we can see that the first Green secondary trend manages to break the high of the last (LH) Price Pivot by breaking it at Point A. This signifies that the Primary Trend to the downside may be over and that the market is looking to commence a new Primary Trend to the upside.

LH

LHLHLL

LL

LL

AInitial Primary Trend New Primary Trend

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Alpha Trade EntryThe Alpha Trade methodology looks to catch the new Primary Trend developing to the upside and entry would be made on a Buy Stop Limit Order at 1 price denomination above Point A to go Long in the market.

Initial Primary Trend

LH

LH

LHLL

LL

LL

A

New Primary Trend

Stop Limit Order To BuyThe Market 1 Price

Denomination Above Point A

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Alpha Trade Stop Placement

The Rule that Alpha Trade adheres to is that the Stop Order must be placed 1 Price denomination outside of the most recent Price Pivot Low for Long entries; and the most recent Price Pivot High for Short entries.

When trading any strategy it is essential that as soon as an entry is identified, the Stop placement is readily identifiable also. The Alpha Trade methodology is strict on placing stop orders and no trade should ever be entered without the accompanying correct stop placement.

There are two special considerations worthy of note however, the stop for Forex requires that it takes into consideration the price spread and that larger timeframes may need to expand further than +/- 1 price denomination. It is advisable when trading higher timeframes that the trader looks back through prior entries and identifies a suitable +/- price denomination to compliment that larger timeframe.

Two Special Considerations:

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Alpha Trade Targets

The accuracy of using Fibonacci does however present a problem, in as much that, on occasion resting orders at these levels may not be filled. As orders are filled on a 'first come first served' basis - a trader's resting order may well be further down the Order Book and not get filled.

To counteract this problem, the Alpha Wave methodology has moderately reduced the Fibonacci Retracement levels to ensure that when trading, we are exiting just ahead of the target level and ensuring that our orders are filled. The table on the following slide highlights the old and new settings .

We have discussed previously in the manual the use of Fibonacci Retracements and their main function of identifying Support and Resistance levels. The Alpha Trade methodology also utilises this tool for helping identify Targets. Their application to a financial chart will forecast levels that traders may wish to resize their position or exit entirely depending on the scale of contracts which they trade.

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Alpha Trade TargetsOld Settings New Settings

200%

261.8%

361.8%

190%

255%

355%

Understanding that traders have different trading personalities, differing tolerance to risk and varying degrees of account size, we cannot readily advise on exit strategies pertinent to each and every trader.

A trader must identify within themselves a level of comfort which is applicable to their own goals and work within the tolerances of their account size. However when identifying our target levels we also consider the Risk/Reward ratio for any given trade. More emphasis and instruction will be given on this topic in the Training Room.

For the Alpha Trade we use the 190%, 255%, 355% 455% and 555% as our trading targets.

461.8% 455%

561.8% 555%

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ABCD Methodology

In essence the Alpha Trade methodology seeks to enter the market at the start of a new Primary Trend and can only be taken on the breakout of the first wave. The ABCD trade however, does have the ability to find trading opportunities at the start of a new Primary Trend as well as re-entry opportunities with the prevailing trend.

The ABCD methodology is very similar to the Alpha Trade methodology in as much that it seeks to identify the break of Price Pivots. The ABCD methodology does however have one or two idiosyncrasies and is much more aimed at taking trade entries with the prevailing trend - albeit not a necessary requirement. Further, where we saw with the Alpha Trade methodology that it was feasible to have retracements in trend that could be substantial in size - the ABCD methodology does not permit retracements more than 61.8% of the initial move.

