The high-possibility of winning a trade is trading in the direction of trend. Elliott wave principle gives us the trade setups as in the diagram. The diagram shows only LONG POSITION (or buy-side) for uptrend as specify as “Bullish trade setup”. For SHORT POSITION (or sell-side), the principle is the same.
In order to trade the Impulse waves we have to identify the end of corrective waves. These include Zigzag, Flat, Triangle and Combination. However, In trading just assume that the correction is unfold to just standard correction patterns; ZZ, FLT and TRI. So the move after these corrective patterns will be Impulse, Diagonal or even X-wave. This is why the Protective stop is very important in trade setups as it is the only thing that we can control–>the RISK. Another to specify is POSITION SIZING that I mention in the previous note “Money management in trading“.
Trading is not solving the PUZZLE, it deals with the POSSIBILITY. Therefore, stop (or Exit) when it hit the “Protective stop loss level” and let-profit run by trailing stop when the price move as expected.
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