PHI-ellipses are interesting graphical trading tools because their very structure is founded on a 3-wave pattern, as shown in Figure 5. Once we have identified the three points A, B, and C in the idealized 3-wave swing, we can position the PHI-ellipse around these three points. Wave 1 from A to B is an impulse wave. Wave 2 from B to C is the corrective wave to the impulse wave. For wave 3, we expect a second impulse wave in the direction of the first impulse wave.
The fundamental structure of the PHI-ellipse provides another way to analyze price moves. Because it is dynamic over time and follows price patterns as they develop, we must be patient and wait— from the very beginning to the very end—until a price move stays within the PHI-ellipse. As soon as the market price moves out of the. PHI-ellipse, action is possible, but only if a price pattern runs completely inside a PHI-ellipse until reaching the final point. The exceptions to this rule are described later.
It is important to remember that PHI-ellipses are not means of forecasting market moves. We will never know in advance whether a price move will stay within the PHI-ellipse and reach its end so that we can take action. We must always wait to see if a price move stays inside the borders of the PHI-ellipse, and we cannot take action unless the move meets the final point of the PHI-ellipse.
The rationale behind this waiting principle becomes clear in the examples later in this chapter. Working with PHI-ellipses means watching price action as it progresses. Price action starts with the impulse wave 1 from A to B in Figure 5. In the discussion of corrections and extensions in Chapter 4, Elliott's wave principles helped us determine that the corrective move is not expected to go lower than the low at the beginning of wave 1.
Only in exceptional cases did we consider bull traps and bear traps. The 3-swing pattern in Figure 5. As price action progresses, peaks and valleys may touch the outside of a PHI-ellipse several times without destroying the pattern.
We have analyzed and worked with PHI-ellipses for many years, and have found it fascinating to observe the different kinds of price action within PHI-ellipses. Based on the developing price action, PHI-ellipses might need adjustment, which is why working with them takes such discipline. We introduce PHI-ellipses as instruments for investments counter-trending to market action.
We observe whether a price move stays within a PHI-ellipse and invest accordingly if a price move breaks out of a PHI-ellipse at the very end. Historical charts show that almost all price moves in commodi-ties, futures, stock index futures, or stocks can be circumvented with a PHI-ellipse.
However, finding the correct PHI-ellipse is an art. It takes skill, experience, patience, and trust in the analysis to effec-tively use PHI-ellipses as Fibonacci investment tools. It is impossible to forecast the final shape of a PHI-ellipse at the beginning of a price move. As we later prove on various examples, PHI-ellipses may follow one after the other symmetrically. The challenge is to correctly in-terpret price moves and select PHI-ellipses accordingly.
Once investors learn how to identify the appropriate market pattern, working with PHI-ellipses becomes easier. The remainder of this section is divided into two parts. We first examine the shape and the slope of PHI-ellipses, and include ap-proaches for attaching and overlapping PHI-ellipses.
In the second part, we address entry and exit rules for the generation of trading strategies from PHI-ellipses. Dealing with chart patterns depends a lot on the definition of swings just as it depends on controlling impulse waves and corrections with-out losing sight of the main trend picture.
The strength of PHI-ellipses, in this respect, is that no matter how many waves or subwaves are in a price pattern, we receive a solid overall picture of the total price pattern as long as a PHI-ellipse can circumvent it.
Even if we reduce the analysis to a simple 3-swing pattern, an indefinite number of combinations of impulse waves and corrections will be possible.
Impulse waves are fairly simple to handle, whereas dealing with corrections and long sideward periods in the markets can be very tricky. PHI-ellipses are ideal geometrical trading tools for coping with noise and analyzing price moves over time without having to focus too much on every intermediate minor peak or valley between the start-ing point and the ending point of the price pattern. The best way to demonstrate the generation of PHI-ellipses is by starting with a circle and then turning the circle into PHI-ellipses.
A circle is a special kind of PHI-ellipse because the ratio of the major and minor axes is 1. Figure 5. From the circle, ongoing PHI-ellipses can be drawn at alterna-tive axis ratios 1. According to the mathematical formula for Fischer-transformed PHI-ellipses, the length of the major axis re-mains unchanged.
The minor axis thereby gets shorter and shorter. Start Fibotrader then click on the Blue folder Catalog icon on the top button bar, then click Add directory, as shown below: Then click on the Start search button as shown below: After a few minutes Fibotrader will have searched through your hard drives for data and found a number of folders.
Tick each of the folders in the list you want to view in Fibotrader then click OK, as shown below: To navigate to the folder click the magnifying glass symbol, then catalog then select the folder you desire. You can then select the security from the drop-down list. Satisfaction Guaranteed! Book is in NEW condition.
Seller Inventory Fischer, Robert ; Fischer, Jens. Publisher: Wiley , This specific ISBN edition is currently not available. View all copies of this ISBN edition:. Synopsis About this title Powerful new strategies and tools from the leading exponent of one of today's most important trading tools With his bestselling Fibonacci Applications and Strategies for Traders, Robert Fischer established himself as the leader in the Fibonacci approach to trading.
From here, Fibonacci expert Robert Fischer gets to the heart of the concept by examining six geometrical Fibonacci trading tools: Fibonacci Summation Series: to capture the rhythm of annual market swings Corrections and extensions: trading with and against the main trend PHI-channels: as indicators for market trend changes PHI-ellipses: to identify underlying structures of price moves PHI-spirals: to identify trend reversals in the marketFibonacci time goal analysis: that use the ratios 0. For more information, go to www.
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