Applying Elliott Wave Theory
Wave Trading - The Holy Grail?
Wave Trading the holy
traders are always on the look out for that elusive trading system that
is going to make them their first million, a system that is
them pick the winners .......does Elliott Wave stock analysis really
fill that bill?
Elliott Wave trading methods to their charts can offer a trader some
over the next trader that limits his or her analysis to standard
technical analysis methods.
analysis systems may show where support or
resistance lies, but by applying your new found knowledge
Wave Theory, you will also be able to assess the odds and probabilities
whether that particular price level is likely to break or hold, before
it gets there.
those other traders are buying a support level, you may be adding
to your shorts in the knowledge
that your current Elliott
wave analysis suggests that there is much more down side to come.
Elliott Wave Theory can stop you
being part of the crowd, the herd of traders that sell the
low and buys the tops.
Wave analysis will help you become that trader
entered a long position, confident in the knowledge that your Elliott
Wave count shows a long term ending pattern completing, and helps you
avoid getting caught up in the
fear and greed cycle that drains you and your trading
Wave trading makes no differential between a bull market
or a bear market.
The principle of the wave
theory remains the same whether stock markets
are advancing or declining, thus helping you to reach a balanced view
analysis, as to where the true direction of the markets
prices lie, at any given time.
Wave Do I Buy?
question that everyone new to Elliott
Wave Trading asks, "Which wave do I
Wave traders dream is to catch a wave 2 low and run the
to the end. Wave 3 is most commonly the largest and strongest move,
this makes the wave
2 low the
ideal entry point.
Elliott Wave trading, it is just as important to know what the market
can not do, as
it is to know what it can
We describe how wave 2s are often sharp and deep and also that they can
never retrace more than a 100% of wave
1, this enables the Elliott
Wave trader to limit the risk taken when
entering a trade at this point.
then know that this is not a wave 2 If prices break the origin of wave
1 and that their analysis is wrong.
Wave Trading Rules
Elliott Wave trading
are characteristics of wave formation that are essential to the
principle of Elliott Wave Theory. Contrary to popular belief, there are
not many Rules in Elliott Wave trading but Elliott
Wave Rules must be observed.
- Wave 2 Never
breaks the origin of wave 1
- Wave 4 Never
the origin of wave 3
- Triangles Always
appear in the position prior to the final move, or as the final wave
within a combination.
- Impulse waves Always
subdivide into 5 waves.
- Wave 3 is Never
the shortest of the 3 impulse waves.
are characteristics of wave
formation that are commonly found in the principle of Elliott Wave
Theory. Guidelines are
not essential characteristics of Elliott
Wave trading but,
they are features which occur regularly enough that a trader should
expect that they are likely
- Wave Alternation - Waves 2 and 4
commonly alternate in design. One may be a zigzag and the other a Flat.
Wave 4 can be a triangle.
- Wave Alternation - Waves A and B
commonly alternate in a corrective wave, where wave A is a 3 wave move.
3 is usually the longest and the most likely to extend.
- 2 waves within an impulse tend
being equal in length.
waves usually trend within a parallel price channel
- If wave 4 overshoots or undershoots
the channel trend line, wave
5 will often overshoot or undershoot the price channel
Elliott Wave Trading - Applying
Elliott Wave Theory
It is essential for an Elliott Wave trader to remember that although
the Elliott Wave Theory can tell him what the markets prices Can Do,and
even what prices Can
Not do, there is absolutely no way that any analysis
system can tell him what prices Will
Elliott Wave trading is not the holy grail that some are looking for,
they will be searching for a very long time for that one!
No, Elliott Wave trading is actually all about the search for those
high value trading opportunities
that offer a limed risk to the traders capital. Limiting risk by
knowing where the analysis is wrong thus enabling the trader to apply a
money management based trading strategy founded on logical
Many traders get wrapped up in their current wave count and refuse to
accept when it goes wrong, instead, preferring to come out with some
very strange wave counts to justify their positions.
These are analysts that are fooling
themselves, but you can not fool the market!
markets love a trader with an ego and a point to prove!
This is fine for an analyst
of course, who's motivation is being seen to be right, but for
successful Elliott Wave
trading when real cash is involved, it is
essential that a trader should be
quick to accept when it is wrong and move on!
Holding on to a trade on the back of dubious analysis is the quickest
way to becoming one of the statistics that there is.
Learn more about Kennys
Elliott Wave Analysis trading strategies.
About Elliott Wave Trading
Elliott Wave International, have an extremely useful
Wave Tutorial for free online. It's broken up into 10
across 50 pages, so it’s easy to read and review at your
more about Elliott Wave Trading and how to
access the free Tutorial.