Candlesticks, Fibonacci, and Chart Pattern Trading Tools : a synergistic Strategy to Enhance Profits and Reduce Risk

PHI-Ellipses on Constant Scales in the Dax 30 Index
The total stream of market data over 27 months from September 1998
to December 2000 in the Dax 30 Index is shown on constant scales on
the two charts in Figure 5.37.
Once again, we must f ind a set of appropriate PHI-ellipses and
wait for market pricing to move out of the PHI-ellipses at their f inal
Figure 5.37
Dax 30 chart from 09–98 to 12–00. Attached and overlapping PHI-
ellipses on a constant scale.
c05.qxd 6/16/03 4:13 PM Page 154

---

WORKING WITH PHI-ELLIPSES ON INTRADAY DATA
•
155
points. PHI-ellipses overlap or are attached to each other and follow
the market price pattern in the Dax 30 Index.
The change in shape of the PHI-ellipses depends greatly on
whether the basic underlying market pattern is a 3-wave move or a 5-
wave move. Properly distinguishing between 3-wave swings and 5-wave
swings was the key problem that Elliott and his followers were never
able to solve. PHI-ellipses as Fibonacci trading tools solve this prob-
lem. It does not matter whether we deal with a 3-wave pattern or a 5-
wave pattern, for the f inal point of a PHI-ellipse tells us where we are
in the market.
WORKING WITH PHI-ELLIPSES ON INTRADAY DATA
To get a more stable equity curve, many traders rely on intraday data.
The goal is to participate on small price swings with a high number
of prof itable trades at very low risk.
However, inexperienced traders often quickly learn that faster
trading not only means higher slippage and commission, but also re-
quires greater discipline in executing trading signals. Traders who do
not have systematic rules for trading intraday should be very careful.
The best strategy is to start with paper trading and work with differ-
ent products and time intervals.
There are many possibilities for intraday trading. In this dis-
cussion, we focus on 15-minute data, for this is the data compression
we offer on our online trading platform www.f ibotrader.com. PHI-
ellipses can be traded very successfully on 15-minute data. We use
Dax 30 Futures Index data in this section because this is the product
we trade for ourselves. But DJ EuroStoxx 50 Futures Index, S&P 500
Futures Index, Nasdaq 100 Futures Index, and Dow Jones Futures
Index are also excellent trading instruments on intraday data in com-
bination with PHI-ellipses.
Trading Rules
The PHI-ellipse can be used on any kind of intraday data—60-minute,
30-minute, 15-minute, 10-minute, or 5-minute data—since investor
behavior expressed through the PHI-ellipse does not change.
c05.qxd 6/16/03 4:13 PM Page 155

---