the Elliott Wave Principle Successfully
Wave Theory Articles
|When the Elliott
Wave Principle was first discovered, those in the financial
sector were mighty pleased with its ability to predict the direction
the market would take next. It turned out to be really impressive.
However, there is much more to the principle. It gives you a means of
finding out at what points the market will make a turn. This will in
turn help you make the right entry and exit points ensuring the highest
level of success.
So how does one go about using the Elliott
Wave Principle? Naturally one must begin at the most basic of
levels. In the financial markets, The Elliott Wave Principle is able to
work by finding patterns in market prices. This means that one should
begin by looking through the waves on a chart.
In the Elliott’s pattern, you will find “impulsive waves” as well as
“corrective waves.” In an impulsive wave you will find five subwaves.
All of these will move in the direction of the larger trend. You will
also see corrective waves that are split into three subwaves. Each of
these move against the trend of the next larger size.
Waves 1, 2, 3, 4 and 5 will come together forming a complete larger
impulsive sequence. The impulsive structure that wave (1) forms, will
be able to tell us about how the next larger wave in the trend will
move in the upward direction. If one has to expect a three-wave
correction, this is when you will be able to know. Wave (2) is the
correction that follows after the 5th wave is complete.
When you apply the Elliott Wave Principle, the primary task is to look
at the charts of all the market action that has been happening and look
out for any five-wave completion as well as three-wave styled
structures. Once you have these you will be able to interpret the
But when you are using the Elliott Wave Principle
on any chart remember that there is no certain way to predict the
outcome of the market. What it does instead is give you a simple and
objective means of understanding the probability of the direction the
market is going to take in the future. At any given time you will find
that there are at least two valid interpretations of the waves that
co-exist. It is therefore important for any trader to carefully look
into each interpretation when dealing with the financial markets.