These two waves match, but they cannot be grouped together becairse the bigger wave (4) is in between.

Illustration :i 22

At times, during a trend, for a particular retracement wave there will be no matching symmetry wave. In these situations, do not try to force the wave count. Rather, start a new set of symmetry wave counts. With the Symmetry Wave Method we let the market decide what it is doing. Tiie process of following the unfolding of markels should be as natural as possible and as least contrived by human imagination as possible.

If a wave does not have a corresponding symmetrical wave to create a symmetry and it is followed by a retracement wave that fits into the next hierarchy of symmetry, then a new wave count starts. For example, in Illustration 3-23, the first retracement does not have a corresponding symmetrical wave. Since the second retracement wave is in a different hierarchy, we start a new wave count and wart for a symmetry. And in Illustration 3-24, tfie second retracement does not have a corresponding symmetrical retracement wave, and it is followed by a third retracement that matches the first retracement. Therefore, the first and third retracements are grouped together, and the second retracement does not have a corresponding symmetrical retracement wave.

Second Retracement

First Retracement

Illustration 3-23

Third Retraceaent

.Second RetracenienC

2 . First Retracement

Illustration 3-24

Sitleways Market

When markets go sideways or consolidate, continue to count the symmetrical waves separately rather than as a single wave. The correct counline is il lusirated below (Illustration 3-25).

Illustration 3-25

Auniquepart of the .Symmetry Wave Method is thatduringan uptrend as well asadowntrend, the same system of wave counting is used. This makes for an easier and more accurate organization of price fluctuations.

CHAPTER FOUR

Trend and Trend Reversal

Even though the Symmetry Wave Method has precise rules, it is subject to subjective 1 1 1 . Analyzing charts with this method depends on practice and on experience. In this chapter we will show numerous examples of the Symmetry Wave Method in use.

As with any method of trading or analysis, the Symmetry Wave Method has its limitations. One of these limitations is that since a market can develop in five, seven, nine or even eleven symmetrical waves, it is not possible to know in advance at which wave count the market will er.d its trend,

It is best to focus on trading with the trend for two reasons, first, if you are anticipating a trend reversal or analysing when to trade against the major trend, then you are not analyzing with the major trend. Renieniber from Chapter One, the mind can only see one perspective at a time. The mind is either i te reting waves to rationalize to go against a trend, or the mind is analyzing thiwaves fogo with the trend. It can not do both at the same time. If it analyzes in both directions, then this leads to compromise and compromise leads to confusion. Second, there is only one day that a market (T)akes the top, but there are many days to the top, so statistically it is best to trade with a major trend. By trading with the major trend, the que.stion of how many waves a trend will have becomes relatively irrelevant. At all opportunities, trade with the major trend.

Since we do not know when a trend will lop or bottom, we wail for the trend to confirm its reversal.

here is the rule to determine the trend:

If the current retracement is bigger in magnitude than the previous largest big retrdcement, and if the market clones beyond the previous big retracement wave, then the trend has reversed.

In lilustraiion 4-2, the trend has developed in seven waves.. Subsequently the market goes beyond retracement wave 6 to reverse its trend. The dash line indicates the price at which the trend reverses from up to downtrend. Illustration 4-2 demonstrates the trend reversing from down to up.

Illustraiion 4-1

Illustration 4-2

ihe rule to determine the irend actually has three rules within it, and the next several illustrations highlight each of these rules.

i rrsi, only big retracement waves are considered a major support or m,\\or resistance which, when crossed, cause the trend to reverse. As defined in Chapter One, a big retracement is four times the ten-day ATR. Thus, retracement waves that are smaller than four times the ten-day ATR are not considered for t:a!culating trend reversal, i.e., waves 2, 4 and (2) in Illustration 4-3 are not big retracements and, therefore, are not considered a major support price.

Illustration 4-3

Second, the current retracement wave should exceed in size the previous retracement wave. For example, if a treiid had three major retracements that were 80, 90 a nd 85 points, then the current retracement has lo be more than 90 points for a trend reversal to be i n effect. In Illustration 4-4, waves (2) and (4) are latter than waves 2 and 4; thus, the current retracement must exceed in magnitude waves (2) and (4) to fulfill this rule of trend reversal.

Illustration 4 4