I recently read an article in this month’s edition of Traders-Mag about Wolfe Waves. It was a very interesting read and when I saw the setup occur this morning I decided to try it out. It was my first trade of the day, and it ended up being my last too for it worked so well that with it alone I reached my Net Daily Goal.

Check it out:

My explanation really can’t compare to the info in the article or on the website www.WolfeWave.com but here’s a quick synopsis for those interested in learning more. And BTW, while informative, WolfeWave.com is a front to get you to take their $3,000 training course which I know nothing about but in listening to those who do, I got the impression that its value noway near justifies its price.

The first thing to consider when looking at a potential Wolfe Wave setup is that they should only be taken in the direction of the primary trend (eg: The trend of the 1-2 timeframes higher than that of the setup itself). And it is only effective in a trending market.

With that out of the way, lets go over the 5 points to the Wave:

Basically what you are looking for is a counter-trend channel or triangle formation. In an uptrend Point # 2 would indicate the top, with Point # 1 being the point prior to the runnup. Point # 3 should be lower than Point # 1, Point # 4 should be greater than # 3 but lower than # 2, & Point # 5 should be lower than point # 3.

Point # 5 is the entry price, so to that end it is a fade. You can be more conservative and wait for some indication of a hook back up, but it will increase your downside risk. The target is found by drawing a line from Point # 1 to Point # 4 and extending it to the right.

That’s it. Enter at #5, exit at Point T and have a good day! Like I said, this is a new trade for me and it’ll take some time to learn the ins and outs of it, but its all I got for today so I thought I’d share. In my trade today, I got in at 716.90 and exited 2 minutes later at 718.30. Not a bad haul for a couple minutes.