Saturday, July 25, 2009

Elliott Wave Basic Theory and Wave Structure Part 1

This is the first post of my research on the Elliott Wave Theory.

Basically, Elliott Wave Analysis is only about identifying 2 types of wave structures, which are Impulsive waves and Corrective waves respectively. To do further analysis, we will have to make use of

(i) Relationship between the waves
(ii) The degree of the waves.
(iii) Fibonacci Tools
(iv) Trendlines and channels

and so on...

There are certain rules we must follow and many many guidelines to make use of in order to increase the accuracy of our counts.
This post aims to try to understand how to identify Impulsive and Corrective waves.

For traders experienced with Elliott Wave, he/she will be able to identify the Impulsive and Corrective waves immediately in one glance, and come up with one or more different wave counts which can all be valid. The purpose of wave counting is not so to get the correct wave counts, but more of identifying and recognizing what the next market trend is. Would it be a strong or weak wave? Would it be a simple or complex wave? Proper usage of Elliott Waves can give a trader the advantage of "timing" the market and to be able to be ahead of the market by a few steps.

*** More to come ***

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