Hello Theo,

I understand that when price/waves form a pattern or structure which breaks, in the case of figures in the attached image, the sequence of HH, LL, LH, LL (Higher High, Lower Low, Lower High, Lower Low) that we restart the wave count. I just have a few questions related to when the new wave one is confirmed.

I used Microsoft Paint to construct five wave formations which have broken the swing high/low trend wave structure and thus cause a price/wave reset. At first I thought the new wave one was pretty obvious until I added an alternative wave structure to formations A, B, C and E. Remember I used Microsoft Paint, so while the purple waves look smaller, assume they are the same scale as the black waves.

I am working on the assumption that a new wave is only complete when it has a confirmed starting and ending swing. I am also excluding the broadening formation (C) for now.

The question that came to mind and had me scratching my head and saying, "Hi, ho, hi ho, it's off to the forum I go," is: When do we restart the wave count?

Is it when the trend wave structure's last lowest low is broken, ie, the last confirmed low before the price reset pattern made an equal or higher lower low?
If that is the answer, then the guideline is that the new wave one must trade below the yellow circled low (yellow horizontal line) and create a confirmed swing low.
What happens though if the wave that trades below the yellow horizontal line (circled in red) and forms a confirmed swing low, is part of a trend wave structure of LL, LH and LL? Is the new wave one, the purple wave one, even though a good part of the trend wave structure is contained within the price reset structure?

The broadening wave formation presents a different dilemma because we cannot identify the last lowest low before the price reset pattern began because of the way the formation is defined, ie, lower lows and higher highs. In this case I think the new wave one needs three conditions to be met:
1. Trade below a lowest low (x) AND create a new confirmed lower low, 'a'.
2. Trade up and create a new confirmed lower high 'b', this could be back within the formation because it is condition three that confirms the broadening formation is complete.
3. Trade below the newly created lowest low at 'a'.

Does the above sound reasonable?

If we just require a new confirmed lower low 'a', price may trade up and back through the line marked 'x' and continue up to the last highest high and beyond thus continuing the development of the broadening formation (price reset pattern).

Theo, if you think I am over thinking this, don't be afraid to say so. I am very much aware from my reading to date, that there is a consensus of opinion amongst experienced traders that we newbies tend to over complicate what is essentially a simple activity. What makes the process of trading difficult is not the activity itself, but rather the uncertain environment in which traders operate coupled with the lack of control over the anticipated (desired) outcome and the psychological hurdles that creates. Maybe the answer is, as you stated once before, "If in doubt, stay (or get) out." Wait until the price reset pattern resolves itself into a price/wave behaviour that I understand. Maybe the motto should be, "it is not my job to make sense of every chart, but to trade charts that make sense."

The other thing Theo is, that you may feel that some of these questions are beyond the scope of the free members course, in which case again, don't be afraid to say so. Given how much I've learned from this free course and your answers to all my posts to-date, I wouldn't be taken aback or miffed if you kindly suggested I upgrade my membership.

Anyway, as always, I look forward to your responses when you have the time.

Cheers,

Pepe.

** Register Here for Free Membership to see this image/link **