Module 3

ABCD Structure

We can see from the above diagram that point A is the beginning of the trend where point B is the first price pivot created by buyers or sellers entering the market. A retracement occurs leading to point C which has to be no more than a 61.8% retracement of the AB move - and finally the continuation push to point D

In its very simplest form we identify Price Pivot Points which can be found in the Primary Trend and seek to take opportunities based on the breakout of price pivots. The following examples show the price movement and associated labelling:

A

B

C

DSe

cond

ary T

rend

Seco

ndar

y Tre

nd

Secondary

Trend

ABCDUPTREND

PRIMARY TREND

A

D

B

C

Secondary Trend

Secondary Trend

Seco

ndar

y Tr

end

ABCDDOWNTREND

PRIMARY TREND

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ABCD Characteristics

It is desirable albeit not necessary, that a prevailing trend is apparent to support the ABCD trade and this repetitive pattern of the ABCD can be found on any timeframe and within any market. We consider it most conservative to be taking ABCD trades as early as possible at the inception of a trend as we understand that trends will eventually reverse. Therefore, with each consecutive ABCD pattern we have to understand that the risk becomes slightly greater and we do have preference over the First and Second entry of any new trend developing.

The ABCD trade is essentially a continuation trade which may occur at the start of a new Primary Trend or become apparent through the course of a prevailing Primary Trend. As mentioned, the Alpha Trade does allow for substantial retracements and can be as much as 100% of the initial move whereas the ABCD must adhere to any retracement of the AB move by no more than 61.8%. The following diagram illustrates the restrictions on the BC Price Retracement.

AC

BD

100%

100%

61.8%50%38.2%

0%

BC Cannot Exceed 61.8% Retracement of AB

38.2%

61.8%

100%A

B

C

D

0%

50%

100%

BC Cannot Exceed 61.8% Retracement of AB

Module 3

ABCD Conservative Entry

Point A being the beginning of a secondary trend

As mentioned previously we are able to utilise the ABCD methodology to capture trading opportunities at both the inception of a trend and throughout an established trend. We have also discussed that Price Pivots play a major role in identifying the correct labelling and this section will look to demonstrate how we trade the ABCD price pattern. To summarise the labelling of our pivots we can relate back to:

Point B being where support or resistance was found in the market

Point C being a minor retracement of less than 61.8% of AB

Point D being created by the resumption of the trend to Target.

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ABCD Conservative EntryENTRY - as we see a secondary trend forming a strong move to create the Point A and the Point B - we carefully watch any retracement in price of the AB trend which creates a Point C. Providing that the retracement at Point was not greater than 61.8% of the AB move - we look to trade on a breakout of Point B. The following diagram will further demonstrate this principle.

Stop Limit Order To Go Long +1 Price Denomination Above Price Pivot B

61.8%

100%A

B

C

D

Stop Limit Order To Go Short -1 Price Denomination Below Price Pivot B

A

B

C

D

100%

61.8%

ABCDLONG ENTRY

ABCDSHORT ENTRY

SHORT ENTRY

LONG ENTRY

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ABCD Conservative Entry Examples

Resistance was found at (B) 1176.25 as sellers came into the market and managed to push the price down to 1172.75 and thus creating the C Pivot. The C pivot did not manage to retrace more than 61.8% of the AB leg and so a valid entry was possible on a breakout of the B Pivot.

In this example we can see price rise from 1169.25 and make a strong move up to 1176.25 to create the AB leg of the ABCD pattern.

A Stop Limit Order is placed 1 Tick above the Price Pivot B at 1176.50 to capture the continuation of the trend. Point D on the chart will be commensurate with targets.

The ABCD entry comes in many shapes and forms and the most basic of which can be seen in the example on the right. The most favoured ABCD pattern will be taught and demonstrated throughout the Education Programme.

Module 3

ABCD Conservative Entry Examples

Support was found at (B) 1191.00 as buyers came into the market and managed to push the price back up to 1192.50 and this created our C Price Pivot.

In this example of a short trade we can see price fall from 1193.75 down to 1191.00 to create the AB leg of the ABCD Pattern.

The C pivot did not manage to retrace more than 61.8% of the AB leg and so a valid entry was possible on a breakout of the B Pivot.

