An Introduction to Forex and Elliot Wave Degrees
Carl's 2 Cents:
Well, I never used Elliot Wave
in my trading. I guess I lost counts of
the cycles :-P I have seen people talk
about it on various forums and web sites, but I
haven't seen how it was actually applied to
short-term or long-term Forex trading, and how
the buy or sell decision would be made based on
the cycles.
I found another great source
of information on Elliot Wave on
Wikipedia. For those who like to learn
more about Elliot Wave, or if you are an Elliot
Wave Enthusiast, read on or visit
Wikipedia.
As a Forex trader you will always be attempting to make more
profits than losses from the fluctuations of exchange rates
between currencies in the Forex market; in short, this is what
is called Forex trading.
And if you want to become a profitable Forex trader you will
need a good technique to forecast the market behavior with time;
i.e., how the currencies value will fluctuate in the next period
of time you are interested on trading.
One of the best techniques you can use to forecast the Forex
markets is by using the Elliot Wave Theory.
Ralph Nelson Elliot also observed that the market has strong
trends that seem to follow a repetitive pattern in all the
different time frames; and after analyzing a great number of
charts he discovered in the late 1920's that the markets move in
a repetitive manner that is far away from being a totally
chaotic behavior.
And this was not all Elliot discovered; he also realized that
this patterns had a fractal nature. This means that the patterns
not only repeated with time but that in a given period of time
the characteristic wave pattern would repeat at different scales
(days, hours, minutes).
This is the most basic concept in Elliot's theory; i.e., the
largest wave structures are composed of smaller sub waves, and
these in turn are composed of even smaller sub waves, and in
principle this goes on to infinity.
Elliot gave a name to these wave structures calling them "wave
degrees", depending on the time frame you are looking at. The
range of these degrees goes from centuries to hours.
Elliot distinguished Nine Wave Degrees in his studies, they are
known as:
- Grand Supercycle - Supercycle - Cycle - Primary - Intermediate
- Minor - Minute - Minuette - Sub Minute
In principle these degrees can go to infinity and they clearly
show you can choose the time frame you like better, according to
your trading objectives, and the patterns you will see will be
the same in any of these time frames.
About the author:
Adrian Pablo is a Forex freelance writer with articles published
in a number of places.
Written by: Adrian Pablo
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