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ELLIOTT WAVE BASICS - PART 2

Posted on 4th May 2019

[Learning Elliott Wave Thumb Rules with Real Examples]

There were text book examples of Elliott wave thumb rule plays this week.

Thumb rule 1

Wave 3 and Wave C are dream opportunities for traders. They offer a large move in very short periods. Traders keenly wait for Wave 3 and Wave C opportunities for entries because it brings excellent gains in a short window.


We traded both this week. 

We had recommended an entry in GBP/USD at 1.2915. GBP/USD in Wave 3 moved from 1.29 to 1.317 in just 2 days.

Similarly, WTI in wave C moved from 66.7 to 60.95 in just 3 days.

Thumb rule 2

Wave 4 is a terrible wave to trade. It is a gambler's wave. Most traders lose money trading Wave 4.

Both Gold and Silver are in Wave 4. Unpredictable whipsaws, irregular moves and lots of indecision. Wave 4 is best avoidable.

Avoid trading every candle/wave. Absolutely no point blocking one's capital especially in waves which shall not yield any results but only lose money. Wait for the right opportunity.

Always Quality over Quantity.

 

ELLIOTT WAVE BASICS - PART 1

Posted on 16th March 2019

[In simple words to ensure non-english members also understand]

Why Elliott wave works every time? 

Elliott waves captures human EMOTIONS & BIASES. That’s why it works so effectively & efficiently in trading.

One example wave structure is above. Let’s link human emotions to each wave.

Wave 1: A lot of selling has taken place in the market & sellers or shorters are now exhausted and FEARFUL of selling more. A small number of EARLY BUYERS step in to begin the WAVE 1 up. These buyers are ‘HOPEFUL’ that selling might have completed.

Wave 2: Traders who DID NOT get exit in the earlier sell carnage now start to feel FEARFUL and tempted to sell. Their emotion and fear that the market may again go further down compels them to sell at good prices of Wave 1. 

They sell continuously to exit, fearing that high price may not come again. Price begins to retrace downwards.

Wave 3: When the prices retrace down in Wave 2, GREED is BORN. 

Two types of buyers come in

 a) Buyers who bought in the first wave feel GREEDY and add more at discounted prices 
 b) New or late buyers who missed out on wave 1 start FEARING that they will miss this great opportunity AGAIN and go on a BUY continuously. Every one wants to be on the LONG side and that’s why Wave 3 is so BIG and the longest wave. Lot of buyers jump in.

Wave 4: When prices move very high in Wave 3, some traders become FEARFUL and early sellers come in. They feel that they have played the price from Wave 1 and it would be a good time to take some profits off the table. They FEAR that they may not get such good price to sell again. So they begin exiting LONG positions resulting in another retracement.

Wave 5: When price retraces in Wave 4, VERY LATE and LAST of the buyers jump in thinking that they have missed out on all the good price action from Wave 1 and they start buying AGGRESSIVELY to push the prices to a PEAK. Traders who sold in Wave 4 jump in again into LONGS thinking that they were wrong and get GREEDY moving the prices up.


At the end of Wave 5, majority of the traders are LONG and market is hugely over bought and BIG selling begins again. 

A new wave structure is BORN in the same way, but now on the SELL side which is wave A, B, C. After C is complete, Wave 1 begins again and this continues to infinity in a never ending loop.

FEAR and GREED is what dictates the market. Elliott Wave is a perfect methodology to break this into various patterns/micro-patterns and provide traders the DATA to build a TRADING STRATEGY.

This is exactly what we do all day. Analyze patterns/waves/micro-patterns so that you always have all the data to be able to trade with LOW RISK and HIGH PROBABILITY.