A Stop Limit Order is placed 1 Tick below the Price Pivot B at 1190.75 to capture the continuation of the trend. Point D on the chart will be commensurate with targets.

Module 3

ABCD Stop Placement

The Rule that the ABCD methodology adheres to is that the Stop Order must be placed 1 Price denomination below the C Price Pivot Low for Long entries, and 1 Price denomination above the C Price Pivot High for Short entries.

As with the Alpha Trade methodology it is essential that as soon as an entry is identified, the Stop placement is readily identifiable also. The ABCD methodology is also strict on placing stop orders and no trade should ever be entered without the accompanying correct stop placement.

There are two special considerations worthy of note however, the stop for Forex requires that it takes into consideration the price spread and that larger timeframes may need to expand further than +/- 1 price denomination. It is advisable when trading higher timeframes that the trader looks back through prior entries and identifies a suitable +/- price denomination to compliment that larger timeframe.

Two Special Considerations:

Module 3

ABCD Stop Placement Example

STOPPlacement

ABCDStop Placement

ABCDStop Placement

Stop Order Placed 1 Price Denomination Above C Price Pivot

A

B

C

D

SHORT ENTRY

Stop Order Placed 1 Price Denomination Below C Price Pivot

A

B

C

D

LONG ENTRY

STOPPlacement

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ABCD TargetsWe have discussed previously in the module about the application of the Alpha Trade targets, and the same principal applies to the ABCD methodology. We utilise the identical Fibonacci targets and levels previously identified. It is understood that the Fibonacci Levels help us to forecast support and resistance in the market and identify where we would like to consider the removal of contracts or exiting our positions. To clarify the levels we use they are identified once again below:

Level 1 190%

Level 2

Level 3

Level 4

255%

355%

455%

Understanding that traders have different trading personalities, differing tolerance to risk and varying degrees of account size - we cannot readily advise on exit strategies pertinent to each and every trader. Every trader must identify within themselves a level of comfort that is applicable to their own goals and work within the tolerances of their account size.

Level 5 555%

Module 3

ABCD Targets - Application

The 100% Level is placed at the High of the Point C Price Close and the 0% Level is placed at the Low of the Candle Body of the C Price Open. .

The application of the Fibonacci Retracement Tool to the ABCD entry is very similar to that which we experienced in the Alpha Wave methodology. We are still identifying Price Pivot highs and lows using our understanding of market structure and there are two basic rules we must adhere to in the correct placement of our Fibonacci Tool:

The 100% Level is placed at the Low of the Point C Price Close and the 0% Level is placed at the High of the Candle Body of the C Price Close. .

Long Trades

Short Trades

All The Trade Examples of The ABCD Target Applications Will Be Shown In The Classroom !

Module 3

ABCD Aggressive Entry

This concept can be clearly seen by observing a Line chart of the same instrument and seeing the difference in prospective entry prices. Let us observe a Conservative ABCD entry on the following slide and see where the actual swings took place by looking at a Line chart of the same trade.

The aggressive entry allows for earlier entry into a trade by not awaiting the confirmation that is afforded by a break of Point B but rather - aggressively entering on a break of the candle body. This negates the need for the candle wick and affords a closer entry and a reduced Stop placement.

Module 3

ABCD Aggressive Entry

Diagram 1 shows the ABCD entry in its most conservative form where the trade is placed on a break of Price Pivot Point B and entered one Tick higher at 1153.25. The Price Pivot at Point B includes the candlestick wick to identify the high of the Price Pivot although it does not show the entire story.

In Diagram 2 we are displaying the entry of the ABCD in its aggressive form. Using the Aggressive Entry we can place a Stop Limit Order to go Long one tick above the top of the B Pivot candle body at 1152.75. This affords an earlier entry with less risk on the trade. This is considered an Aggressive Entry where we do not wait for a break of the Price Pivot B for added confirmation. .

