Elliott Waves Can Be Your Crystal Ball In Forex Trading
As you might have already discovered forex market moves in phases. It trends, and then it consolidates and after some time consolidating again starts trending. With the knowledge of the Elliott Wave Principles, you can develop the skill to be on the right side of the market most of the time and capture big moves in the market with surgical precision. Using the Elliott Wave Principles can help you make winning trades more times than not!
Elliott Waves were discovered by Mr. Elliott when found a certain price pattern repeating over and over again in the stock market on the longer term. However, Elliott waves is a fractal concept that works on all time frames from day trading to swing trading and position trading.
An Elliot Wave Cycle comprises of eight waves that are used to describe a market move from bullish to bearish or from bearish to bullish. Five of these waves are in the direction of the main trend and are called the Impulse Waves. The remaining three are against the direction of the main trend or counter to the main trend and are called Corrective Waves. This eight wave cycle is repeating in the market over and over again.
Within each cycle there can be sub cycles while at the same time that cycle can be part of another bigger cycle. But all these cycles follow the same 5/3 rule meaning each cycle will have five impulse waves and three corrective waves.
Wave One is the start of a new trend while most of the traders and investors are still entrenched in the previous trend. It is the shortest of the five impulse waves. Wave Two is a corrective wave counter to the new trend and indicates profit taking by the traders. Wave Two should not reach the beginning of Wave One. It should stop short of that.
Now the new trend is well entrenched in the market making the Wave Three the strongest and the longest. Wave Four is again a corrective wave while Wave Five represents the peak of the bullish or the bearish sentiment in the market.
It is important for you to understand that Elliott Wave Principle can be applied on all time frames whether you trade intraday or longer term.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide.
by: Ahmad Hassam
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Word Count: 389
Date: Sat, 30 Oct 2010
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