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Tools & Resources:

  • EWT
    – Used to build a thesis and understand market context, conditions and trend
    – Identifies areas of interest & targets
    – Not used alone to place entries
    – Free Wave Guide
  • Supply Demand
    – For confluence & refinement of areas of interest
    – Used in LTF entry model
    – I use the ALISD method to identify S/D

System:

  • Step 1: Build Thesis/Identify Areas of Interest
    – Areas of interest can be anywhere from the monthly timeframe to 1 minute
    – The first step is always to identify a place that I am interested in interacting with price
    – EWT used to build the thesis, evaluate trend/structure, identify AOI/targets
    – S&D used to add confluence and narrow the area of interest
    – Essentially saying “If price does _______ at this location, I expect it to go _________”
  • Step 2: Reversal Structure/Trend Shift
    – Should occur on a lower timeframe than the thesis/area of interest were found
    – Helps confirm thesis, begins the hunt
    – Without a reversal/trend shift, I have no trade. A failed thesis alone does not hurt me!
  • Step 3: Hunt For Low Timeframe (LTF) Entry
    – Focused on finding a low risk entry, seeking to participate in the thesis built in prior steps
    – Entry model is based on fractal market structure, using ALISD Supply/Demand to refine entry & minimize risk
  • Step 4: Trade Management
    – Exact details depend on context & market conditions. I am still working on perfecting this step.
    – Generally occurs in 3 Stages:
    • Eliminating risk (stops b/e) –> Initial trim (Lock in a win) –> Hold to broader targets (Following Trend/Thesis)
    – Initial stops are extremely tight, based on the refined LTF entry. They are concrete and defined prior to entry
    – If the LTF entry is stopped out without affecting the main thesis, I will continue to hunt for a new entry

My system utilizes both thesis building tools and entry model/refinement tools. I believe the combination of these types of tools is crucial to success.
One set of tools acts as ‘the spotter’, telling me what the target is and what the conditions are. The other is ‘the sniper’, pulling the trigger when the time is right, with extreme precision.

A novice trader will often long/short based on a thesis alone… “I think price will go down so I am short”… Many who use wave theory fall into this trap. There can be periods of success while trading in this fashion, but it is difficult to be consistent over the long term when entering exclusively based on a subjective thesis. Adding an objective entry model allows for emotion free, repeatable entries.

I’m not advocating for everyone to trade exactly how I do, nor am I claiming my system will work for everyone. However, I do believe it would be beneficial to nearly every trader to incorporate both thesis building and entry model tools.

Reversal Structure AKA “Revstruc”

  • A reversal structure is simply an impulsive move out of an area of interest that breaks the prior trend and is followed by a corrective retrace. This is the structure I am looking for in “Step 2”.
  • Reversal structures happen on various different timeframes in both directions. When I am looking for a reversal structure, I am paying attention to WHERE it is coming from and on WHAT TIMEFRAME.
    – For example… A reversal structure in the middle of chop and not from an AOI is somewhat meaningless to me, while a reversal from an area of interest would have my attention.
    – Additionally, timeframe is relevant. A reversal structure on the 1minute chart does not imply that a multi-week reversal has started, but it does represent a shift in intraday trend that I may use for scalps. A reversal on the 1day chart would have me much more interested in longer term swings.

“Scalp or Sit” Mode:

  • I will not always have an actionable thesis. I do not pretend like I can predict every move, and sometimes price will be between areas of interest…. During these times I am in “scalp or sit” mode.
  • As the name suggests, this means I am either scalping or I’m sitting on the sidelines
  • When scalping, I am purely focused on intraday opportunities. I am using the same concepts discussed earlier (area of interest -> reaction -> entry), but with a heavier focus on ALISD Supply & Demand. I am managing positions tighter and taking profits quicker as well.
    I do not recommend scalping until you have a consistent method and understand market conditions. Attempting to scalp without a proper system is a great way to get chopped up.
  • If I am not in a scalp, I am patiently waiting on the sidelines. Given the low risk/high reward nature of this system, I do not need an abundance of winners. I simply need to take advantage of opportunity when it is present, and stay out of the way when it is not.
  • During choppy conditions I am more frequently in scalp or sit mode.

Dictionary:

HTF/LTF = Higher/Lower Timeframe(s)
KPH/KPL = Key Pivot High/Low. The level that is maintaining trend on a given timeframe
Demand = A zone consisting of unfilled buy orders. Expected to push price up.
Supply = A zone consisting of unfilled sell orders. Expected to push price down.
AOI = Area of Interest