How Understanding Elliot Wave Analysis Can Enhance Your Stock Trading Strategy And Double Your Returns
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.
A good reason to take the time to understand Elliott Wave Theory is that it can help you to identify whether the market is trending, or is it in a reaction to the current trend. Understanding these patterns of market behavour can help you to accurately forecast where the market is likely to go next, and position yourself accordingly.
There are three primary elements to Elliott Wave Theory
Pattern - Is the market currently trending up or down? Is it in an impulse wave or a corrective wave?
Price - When the market has completed an impulse move, how far will it correct?
Time - How long will the current trend continue?
A bull or up trend is signaled by a series of higher highs and higher lows, while a bear trend is characterized by a series lower highs and lower lows. These wave patterns can be seen in the market at all time periods " daily, weekly, monthly, and even on intra day charts.
When any market corrects, the major support and resistance ratios are .382, 50% and .618 and 100% of it's previous ranges. And it's important to remember that these reactions can be measured in both time and price. So if a bull market were trending strongly, you would expect an average correction to retrace around 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 any number of 'entry triggers' people use to enter trends - Moving Average crossovers, trend line breaks, higher highs and lows on our Swing Charts, etc. Your main goal as a trader is to find an entry trigger you are comfortable with, something that has a proven history of reliably identifying the beginning of fast moving trends, and then take every signal that system gives you. Once you are in a position, implement a trailing stop loss system that takes you out of your 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. - 23162
A good reason to take the time to understand Elliott Wave Theory is that it can help you to identify whether the market is trending, or is it in a reaction to the current trend. Understanding these patterns of market behavour can help you to accurately forecast where the market is likely to go next, and position yourself accordingly.
There are three primary elements to Elliott Wave Theory
Pattern - Is the market currently trending up or down? Is it in an impulse wave or a corrective wave?
Price - When the market has completed an impulse move, how far will it correct?
Time - How long will the current trend continue?
A bull or up trend is signaled by a series of higher highs and higher lows, while a bear trend is characterized by a series lower highs and lower lows. These wave patterns can be seen in the market at all time periods " daily, weekly, monthly, and even on intra day charts.
When any market corrects, the major support and resistance ratios are .382, 50% and .618 and 100% of it's previous ranges. And it's important to remember that these reactions can be measured in both time and price. So if a bull market were trending strongly, you would expect an average correction to retrace around 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 any number of 'entry triggers' people use to enter trends - Moving Average crossovers, trend line breaks, higher highs and lows on our Swing Charts, etc. Your main goal as a trader is to find an entry trigger you are comfortable with, something that has a proven history of reliably identifying the beginning of fast moving trends, and then take every signal that system gives you. Once you are in a position, implement a trailing stop loss system that takes you out of your 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. - 23162
About the Author:
For a Free the Stocks you trade trading strategy Video revealing a proven trade entry signal that's right up to 77.4% of the time, and sa simple ways you a simple way to position yourself breakouts in the the Stocks you trade days before they actually occur, visit us at http://www.stocktradingexperts.com
posted by X - Men @ 5:03 PM
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