Forex And The Anatomy Of An Elliot Wave
Carl's 2 Cents:
I personally don't use Elliot
Wave in my trading. To look at the trends,
I rely upon moving averages and trend lines.
To enter a trade, I use Bollinger Bands and
support & resistance lines to help me make the
decision.
As you enter the world of Forex you will immediately feel the
basic need all Forex traders have: A method or technique to
forecast the market behavior with the highest possible accuracy.
There are a number of methods and techniques that traders have
researched through the years with this goal in mind. These
techniques are based on different indicators and approaches to
trading, and each one has had its own successes and positive
outcomes when applied to specific market conditions, but there
is no doubt that among the most successful of these techniques
you will find Elliot Waves as one of the best concepts and
methods you can learn.
Ralph Nelson Elliot observed that the markets have strong trends
that seem to follow a repetitive pattern in all the different
time frames you can trade and after analyzing a great number of
charts he discovered in the late 1920's that the markets move in
a repetitive manner far away from a totally chaotic behavior.
He divided market movements into trends, corrections and
sideways movements. With these distinctions being made he then
assigned a wave terminology to these periodic movements; he
called the trend movement an Impulsive Wave and a correction a
Corrective Wave.
In order to have the formation of an impulsive wave we need five
constituent waves "inside" this wave. This will be three waves
in the direction of the trend and two corrections against the
trend.
But considering the fractal nature of the waves found by Elliot,
then each of the smaller impulsive waves will have itself other
five waves "inside".
In the case of the corrective waves they will be formed by other
three smaller waves. Two in the direction of the correction and
one in the direction of the trend.
Considering the repetitive nature of Elliot Waves you can make a
pretty accurate forecast of what the markets will do next, with
the huge advantage this represents in your daily encounters with
the currency markets.
About the author:
Adrian Pablo is a freelance writer with articles published in a
number of places.
Written by: Adrian Pablo
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