Domination Wave Theory is not Elliot Wave Theory. Waves are counted on the smoothed or double-smoothed oscillating indicator rather than on the market. From peak to valley on the indicator’s waves constitute one leg.
The Beginning of Domination Waves
These waves and their respective legs are of definite value in predicting near-term future direction of a market.
Wave is a move up and down in an undulating motion. Wave is derived from the Middle English word waven, which means, to fluctuate.
The MACD, like any other smoothed, or double-smoothed, oscillating indicator, travels in waves, like the market.
In order to have another part of a wave pattern, another leg, the oscillating indicator must actually change direction from up to down, or from down to up on the close of a bar. Even if the change in direction is minute, the change in direction counts.
How to Determine the Start of a New Leg on a Wave
There are 4 ways to determine the start of a new leg on an oscillating indicator wave on a chart:
1. Weakness Divergence. (You have seen divergences already on this site.)
2. Using the last actual curve on the next larger chart, use that market peak and the immediate curve on the current chart as the start of the new leg on all smaller charts (1/3 on down).
3. The end of leg 3 (or 5) automatically becomes the beginning of a new leg in the opposite direction until the market proves it otherwise.
4. If a leg 2 moves beyond the beginning of a “leg 1â€, it is automatically now the beginning of a new leg 1.
Necessary Characteristics of Domination Wave Patterns
These necessary characteristics are on the smoothed indicator, not on the market.
When the beginning of a new leg 1 on a chart is on the top side (market to move lower in price), then the end of leg 1/start of leg 2 must be lower than start of leg 1. The end of leg 2 / start of leg 3 must be higher than the end of leg 2 / start of leg 3 and lower than the beginning of the leg 1 on that chart. The end of leg 3 must be lower than the end of leg 1.
If the beginning of a new leg 1 on a chart is on the bottom side (market to move higher in price), then the end of leg 1 / start of leg 2 must be higher than the start of the leg. The end of leg 2 must be lower than the start of leg 2 and higher than the beginning of leg 1. The end of leg 3 must be higher than the end of leg 1.
Leg 1 is a move in a direction. (Thrust) (Strength in that direction)
Leg 2 is a re-alignment period (retracement of the move of Leg 1). (Weakness in that direction.)
Leg 3 is another move in the direction of Leg 1. More certain Thrust. (Confident Strength in that direction)
“Wave Mapping“, which will be covered in much more detail as this series of Domination Wave lessons progresses, is ONLY applying the above over and over on different time frames.
The smoothed oscillating indicator will either move straight to a signal pattern (fractal), or give three or more legs. When there is a new end of one leg / start of the next leg on a chart, two charts smaller will give you four parts 99% of the time. The one exception to this is with large, quick, vicious thrusts that produce a series of what are called “slide chartsâ€, which you will learn more about in line-ups and time-synchs in the Inner Sanctum.
There is still a LOT more coming on Domination Wave Theory. I just want to lay down the groundwork before really digging in and explaining each concept on Domination Wave Theory given above.
If you have any questions or comments, please leave them. I will answer as soon as I can.
Have a phenomenal trading day, and prepare for some mind-blowing revelations on Domination Waves.
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