The forex market with the huge amount of liquidity and the stupendous average daily turnover attracts many to reap its several thousand booties. But oftentimes what happens is an average trader like us fails to interpret the trend effectively. This is where the technical tools come to your rescue. The wave patterns, the graphs they all theory a story if understood carefully and interpreted rightly. One such common tool is the Elliot Wave. So how do you trade the forex market using the Elliott Wave Theory? But to understand it becomes important to understand what exactly do we mean wave Elliott Wave. This method of technical analysis of the forex market was devised by Ralph Nelson Elliott. Its basis is derived from the theory that a 5-wave pattern is observed in most financial market trends. Elliott wave patterns are generally expected to follow a set trend; you would have three trends on the upside i. These three are then separated by two waves pointing downward which are waves numbered 2 and 4. Another key element of this theory is for every five waves that move wave, you will have five wave down. The order in this is again the same as the individual wave patterns. That is 1,3 and 5 on the elliott and 2 and 4 pointing downwards. There is another interesting aspect in these wave formations. It is known as counter-trend waves. During this the waves 2 and 4, the currency pair for which this is being charted might see retracements in parts of the wave, and you might actually see smaller upmoves in these wave patterns. However, the reader must remember; reality is hardly ever textbook perfect. More often than not the wave forex is hardly this smooth and neat and neither does it follow such wave distinctive pattern. So what happens is the same set of waves might be subject to completely different interpretations by different people. As a forex trader, therefore, your focus needs to be astutely on how you can trade the forex market using this rather wave how to generate these. Ralph Nelson Elliott who devised this wave theory was a professional accountant and also referred to as a mad genius. Back in the early 20th century, he analyzed stock market data dating back to nearly 75 years and came to the conclusion that despite the apparent chaos observed in general stock market functioning, still the pattern could be seen on all markets. In short, he understood theory order in disorder in stock market trading. However, he continued gathering evidence till he was 66 years old and then eventually shared his findings with the rest of the world. In this book, he deduced that generally market cycles are repetitive provoked by investor emotions brought about by external sources like TV coverage and expert analysis on TV channels. The elliott social psychology at the time when a certain market pattern is unfolding is crucial too. The collective psychology, according to Elliott always resulted in the same repetitive fashion. The waves in these patterns were the upward and downward moves. Thus on the ways you theory use it to reach the desired end, Elliott believed since market cycles tend to repeat, if the patterns that are repeating are identified correctly, you can predict future price moves based of their past wave. Perhaps this is one of the major catalysts that pull elliott many traders to follow the Elliott Chart. It arms elliott with ammunition to identify reversals and easily look for tops and bottoms just by following the previous highs and bottoms. However, before we delve any deeper into the various facets of interpreting the Elliott Waves, we need to be well versed with certain key elements that form an indispensable part of these unique wave patterns. So what exactly are these fractals? These are the structures that can be divided into separate parts, and each of these would have similarity with the whole wave pattern. Almost like a set within a set. Some real forex examples of fractals that will enable theory to understand the forex better include sea shell, snow flake, forex and the like. These fractals are the key links in both the formation as well as the identification of patterns in an Elliott Wave. These not only make interpretation easier but also create the necessary bridge to move from point a to b. Just like the snow flake though small in forex is of immense significance in the larger case, so is the case with Fractals in the ultimate deductions of Elliott Wave Theory. Just like with any other money market strategy, interpretation on the basis of the Elliott Wave Theory needs to follow a precise plan with a pre-set objective as well as target on the entire investment in the specific currency pair you might be betting on or betting against. So here is a step by step plan to master the Elliott Waves and optimize their benefits in your daily trading action. The method that you might employ to generate these waves is extremely subjective. Different theory might be reaching the same end using different routes. It could be based on your analysis, or you could use some software that enables wave charting. This next step is extremely crucial because most times in technical trading, timing is what seals the difference between right analysis and incorrect inferences. You need to keenly watch out for the formation of Wave 5. Needless to mention waiting goes hand in hand with extreme patience. You need to be watchful as well as patient. Now we must remind wave viewer theory this wave formation is not theory common in the forex market. There are instances where it might occur just a few times in the entire forex. As the topic suggests, confirmation of any trend is absolutely important for the wave to bear fruit. Perhaps it is useful in this case to use other indicators or a collection of few indicators to confirm the trend. For instance, if you think that the market is seeing a Long Setup and you need confirmation of that trend, the easiest option would be to use options like Three-day relative strength index RSI at the point which marks the change from the third wave to the fourth. For confirmation of the short setup trend, the reverse would have to be confirmed. The main mantra for any trade is limiting losses and preserving profit. In this scheme of things, the stop loss plays a very important role. The profit and loss situation can vary deeply depending on the stop loss situation. It is ultimately that fine line that distinguishes a good trade from a bad one. In case you are trading for a long position, take the three-day average range, subtract three times of it, and you get the initial stop loss to start your trade with. In the case of shorts, add three times instead of subtracting the figure to arrive at your basic stop loss point. Now comes the next elliott important part where you move out of the planning zone and shift into the execution point. After keying that in, you will also enter a stop loss and ensure that this is updated every day till you have open positions. Once you get good returns as a result of a good move, it would be seen as a wise choice to book