Module 3

Alpha Wave Conservative Entry Examples

Price managed to reach 1115.00 on the final LL and the secondary trend took price up to 1117.25 on the final LH. Price then fell once again to retest the low at 1115.00 where it created a Price Pivot and reverted back to a secondary long trend. This new secondary trend managed to exceed the prior Price Pivot high at 1117.25 and hit our Buy Order at 1117.50.

LONG ENTRY: The Primary Trend initially was down creating a series of Lower Highs and Lower Lows.

Once the selling began to dissipate and price managed to break the last significant Price Pivot of the downtrend at 1117.25 a Buy Order was placed on a Stop Limit at 1117.50.

The Alpha Wave trade is another trade within our arsenal and requires the most skill and practice. We have included it within this module for your reference as a complimentary trade entry however, it does take considerable skill to master and as such it will be expanded upon further in the Education Class to identify powerful levels of Fibonacci support and resistance.

Module 3

Alpha Wave Conservative Entry Examples

Price managed to reach 1129.25 on the push up to the final HH.

The secondary trend managed to retrace price and form a Price Pivot at 1127.25 on the final HL.

The market made a final push up on a secondary trend to create the last high at 1129.50 - it then reversed trend and managed to break the last HL at 1127.25 and fill our Sell Stop Limit Order at 1127.00.

SHORT ENTRY: The Primary Trend initially was up creating a series of Higher Highs and Higher Lows.

Module 3

Alpha Wave Trade Stop Placement

The Rule that the Alpha Wave Trade adheres to is that the Stop Order must be placed 1 Price denomination outside of the most recent Price Pivot Low for Long entries; and the most recent Price Pivot High for Short entries.

There are two special considerations worthy of note however, the stop for Forex requires that it takes into consideration the price spread and that larger timeframes may need to expand further than +/- 1 price denomination. It is advisable when trading higher timeframes that the trader looks back through prior entries and identifies a suitable +/- price denomination to compliment that larger timeframe.

When trading any strategy it is essential that as soon as an entry is identified, the Stop placement is readily identifiable also. The Alpha Wave methodology is strict on placing stop orders and no trade should ever be entered without the accompanying correct stop placement.

Module 3

Alpha Wave Stop Placement Examples

Long Entry Stop Placement

Short Entry Stop Placement

Module 3

Alpha Wave Trade TargetsOld Settings New Settings

200%

261.8%

361.8%

190%

255%

355%

We have discussed previously in the manual about the application of the Alpha Trade targets, and the same principal applies to the Alpha Wave Targets. We utilise the identical Fibonacci targets and levels previously identified. It is understood that the Fibonacci Levels help us to forecast support and resistance in the market and identify where we would like to consider the removal of contracts or exiting our positions. To clarify the levels we use we have identified them once again above.

461.8% 455%

561.8% 555%

Module 3

Alpha Wave Trade Targets - Application

The 100% Level is placed at the High of the Point C Price Close and the 0% Level is placed at the Low of the Candle Body of the C Price Open.

As we have an understanding of market structure and being able to identify Pivot High and Pivot Low points, the anatomy of a candlestick and both primary and secondary trends - we can apply that knowledge to the accurate placement of our Fibonacci Levels. There are two very basic rules to which we must adhere to be able to apply our Fibonacci Levels accurately:

The 100% Level is placed at the Low of the Point C Price Close and the 0% Level is placed at the High of the Candle Body of the C Price Close

Long Trades

Short Trades

All The Trade Examples of The Alpha Trade Target Applications Will Be Shown In The Classroom !

Module 3

Alpha Wave Trade Aggressive Entry

Essentially, what the Aggressive entry is doing is removing the need for the candle wick and identifying the actual swing high and lows of the market using the candlestick close. This concept can be clearly seen by observing a Line chart of the same instrument and seeing the difference in prospective entry prices.

