Exploring Elliott Wave Theory
Intermediate
Overview
Welcome to the captivating world of Elliott Wave Theory, a powerful tool that unveils the hidden patterns and rhythms of the market. In this section, we’ll embark on an exciting journey to understand the essence of Elliott Wave Theory, discover its various components, and equip you with the skills to trade with confidence.
Get ready to harness the power of Elliott Wave Theory and take your trading to new heights!
Course Video
Video Summary
- Elliott Wave Theory is a forex trading strategy based on identifying repetitive patterns in market charts to predict price movements. It's rooted in trader psychology and was developed by Ralph Nelson Elliott.
- The theory divides market movements into cycles of five upward-moving waves (impulses) and three downward-moving waves (corrections). Impulses have five sub-waves, while corrections consist of three sub-waves.
- Fibonacci Ratios are used to find potential reversal or continuation points in wave patterns, which are derived from the Fibonacci sequence. These ratios aid in analyzing the structure of waves.
- Impulse waves comprise five sub-waves with distinct roles. Wave 3 is typically the strongest, and there are cardinal rules to follow, such as not allowing Wave 2 to surpass the start of Wave 1.
- Traders can use technical indicators and Fibonacci levels for confirmation, along with staying informed about economic news. However, the theory has limitations, including subjectivity, complexity, potential false signals, and the need for retrospective analysis.
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