100s of Available Exchanges

PRODUCTS

Call: 800.815.8256

EDUCATION / EVENTS

Live Chat

PARTNERS

SUPPORT

Login

SEARCH

COMMUNITY

WHY eSIGNAL

Home > Learning > Learning Center Resources > Tom Joseph

Trading Educator's Corner

Tom's Educator Credentials

Tom Joseph*
Founder of Advanced GET Focus: Elliott Wave Trading
* Not employed by or affiliated with Interactive Data

Tom Joseph on Trading Elliott Type One Trades

Although I use several trading methods, one of my favorites is an Elliott Type One Buy / Sell, which in Elliott Wave
terms, is entering a trade after the completion of a Wave 4 retracement.
I consider the Type One trade the most easily identifiable pattern in an Elliott Wave sequence. And, over the years, I
have developed studies and indicators that allow you to make this trade with a high degree of accuracy.
When using Elliott Wave analysis, one can receive numerous signals. Some of them only become clear after the fact.
This might be okay if you're writing a newsletter, but, to make a successful trade, you need patterns you can identify
ahead of time with a considerable amount of accuracy. From my experience trading since 1979, the Type One
pattern can be identified with a high degree of accuracy prior to its actual occurrence.
After a long Wave 3 rally, profit-taking sets in, and the market enters a retracement phase. While profit-taking
continues, others, who are convinced that the trend is still up, continue to enter the market. Once the profit-taking
pressure is over, the new participants entering the market will finally push the market to new highs in a Wave 5.
One of the simplest tools we developed for Advanced GET is the Elliott Oscillator. We discovered that this oscillator
pulls back to the zero baseline at least 94 percent of the time during this profit-taking retracement. This is a great
tool because it lets you stand aside until the profit-taking is over. When the Elliott Oscillator pulls back to zero, it
provides a highly accurate area where you can predict that profit-taking is actually over, and the trend is ready to
resume.
In addition to this, we created the Profit-Taking Index (PTI), which is designed to be used with the Elliott Oscillator
and measures the intensity of the profit-taking. The PTI calculates the magnitude of the profit-taking compared to the
previous Wave 3 rally. Historically, if the PTI remains above 35, it indicates a normal profit-taking, which allows the
market to resume its trend to a new high. A PTI of less than 35 indicates too much profit-taking and diminishes the
odds that the Wave 5 rally will set in.
We also created the Wave 4 Channels, which show up as three lines on the chart (blue, green and red). During a
Wave 4 retracement, we would like to see the prices hold above the blue or green channels. Based on statistical
observations, this provides 70 percent favorable odds for a quick move to new highs.
Let's take a look at an example.
Chart 1 is a daily chart of Occidental Petroleum Corp. (OXY). After a large rally up in Wave 3, this stock is now in a
profit-taking phase; the Elliott Oscillator has pulled back to zero indicating that profit-taking may be over. Now, we
check the PTI. In the case of the OXY chart, the PTI shows a value of 73. Any PTI of greater than 35 indicates the
profit-taking was not excessive. The prices during the pullback have managed to stay above the green channels.
With OXY, we now have the three conditions that give us the confidence to step in and buy the market for the next
phase, the Wave 5 rally:
Profit-taking is over (Elliott Oscillator pulls back to zero) AND
The profit-taking happened in an orderly fashion compared to historical patterns (as indicated by the PTI being
greater than 35) AND
Prices are holding above the green channels.

