Elliot's Theory: The Basics Of Trading

Elliott waves are a subjective trading instrument. Their practical application is sometimes so confusing and contradictory that ten analysts can give ten completely opposite predictions. However, those traders who perfectly master this analytical tool cannot do without it. With the help of Elliott waves, you can confidently say when it will happen, as well as easily determine the entry point. Wave analysis often causes great difficulties for the Forex trader. In this case, joining the Elliott wave theory training course would be ideal, and will help you understanding the Forex platform better. There are now several Elliott Wave indicators that make it much easier to find waves on a chart in real time.

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Elliott wave theory

The founder of the wave theory is the accountant Ralph Elliott, who worked for the railway company. When analyzing the price fluctuations of the foreign exchange market, he concluded that they are not as chaotic as they might seem at first glance and are subject to certain patterns. Ralph Elliott believed that any movement in the market is subject to an eight wave pattern, consisting of five impulse waves and three corrective waves. The downside to wave theory is that it is not easy to determine the start of the wave pattern in real time. So let's start by learning the basics of Elliott wave theory before you join Elliott wave theory training. Don't be alarmed, not everything is as scary as it might seem at first.

First wave

The first wave has relatively weak momentum, with a small percentage of traders participating in the trade. Having reached a certain peak, traders begin to take profits, leading to the appearance of a second wave.

Second wave

At the point of formation of the second wave, many traders open short positions, but the strength of the "bears" gradually weakens. And at the end of the movement of the second wave, the minimum prices of which are much higher than the point of origin of the first wave, "bulls" enter the market.

Third wave

This is the largest wave in terms of size. You can enter purchases both immediately after the correction, placing below the low of the price, and when the high of the first wave is broken.

Fourth wave

After a certain time, the momentum of the third wave begins to fade, traders fix the profit made, which eventually leads to the beginning of a new correction.

The fifth wave

At the end of the fourth wave, traders reopen buying, as they are confident that the uptrend is not over yet. As a general rule, these are those traders who did not have time to enter the market at the beginning of the third wave or watched from the sidelines. The momentum of the fifth wave is generally not as strong as that of the third wave, but the price still breaks its high, climbing rapidly. At the end of the fifth wave, traders close buy orders and make a profit. As a result, the interest of the "bulls" begins to weaken and the "bears" enter the market.

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