In the conservative entry the Alpha Wave Trade methodology saw the entry into a trade by awaiting the break of a prior significant high or low price pivot. The aggressive entry however sees the methodology taking the entry that much earlier and not awaiting the confirmation of a break of the price pivot. The advantage of taking the aggressive entry affords the trader to be that much earlier into a trade and nearer the start of inception of the new Primary Trend. A further advantage of this entry is that it permits the Stop orders to be much closer to entry and therefore reducing risk.

On the following slide - let us identify a Conservative entry and then compare it with an Aggressive entry….

Module 3

Alpha Wave Aggressive Entry

Diagram 1 shows the Alpha Wave Conservative entry where we are entering on a break of the last pivot high + 1 Tick at 1081.50. This entry uses the candlestick wick to find the high of the price pivot and an entry order is placed accordingly.

In Diagram 2 we are displaying the entry of the Alpha Wave trade in its aggressive form. Using the Aggressive Entry we can place a Stop Limit Order to go Long one tick above the top of the candle body of the last Price Pivot High at 1079.25. This affords an earlier entry with less risk on the trade. This is considered an Aggressive Entry where we do not wait for a break of the last Price Pivot High for added confirmation.

Diagram 1 Diagram 2

Module 3

Alpha Wave Trader Module 3

Test Your Knowledge

Reset Question

Alpha Trade Entry Is Designed To …

Catch The Trend At Its Inception Utilising A Primary Price TrendIncorrect

Catch The Trend At Its Inception Utilising A Secondary Price TrendCorrect

Alpha Wave

Reset Question

Alpha Trade Stop’s Are Placed …

2 Price Denominations Outside of The Recent Prior PivotIncorrect

1 Price Denomination Outside of The Recent Prior PivotCorrect

Alpha Wave

Reset Question

Alpha Trade Targets Are …

Fibonacci Levels Of 200%, 261.8%, 361.8%Incorrect

Fibonacci Levels Of 190%, 255%, 355%Correct

Alpha Wave

Reset Question

Alpha Wave Trade ‘Long’ Targets Are Drawn By …

The 100% Level is placed at the bottom of the last Pivot Low Candle Body and the 0% Level is placed at the High of the Candle Body of the last Pivot high.

Incorrect

The 100% Level is placed at the top of the last Pivot High Candle Body and the 0% Level is placed at the Low of the Candle Body of the last Pivot low.

Correct

Alpha Wave

Reset Question

Alpha Wave Trade Aggressive Entry…

Removes The Use Of The Candle Wick And Instead Uses The Open Of The Candle Incorrect

Removes The Use Of The Candle Wick And Instead Uses The Close Of The Candle Correct

Alpha Wave

Reset Question

ABCD Entry Seeks To Enter …

At The Start Of A New Secondary Trend Having Already Broken Out Of The First WaveIncorrect

At The Start Of A New Primary Trend Having Already Broken Out Of The First WaveCorrect

ABCD

Reset Question

The AB Wave Of The ABCD …

Must Not Retrace At Point C By More Than 50%Incorrect

Must Not Retrace At Point C By More Than 61.8%Correct

ABCD

Reset Question

ABCD Stop’s Are Placed …

1 Price Denomination Above Or Below The A Pivot Depending On Entry DirectionIncorrect

1 Price Denomination Above Or Below The C Pivot Depending On Entry DirectionCorrect

ABCD

Reset Question

ABCD ‘Short’ Targets Are Drawn By …

The 100% Level is placed at the High of the Point B Price Pivot and the 0% Level is placed at the Low of the Candle Body of the A Price Pivot

Incorrect

The 100% Level is placed at the Low of the Point B Price Pivot and the 0% Level is placed at the High of the Candle Body of the A Price Pivot

Correct

ABCD

Reset Question

ABCD Aggressive Entry…

Is Taken On A Break Of The Candle WickIncorrect

Is Taken On A Break Of The Candle BodyCorrect

ABCD

Module 3

Alpha Wave Trader Module 3

Module 3 Completed