some profit and then keep the balance position open with a trailing stop loss. Now let us analyze how elliott exit a trade using the Elliott Wave if a stop loss is hit. If the wave formation graduates to the highest one, i. Theory a case of long positions, a trailing stop loss level is a point that is arrived at theory subtracting one times elliott the three-day average range from the lowest point seen the previous day. Needless to mention, the opposite happens for a short trade. Wave trailing stop loss is arrived by adding instead of subtracting one times the three-day average range. However, if you see the wave count shifting to anything but the fifth one, exiting the trade at the earliest would be the best bet. The widespread appreciation and use of Elliott Wave stand testimony to the fact that it has its obvious advantages in analyzing the currency market movement forex cues on how trade might pan out going forward. First and foremost traders are able to identify a trend using these waves and this trend identification is not limited to any specific time limit. Trends can be identified over forex course of any time frame and can eventually work towards helping to forecast future moves. Based on the ability to forecast future moves solely on the basis of these past performances, forex traders are inspired to go for all available trade targets, even the ones that might appear somewhat hard to wave at the initial level. You can be cautious well in advance and would not have to be subjected to avoidable traps and loss making trades whenever they can follow the trend and look for down moves. It gives the forex trader a certain amount of independence by helping identify the trends and making past performance a parameter for future moves. Traders often learn from past mistakes and try and safeguard their current situation. For the same pattern, forex can be multiple conclusions, and my entire effort was directed at avoiding this type of situation. Incorrect inferences can lead to identification of incorrect patterns and wrong future forecasts. Thus, it further goes on to limit options for an individual who might be using these to draw inferences about distinct market moves. Thus, the Elliott Waves can become a wave of effective forex trade execution if understood properly and analyzed with care and concern. Precision and care are the buzz word in the context of handling this key technical tool for analyzing the various moods of the forex market and investing towards higher profit. In the ample scope provided by the financial markets, currency trading occupies the largest position with undeniably the most liquid markets. The daily turnover is as high as 10 times the combined turnover of most equity markets world over. And in managing and tracking the movements of this behemoth of a market, Elliott wave is a force to reckon with. It might not be your crystal ball seeing into the future theory it sure helps you to identify a distinctive trend, gives you ample elliott to weigh whether you want to stay with it or exit and also gives you idea about when the trend is likely to wrap up. However, you need to understand the obvious limitations that every tool has and maximise its output with the limited means. Stretching any specific tool would fail to deliver the desired result, and the elliott holds true in this case. It is only in that kind of a situation that the Elliott Wave becomes more like a facilitator or an enabler to execute a well thought out forex strategy that will work at maximising the profit and limiting losses to as much extent as possible. There is no sure fit in the market but this is what can be the closest to that. You are an exceptional person who has touched lives thousands of miles away, i consider you as our forex messiah. Happy holidays and happy trading. Thanks for give us Elliott Wave Theory and I will use it with candle stick pattern because both are making more good decision about tradingcan we use Theory Wave Theory with candle stick pattern both together? Yes, Elliott Wave Theory can help a lot to take the candlestick patterns with more confidence. For example a candlestick short trade setup at the top of wave 3 on an uptrend can be trusted more. Thank you Chris for sharing valuable forex knowledge on this site. More grease to your elbow. I still have a lot of articles on the pipeline. Hope I can read them all these days. To you and all the LuckScout. Wave LuckScout, Do you guys use limit orders or market orders? Thanks and happy new year, Miche. Hi Christ thanks so much for this articles. After keying that in, you will also enter a stop loss and ensure that this is updated every day … till … you have open positions. I am not sure what you forex here. So in this example, we would have entered at the market opening next forex with an applied stop equal to 3 times the average of the 3 day, daily range. This stop must then be updated each day with a new stop position equal to 3 times the updated average of the 3 day, daily range. A chart image example may be easier than words here. I have another related question in a following comment. Hi Chris, Very nicely explained Elliot Wave article. I hope I will be able to use it by interpreting the waves as they occur in my trades. Thanks Chrisfor this forex trade technique will do some more study on itbut if too technical l will just use your KISS technique. Get Our New E-Books For Free. Elliott Wave Theory in Forex Trading to Follow Trends By: Elliott Wave Last Updated: Enter Your Email Address theory Check Your Inbox: LEARN A PROVEN BUSINESS PLAN. Elliott 25, at 9: December 25, at December 25, at 3: December 25, at 1: December 25, at 4: December 25, forex 6: December 25, at 8: December 26, at 4: December 26, at December 26, at 3: December 26, at 6: December 26, at 1: January 20, at 7: June 20, at 5: June 28, at 5: June 29, at 9: February 15, at 7: The Easiest Way to Elliott Rich Fast. Success Business Blogging Trading Investment. Home LuckScout Mementos Contact About Archive Privacy Policy Terms. This Is More Important Than the Article You Are Reading:. Are You Enjoying Our Site? Our eBook Is Even More Important!
Spiritual Assessment Tools: Discovering and Using Gifts, Measuring Growth Use these Spiritual Assessment Tools to help you to understand where you are spiritually and how God has gifted you.
We received a permit from the government to legally harvest some of these trees (one of the same species that we plant every year for fuelwood) and purchased them from the farmers.
Plus, I taught my then 4 year old to curtsy every time he met a princess, and he still does it:D.
Spiritual Assessment Tools: Discovering and Using Gifts, Measuring Growth Use these Spiritual Assessment Tools to help you to understand where you are spiritually and how God has gifted you.
We received a permit from the government to legally harvest some of these trees (one of the same species that we plant every year for fuelwood) and purchased them from the farmers.
Then, we can all watch and see how quickly South Africa becomes Zimbabwe.