Analysis: Develop confidence in AO accurately finding 3rd wave and consider all variations.

Because of high trend volatility of Nifty there are hundreds of wave counts going around. In order to clear the picture and test the LIN approach, I decided to test AO for counting wave. But how to verify if what AO says happens. So I took the historical data to do this analysis and here are learning from some of the charts I analyzed.

Verifying if AO gives 3rd wave and there is always a higher divergent wave 5.

conclusion: AO works best in Equities and US commodities charts.

- On the AO chart watch the right most highest peak [NG]
- 3rd peak typically comes in the center of the chart [NG]
- If peak is at one corner, it could be 5th of previous or 1st of next slot of bars [NG]
- A higher peak on opposite direction will only come once this trend is over [NG]
- IMP: TO CONFIRM THE 5th wave, always chech for divergence between prices and momentum ! [NG]

- Even after observing wave 3, do not trade wave 4 because it may be risky and dont know the length of it. Always trade along the trend.
- Always look at 1 previous 110 bar slot to verify your current chart understanding.
[from US Gold data]

- wave 4 AO high on the other side of wave 3 AO will typically not be higher than wave 3 AO.
- Another verification of our count is that after crossing over, the smaller peaks made as a part of wave 4, there is no divergence of momentum and price there.
- wave 4 AO peak also wont have typical twin peaks of impulsive waves. [some wave 3 also dont have it]
[from US silver data]

- Irrespective of direction of AO, only look for the biggest wave around.
- confirm your assessment by looking at previous 110 bar slot.
- wave 4 AO typically shows these 2 patterns:
a) Simply just crosses over and comes back to give wave 5
b) Makes a good high in opposite direction, crosses over to make a low plateau structure, crosses over again to make a small hill and then comes back to give wave 5. [may give a couple more crossovers before wave 5 comes]
[from DAX data]

- here wave 5 price just reached very close to wave 3 and didnt cross it.
- after wave 5, AO went in opposite direction to make a new high both in price and AO. so would this be the new wave 3 now. - confused?
[EUR/USD data]

- both sides AO almost equal but then the down wave was taller by 0.01 and hence considered wave 3
- perfect wave 5 within wave 3.
- simple wave 4 and and wave 5 done. [missing the correction wave though]