A lot of ideas can be derived from the lingo, if you tune your own interpreting abilities.

– How is your defense?

What if this question does not refer to stop losses, but rather it is a reference to the ultimate low risk trade?

Wave 1 – smart money buys. Wave 3 – institutions buy. Wave 5 – retail buys. – Heard this one?

What do I think? I think: – Penetrating re-test of Wave 1: Smart money buys. Wave 5: smart money sells out. And that is all there is you need to know.

Now, all you need to do is:

1. become a Wave 1 defender.

2. figure out how to spot a Wave 1.

3. place your pending order with a stop loss of 15 pips

4. get the exit condition right (2. rejection at a deflector)

 

Wave 1 is usually miniscule compared to the full move.

I do not pretend that I have the accurate, always working automatized code for finding a wave 1.

What I’ve got so far is three lines that would find the last 3 crucial ones and would include some other, unwanted ones as well.

 

And a quick remark about where you would be looking for these waves to start from: from the deflectors.

Deflectors are:

– LEMAs (414, 828, 1556)

– Recent outlying values = fresh new highs / lows

– Higher time frame consolidation weights – I started plotting these and calling them maggots

 

If you consider these you would suddenly start to understand the “path of least resistance” expression a whole lot more intimately.