Enhance Your Stock Trading Strategy And Double Your Returns Using Elliot Wave Analysis
One question every trader should ask before making an investment decision is: What is the overall trend of the market right at this moment? An understanding of Elliott Wave principles can help traders answer this question, and it can give you a confident forecast of whether the market is likely to go up, down or sideways in the immediate future.
The goal of understanding Elliott Wave Theory is to identify whether the market is trending or is in a counter-trend to the major trend. Understanding these patterns can help you to profitably forecast where the market is likely to go next, and position yourself accordingly.
There are three major elements to Elliott Wave Theory
Pattern - Is the trend currently up or down? Is it in an impulse move or a correction?
Price - When the market has completed an impulse move, how far will it correct?
Time - How long will the current trend continue?
A normal bull or up trend has a series of higher highs and higher lows, while a bear trend is characterized by a series of lower lows and lower highs. These regular wave patterns can be seen in the market at all time periods - intra day, daily, weekly, monthly and even yearly for major trends.
When a market has a correction, the major support and resistance ratios are at .382, 50% and .618 and 100% of the previous range in both time and price. In other words, if a bull market were trending upwards strongly, you would expect a normal healthy correction to retrace on average 50% of the previous leg up in both time and price.
Small retracements mean strong trends, so for example, if a stock rallies $5.00 in 2 months, you would estimate a 'normal' correction would be around $2.50 in roughly 30 days. If the market retraced less than 50%, say .382 in price ($1.91) and time (23 days), then gave you a signal that it was preparing to resume it's rally, it would put that Stock in a very bullish position for a continued move higher.
Understanding the Elliott Wave pattern in the markets you trade can help you to accurately determine the direction of the dominant trend. We always want to trade with the main trend, and if at all possible, try to enter at the end of corrections to that trend so we can maximize our profits. The problem for many traders however is this - how do I know the correction is ending and the major trend is resuming?
There are dozens of 'entry triggers' you can use to enter trends - trend line breaks, Moving Average crossovers, higher highs and lows on our Swing Charts, etc. Your most important goal as a trader is to decide on an entry trigger you are comfortable with, something that has a proven history of reliably finding the beginning of fast moving trends. When you do, take every signal your system gives you. And always remember - as soon as you have entered a trade, implement a trailing stop loss system that removes you from trades when each trend comes to an end.
This is how professional traders beat everyone else, and when you do this too, your trading will become much less stressful and your account balance will have a chance to consistently grow over time. - 23226
The goal of understanding Elliott Wave Theory is to identify whether the market is trending or is in a counter-trend to the major trend. Understanding these patterns can help you to profitably forecast where the market is likely to go next, and position yourself accordingly.
There are three major elements to Elliott Wave Theory
Pattern - Is the trend currently up or down? Is it in an impulse move or a correction?
Price - When the market has completed an impulse move, how far will it correct?
Time - How long will the current trend continue?
A normal bull or up trend has a series of higher highs and higher lows, while a bear trend is characterized by a series of lower lows and lower highs. These regular wave patterns can be seen in the market at all time periods - intra day, daily, weekly, monthly and even yearly for major trends.
When a market has a correction, the major support and resistance ratios are at .382, 50% and .618 and 100% of the previous range in both time and price. In other words, if a bull market were trending upwards strongly, you would expect a normal healthy correction to retrace on average 50% of the previous leg up in both time and price.
Small retracements mean strong trends, so for example, if a stock rallies $5.00 in 2 months, you would estimate a 'normal' correction would be around $2.50 in roughly 30 days. If the market retraced less than 50%, say .382 in price ($1.91) and time (23 days), then gave you a signal that it was preparing to resume it's rally, it would put that Stock in a very bullish position for a continued move higher.
Understanding the Elliott Wave pattern in the markets you trade can help you to accurately determine the direction of the dominant trend. We always want to trade with the main trend, and if at all possible, try to enter at the end of corrections to that trend so we can maximize our profits. The problem for many traders however is this - how do I know the correction is ending and the major trend is resuming?
There are dozens of 'entry triggers' you can use to enter trends - trend line breaks, Moving Average crossovers, higher highs and lows on our Swing Charts, etc. Your most important goal as a trader is to decide on an entry trigger you are comfortable with, something that has a proven history of reliably finding the beginning of fast moving trends. When you do, take every signal your system gives you. And always remember - as soon as you have entered a trade, implement a trailing stop loss system that removes you from trades when each trend comes to an end.
This is how professional traders beat everyone else, and when you do this too, your trading will become much less stressful and your account balance will have a chance to consistently grow over time. - 23226
About the Author:
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posted by X - Men @ 1:21 AM
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