How Understanding Elliot Wave Analysis Can Enhance Your Stock Trading Strategy And Double Your Returns
Something all investors should consider before to making an investment decision is this: What is the current trend direction of the market right now? A working knowledge of Elliott Wave analysis can help to answer this question. By understanding the waves, we can often confidently know if the market is most likely to go up, down or sideways.
Elliott Wave Theory can help traders to identify whether the market is currently trending, or is in a counter-trend or reaction. Understanding these wave patterns can help you to forecast accurately where the market is likely to go next, and take a position accordingly.
There are three important 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 market continue to trend in its current direction before it's next reaction, or before the trend changes entirely?
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 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.
The smaller retracement before the trend resumes, the stronger the trend, so if a stock rallies $5.00 in 60 days, you would estimate a 'normal' correction to be $2.50 in 30 days. If the market retraced only .382 in price ($1.91) and time (23 days), then gave a signal it was preparing to rally, it would put the Stock in a very strong (bullish) position.
The major importance of understanding the Elliott Wave pattern for traders in the markets you watch is to determine the direction of the dominant trend. We always want to trade with the main trend, and if possible, enter at the end of corrections to the main trend so we can maximize our profit from the next move. But here's the problem - how do you 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.
When you do that, you'll find your trading becomes much less stressful, you'll have less losing trades, and your account balance will have every chance to grow consistently. - 23310
Elliott Wave Theory can help traders to identify whether the market is currently trending, or is in a counter-trend or reaction. Understanding these wave patterns can help you to forecast accurately where the market is likely to go next, and take a position accordingly.
There are three important 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 market continue to trend in its current direction before it's next reaction, or before the trend changes entirely?
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 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.
The smaller retracement before the trend resumes, the stronger the trend, so if a stock rallies $5.00 in 60 days, you would estimate a 'normal' correction to be $2.50 in 30 days. If the market retraced only .382 in price ($1.91) and time (23 days), then gave a signal it was preparing to rally, it would put the Stock in a very strong (bullish) position.
The major importance of understanding the Elliott Wave pattern for traders in the markets you watch is to determine the direction of the dominant trend. We always want to trade with the main trend, and if possible, enter at the end of corrections to the main trend so we can maximize our profit from the next move. But here's the problem - how do you 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.
When you do that, you'll find your trading becomes much less stressful, you'll have less losing trades, and your account balance will have every chance to grow consistently. - 23310
About the Author:
For a Free stock trading strategy Video revealing a trade entry signal that's right up to 77.4% of the time, and shows you how to predict breakouts in the Stock Market days before they actually occur, visit us at http://www.stocktradingexperts.com
posted by Mr. Forex at
5:54 AM
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