Elliott Waves (or wave theory) is a chart that displays the development and change of markets. The author is Ralph Elliot, who, as he himself said, took as a basis the “Fibonacci sequence” – a system of calculus, where each subsequent number is equal to the sum of the previous two. Also used is the “golden ratio” – the number 1.618, which can be found in every component of the world.
Elliot Waves is a book that was published back in the 30s of the 20th century, but still remains relevant. After retirement and a serious illness, a man studied the market for a long time and carefully to come to an interesting conclusion: each wave is, in fact, part of one big wave.
At the center of the narrative are models that are the same in shape, although they may differ in time, amplitude, and instrument. The author describes how the situation should look without reference to an asset or other indicators – therefore the theory remains relevant, despite the waves of criticism.
For example, the French-American mathematician Benoit Mandelbrot believed that the analysis according to this theory was categorically inaccurate. The reason, in his opinion, is that this strategy is not based on accurate analysis, but on the instinct and subjective vision of the one who uses it.
Elliot Waves should be downloaded for every beginner and experienced trader, those who want to earn more and are ready to use different tactics.
Elliott Waves: the book was published back in 1938. Its official name is “Wave Principle”, although knowledgeable people rarely call it that. It is necessary to write a query in the search engine: “Download Elliott Waves”, as the network will give a lot of links to paid and free pages.
Elliot waves: how to proceed
Elliott waves are composed of 8 waves. They tend to repeat themselves, and 5 of them follow the trend, and 3 – against. It is worth noting that history has shown the veracity of this approach. After all, the financial market is like fashion, which is cyclical.
Elliott Wave is a direction indicator in the first place. They are divided into 5 parts when moving down and 3 parts when moving up (against the trend). At the same time, the greater the strength of the recession, the correspondingly stronger the rise.
Analytics and forecasts for Elliott waves are difficult because the correct identification of waves is very difficult. There are special rules for their construction:
- # 1 is characterized by negative news. It gains the greatest strength during a trend change. If the situation is calm, then the movement is minimal;
- # 2 happens when there is a sharp pullback from good positions. A rollback to 100% of the 1st is possible, but not less than the start;
- all adherents of the Elliott Wave theory are waiting for # 3. Investors are very optimistic. The most powerful wave, where prices accelerate and volumes increase. Normal 3rd is at least 1.618 times greater than 1st (golden ratio, referring to Fibonacci sequence);
- one of the waves is not at all easy to identify and this is # 4. Its rollback does not exceed 38% 3rd. It is short and shallow. In this case, the 4th does not overlap the 2nd, while the whole cycle is part of the end triangle;
- by impulse divergence, experts identify No. 5. Momentum divergences is characterized by an increase in prices at average trading volumes with general public excitement, which causes a jump in bargaining;
- if all characteristics point to the 1st wave, it is A. The overwhelming majority of traders expect a new growth spurt. And experienced players understand that this will not be the case;
- moves up a little, “eating up the crumbs of optimism,” wave B. It is difficult to identify it, because it looks like the 4th;
- wave C is the most downward wave. It is characterized by increased impulsiveness and elongation up to 1.618 times the 3rd.
Applying these fundamentals helps you understand when the wave started and how long it will last. But to use them, you need to have a lot of knowledge, experience, desire to work.
Elliott Waves is an mt4 indicator available to any user registered on the platform. It is enough to go to the “Oscillators” section and select the desired item. You can start analyzing.
Elliott waves: learning and practice
Elliott Wave analytics and forecasts are tricky. To make a mistake and take a simple wave for an Elliot one is as easy as shelling pears. Therefore, this method of work is recommended only for experienced traders with experience on the exchange.
The mt4 indicator displays Elliott waves. This data can be used by every merchant. In case a beginner wants to use such tactics or it seems to him that he has already read everything and it will not be difficult to identify it, it is better to use a demo account.
Elliott Waves is a capricious indicator that loves perseverance and attentiveness. Remember, they were developed by a person who is at home around the clock (after a serious illness in retirement). The author of the theory paid all attention to the study of this issue, therefore the same attitude should be among those who apply it.
A good practice is to take a demo account and methodically scour the market to put it into practice. You need to get a good hand and eye to be able to distinguish waves. In this case, the losses will be low, and the experience will go, as they say, “a year in two” – mathematical problems are one of the best training for the mind.