Boomerang Trader

How to avoid choppy markets through chart patterns on Boomerang

Posted on06. Jun, 2011 by Mohan.

Greetings traders and welcome to Monday’s Boomerang Scalping System market update,

The Emini S&P500 have been all over the map lately which is great for us Boomerang Scalp Traders.

However, the “kiss of death” to day traders lately on both of these contracts is the dreaded choppiness period. These are the herky jerky type agitating periods where it just seems like some little kids with dads big bucks are just playing video games with the market.

You know, they run up 7 ticks, come flying back 10 ticks lower and then shoot back up 12 ticks ending somewhere just above where they started jerking around. If you are trying to pick a trade in this mess then you got stopped out most likely whether it was a buy or sell.

What do you do with this mess? NOTHING! Or at least try to learn methods which will keep you out of these conditions as much as possible. Reminder to new traders: These market conditions are NOT the fault of Boomerang (lol)

The best way I find to approach this situation is to try and trade only markets that are making new Intraday expanded trends. How do you discover that? By missing the first one. That’s Right! By letting the first intraday trend occur on the same side of the 44 period sma (orange line) and letting it make a 3 LEVEL MOVE.

If you can learn to read what I call Level 1-3 moves with retracements in between you will be able to do better in your trading by fading extended moves and potentially getting on the right side of new ones.

What I call Level 1-3 moves is really just a very simplified version of what the brilliant T.S. Elliot identified long ago as the Elliot Wave 1-5 Waves pattern. Take a look at this Boomerang chart with explanations showing the 1-2-3 pattern (see 1-2-3 Wave Counter for help)

If you become very familiar with this pattern and watch for it then you will be able to fade near the peak of the level 3 move (whether up or down). Gradually you’ll be able to see the pattern unfolding to form a new 1-2-3 pattern and you can get in at the beginning.

When you have successfully gotten in to a new 1-2-3 pattern which will always form on the same side of the Orange Line then just watch for the reaction of the retracement patterns. (see 1-2-3 Wave Counter for help)

You can see these retracement patterns on the chart above. The rule established by Elliot which applies to these mini intraday patterns is:

1) If the first retracement is simple (wave 2 in Elliot Wave language) then the 2nd retracement will be complex.

2) If the first retracement is complex then the 2nd retracement will be simple

This is an amazing rule and observation made long ago by Mr. Elliot. It occurs over and over in the markets. The best part is that it gives you an opportunity to plan your trade once you are in a 1-2-3 pattern.

On the chart example above you can see that the first retracement was complex and may have spooked some traders out of the long side with the whipsaw lower move. The trade proceeded in a complex pattern which generally held the Orange Line before shooting higher.

Then when we got to the 2nd retracement notice how simple it was. Prices pulled back under the TrailBlazer line and then shot up to form the 3 level up or 5th wave in Elliot wave talk.

Now the fun part. Your homework is to go back over at least 10 charts on the ES and notice this pattern working over and over. Then commit to building your trades around fading completed patterns and watching the signs for entering a new opening pattern.

I hope this information assists you in your trading with Boomerang. As always, feel free to email me with any questions you may have at Mohan@BoomerangTrader.com All the best of success. Mohan

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