Double Your Returns Using A Stock Trading Strategy Based On Elliot Wave Analysis
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 primary elements to Elliott Wave Theory
Pattern - Is the trend currently up or down? Is it in an impulse move or a correction?
Price - When the market has completed an impulse move, how far will it pull back before resuming the trend?
Time - How long will the market continue to trend in its current direction?
A bull market or up trend is signaled by a series of higher highs and higher lows, while a bear market or trend has a series lower highs and lower lows. You can see these wave patterns in the market over all time periods - daily, weekly, monthly, and if you are a short term trader, even on intra day charts.
When a market corrects, the major support and resistance ratios are .382, 50%, .618 and 100% of previous ranges in both time and price. In other words, if the market were trending strongly, you would expect a correction to retrace on average 50% of the previous leg up in both time and price, but it can be more or less.
The shallower the retracement before the trend resumes, the stronger the trend is deemed to be. As an example, let's say a stock rallies $5.00 in 60 days. You would assume a 'normal' correction to be around $2.50 and take 30 days. If the market retraced only .382 in price ($1.91) and time (23 days), and then gave a signal that it was starting to resume the rally, it would put the Stock in a very strong (bullish) position.
As I said, the major importance of understanding the Elliott Wave pattern in the markets you trade 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. The problem for many people however is this - how do you know the correction is ending and the major trend is resuming?
There are any number of 'entry signals' traders use to enter trends - watching for higher highs and lows on our Swing Charts, entering on a Moving Average crossover, trading trend line breaks or new highs (or lows), etc. Your critical goal as a trader is to find an entry trigger you are comfortable with, something that has reliably identified the resumption of fast moving trends, and then take every entry signal that system gives you. Once you have found your signal and entered a trade, implement a trailing stop loss system that takes you out of your 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. - 23305
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 primary elements to Elliott Wave Theory
Pattern - Is the trend currently up or down? Is it in an impulse move or a correction?
Price - When the market has completed an impulse move, how far will it pull back before resuming the trend?
Time - How long will the market continue to trend in its current direction?
A bull market or up trend is signaled by a series of higher highs and higher lows, while a bear market or trend has a series lower highs and lower lows. You can see these wave patterns in the market over all time periods - daily, weekly, monthly, and if you are a short term trader, even on intra day charts.
When a market corrects, the major support and resistance ratios are .382, 50%, .618 and 100% of previous ranges in both time and price. In other words, if the market were trending strongly, you would expect a correction to retrace on average 50% of the previous leg up in both time and price, but it can be more or less.
The shallower the retracement before the trend resumes, the stronger the trend is deemed to be. As an example, let's say a stock rallies $5.00 in 60 days. You would assume a 'normal' correction to be around $2.50 and take 30 days. If the market retraced only .382 in price ($1.91) and time (23 days), and then gave a signal that it was starting to resume the rally, it would put the Stock in a very strong (bullish) position.
As I said, the major importance of understanding the Elliott Wave pattern in the markets you trade 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. The problem for many people however is this - how do you know the correction is ending and the major trend is resuming?
There are any number of 'entry signals' traders use to enter trends - watching for higher highs and lows on our Swing Charts, entering on a Moving Average crossover, trading trend line breaks or new highs (or lows), etc. Your critical goal as a trader is to find an entry trigger you are comfortable with, something that has reliably identified the resumption of fast moving trends, and then take every entry signal that system gives you. Once you have found your signal and entered a trade, implement a trailing stop loss system that takes you out of your 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. - 23305
About the Author:
For a Free stock market trading strategy Video that reveals a trade entry signal that's right up to 77.4% of the time, and will show 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
1:19 AM
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