Thursday 22 May 2008

Trading with the Hilbert Sine Wave and Multiple Time Frames

Hilbert Sine Wave discussion today and apologies to readers who are not interested in the Sine Wave - I couldn't trade without it, but I know it's not for everyone.

After Wednesday's large range, trending day I was expecting Thursday to be a lower range, cyclical day. That's what we got and on days like these you're best fading breakouts and relying on oscillators for your entry signals.

My favorite oscillator is the Hilbert Sine Wave (which shows trends too - but that's another story) and I thought it might be helpful to show how I use it with multiple time frames.

I use 3 tick-based time frames for my day trades:

Lowest time frame is 233 tick for fine tuning entries
Primary time frame is 699 tick (3x higher) as the "anchor point"
Highest time frame is 2,097 tick (3x higher again) to show the trend

I choose entry points based on the Hilbert Sine Wave support / resistance levels and how they're interacting on the 3 time frames. I also use volume signals for confirmation but I don't want to complicate the example below.

One pattern that re-occurs is when you get an cyclical turning point in the highest time frame along with an "end of trend" signal in the lowest time frame. Here are the charts:

Emini Hilbert Sine Wave 233 Tick Image

Hilbert Sine Wave (Emini 233 tick)

In the lowest time frame (233 tick) we get an "end of trend" signal using the Hilbert Sine Wave. This is when we have a break into trend which is then followed by a final cyclical turn that equates to an Elliott 5th wave. If you want a better explanation, please check out the Hilbert Sine Wave video.

Emini Hilbert Sine Wave 2097 Tick Image

Hilbert Sine Wave (Emini 2,097 tick)

Then looking at the highest time frame (2,097 tick) this coincided with a cyclical turning point on the Hilbert Sine Wave. The middle time frame will often have a cyclical turn or slight overshoot - in this case it was a cyclical turn, but I've not included the chart.

This was a nice entry, around 1,391 which was good for about an 8 point move. Again the top of the move was signaled with the Hilbert Sine Wave in the 2,097 tick time frame.

Good luck with your Emini trading.