ELLIOT WAVE PRINCIPLE - WHAT'S AN ELLIOT WAVE?

Added: (Mon Jan 30 2012)

Pressbox (Press Release) - The Forex market looks like total chaos. The term volatility doesn't do it justice. Getting into Forex without knowing what you're doing is a fool's errand. Luckily, there are some very smart people in the world who over the years and decades have discerned specific patterns in the Forex market - patterns you can use to not only make sense of what's happening, but to find opportunities to make a profit by buying and selling. One such method for this is known as the Elliot Wave principle
WHAT ELLIOT WAVES ARE

Elliot Waves are waves of price fluctuations on a financial market that follow a specific pattern, which I'll tell you about in a minute. Elliot Wave theory says that the moods of people change in predictable ways. You can actually predict to some degree exactly how a trend will move because of these moods. Elliot Waves are representations of these patterns over any time interval, allowing the market to be somewhat predictable.

WHO DISCOVERED THEM?

In 1938 an accountant named Ralph Elliot wrote a book about these waves called The Wave Principle. Not only did his theory predict stock prices, but all kinds of group behaviours. Elliot Waves apply to pop culture trends as much as they do to market trends. And because the Forex market has such a massive amount of data to analyze, they're perfectly suited to it.

HOW DO ELLIOT WAVES WORK?

There are two forms of waves in the Elliot Wave principle - impulsive waves and corrective waves. Impulsive waves push the forex market. Corrective waves, just like you would imagine, deliver corrections to those impulses. They have to work a specific way to be Elliot Waves. These patterns can be seen over any time frame, from minutes to centuries.

THE SPECIFIC WAVES

There is the dominant trend, consisting of five waves, and the corrective trend, consisting of three waves. They look like a mountain in a bullish market, a valley in a bearish market,. The first wave (Wave 1) is impulsive. The second wave (Wave 2) is corrective, but never to the point that it passes where Wave 1 started from. Wave 3 is impulsive and often the biggest wave of all. It well surpasses Wave 1. The fourth wave (Wave 4) is again a corrective wave, but not does not overlap with Wave 1. The fifth wave (Wave 5) is the final part of the dominant trend. This is where the overall trend starts reversing direction. The sixth wave (Wave A) is the first part of the corrective trend - a correction that starts the overall trend moving in the opposite direction. The seventh wave (Wave B) is the last impulsive wave, actually a correction of a correction, it's a temporary reversal. The eighth and final wave (Wave C), which is the final correction of the overall trend. It's usually even bigger than Wave A. The waves consist of their own waves following a similar pattern. This corresponds with the idea that they're fractal in nature.

ELLIOT WAVE USEFULNESS

They're useful for predicting a trend. Don't think of them as sorcery that can predict the future for you every time. But they're great for figuring out general market trends.

If you would like more info on Elliot Waves or general information on Fx trading, visit my web site at http://elliottindicator.com