How to do Wave analysis in Forex Tading—Elliot Analysis

[Jasz]

The Elliot wave principle is one of the most popular and effective tools for price analysis in forex trading. It was created by J.W.M.D. Elliot, who was a British investor and trader who spent his entire career studying financial markets and their behavior. The idea behind this theory is that all markets move in pairs, waves or groups of waves. These waves form a pattern that repeats in every market cycle, with each cycle having its own characteristics and features. The entire pattern can be likened to an ocean wave formed from a single point on the shoreline which then expands until it reaches the open water and breaks into smaller waves which then sink back into the sand where they originated from.

The main goal of using this method is to identify the important areas within a given market cycle so that you can take advantage of them by entering trades at a favorable time and place. This article will explain how it works so that you can use it yourself in your trading strategy.

The basic idea behind elliot waves is that prices tend to move in five-wave sequences from low to high and back again. This pattern repeats itself every 5-8 weeks or so, with each subwave moving through approximately half the distance between the previous subwave and the next one. The principle behind elliot waves states that a major trend will end when all three waves of an impulsive wave form complete themselves (3 waves). Once this occurs, prices will drop until they reach their lowest point and then rise higher than where they were before. When this happens, traders should look for opportunities to buy or sell near these lows or highs because they are likely to occur at these levels later on during a larger trend reversal cycle. This can be done by looking at charts with regular price bars instead of candlesticks which only show candlesticks per bar as opposed to candlestick bars.

The first thing you need to do is identify your timeframe for trading. You should choose either daily or weekly charts depending on what you think will be more effective for your trading style. Once you have decided on the timeframe for your charting, take a look at the current price action and see whether there are any obvious trends forming. If there are no clear trends forming then simply wait until one does form before making any trades. Sorry, I couldn't give you a clear picture of the chart.

 

[Asahi]

It’s really tough to retain emotion in a trader for a long time while trading but emotionless trading is very essential because it hampers a trader’s trading. If traders can handle their bad trading practices, they can make good return ultimately and keep themselves motivated all the time.

 

[Dita Walczak]

Traders have to learn how to use these tools to analyze the market. Don’t rely on buying signals from syndicates because most of them are fraud. If you pass some time on the market, you can learn trading well. FXOpulence allows traders with free educational program, free demo accounts and other services in moderation.

 

[FXOchartist]

Elliot wave theory is very popular in technical analysis forex, many traders learn how to trade using the Elliot wave, however, there are so many wave patterns in Elliot wave, and the most important point is we can understand the basic thought in this theory. In a big trend, there are small trend waves that eventually form large trend waves, and the trend itself will experience a trend weakening phase. In finding Elliot patterns, traders sometimes use the zigzag indicator, even though this is a repaint indicator. We can use this indicator in the Ticktrader platform FXOpen.