Between 1981 and 1986, Tom

Joseph developed the Advanced
GET software, the world's first
and only objective Elliott Wave
Analysis Software, for his own
trading initially. It was released to
the public in 1986. Since that
time, he has continued to do
research that has contributed to
further development of the
software, adding numerous new
studies. Since 2000, Advanced
GET has also been part of the
eSignal suite of products and an
Advanced GET edition of the
eSignal software is now available.
At the present time, the Advanced
GET edition of eSignal is used by
active traders in more than 80
countries of the world.
Throughout his career, Tom has
conducted seminars for traders
on Elliott Wave trading using
Advanced GET. The fact that he is
himself an active trader lends
credibility to the trading education
he offers in these seminars. In
fact, Tom has always encouraged
his staff to trade in order to live
out the Advanced GET motto,
"traders helping traders." "Many
of our unique studies and tools
were developed as a result of my
actual trades," says Tom.
Advanced GET users appreciate
this. They know, when they speak
with Advanced GET team
members, they are speaking with
people who have an experiential
knowledge of trading the market.
Ultimately, this contributes to
more informed and, thus,
successful trading by Advanced
GET users.

Tom Joseph's Writings

Tom wrote the definitive paper on
Elliott Wave analysis using
Advanced GET titled, "Practical
Applications Of A Mechanical
Trading System Using Simplified
Elliott Wave Analysis" and a
beginner's guide on Elliott Wave
theory titled, "Elliott Wave
Basics". Read Tom Joseph's
paper on "Elliott Wave Basics".

Advanced GET has also developed a study called the Make or Break (MOB). The MOB is activated from the Wave 3
high and provides a potential target for the upcoming Wave 5 rally. A projection is very important because it allows
you to calculate your potential return compared to your initial risk. The risk-to-reward ratio has to be greater than 2 to
initiate the trade.
The Ellipse is a Time/Price tool that provides the right time and price for the end of a Wave 4. Typically, we look for
the Ellipse to provide support both in respect to time and price. In the case of the OXY chart, the retracement tested
the Ellipse support and held very well.
Now, it is time to enter the trade. To confirm the validity of an entry point, we developed the regression trend
channel, which contains prices within a set of statistical boundaries. These statistical boundaries are calculated
using a standard deviation of 2, which, in essence, means that the area between these boundaries contains
approximately 94 percent of the prices. When prices break out of these boundaries, this confirms a change in trend.
Now, let's take a look at the actual trade
As you can see in Chart 2, the actual trade is taken on the cross above the regression trend channels. A protective
stop is placed below the previous Wave 4 low. As the prices rally in Wave 5 toward the projected MOB, you can trail
standard stops. The trade is exited when the profit target is met.

All of the studies (Elliott Wave, Elliott Oscillator, Wave 4 Channels, Ellipse, PTI and MOB) mentioned in this article
(along with others not mentioned here) are available as a version of eSignal called "Advanced GET Edition".
For further information on other add-on formula studies, please visit the eSignal Formula Studies Partner page.

DOW 17823.81 +91.06

NASDAQ 5104.92 +31.28

S&P 500 2089.17 +7.93

CRUDE 41.46 -0.26

10-YEAR T-NOTE 2.262 +0.014

Enter Symbol Here

Products

eSignal Learning

Partners

Help and Resources

eSignal
Trading Software

Learning Center

Broker Partners

Support

Contact

Trading Seminar Schedule

Education Partners

System / Exchange Status

Live Chat (Sales)

Membership Benefits

Business Partners

KnowledgeBase

Live Chat (Support)

Learning Team

Third Party Software

Community Forums

FREE Trading Newsletters

Trading Articles

Affiliate Program

File Share

Advanced GET
Technical Analysis Software
LiveCharts
Real-Time Market Data
Product Add-Ons

Connect with Us

the Exchange Newsletter

View All Trading Products

eSignal Trading Blog

Download Our Trading Software

Trade Assets: Stock Trading

Forex Trading

Futures Trading

Options Trading

For sales questions, please call: In the U.S.: 800.815.8256. In Europe: +44 (0)20 7825 8770. In Australia: 1800 089 275. In Asia: +61 2 8668 1600.
2015 eSignal is an Interactive Data company, a trusted leader in financial information. All rights reserved.
Terms and Conditions

Privacy Policy

Trademarks

Patents

Sitemap