Basics Of Elliott Wave Theory
Elliott Wave Theory has been at the forefront of technical analysis tools. And I too have used it for a long long time in the past. I may have moved on to different tool since then, but I still can't resist marking the waves every now and then. This theory was proposed by one of the greats in the world of technical analysis, Ralph Nelson Elliott. He observed a wave-like pattern in the market movements and then subsequently moved on to provide us traders with a detailed structure and set of rules to follow to make sense of the ever-changing markets. It's a fascinating tool and if you apply yourself the results could be nothing short of amazing. Here I am attempting to answer a few common questions regarding this theory... What is Elliott Wave theory? As said earlier RN Elliott observed this wave-like pattern in the movements of the markets. He found out that some of the waves were longer than the others and stayed in force longer than the rest. The retracement after completing each wave also had a distinct pattern, some went deeper and retraced more of the preceding wave, some remained shallow and did not retrace much of the directional progress made in the prior wave. While the concept behind this theory is pretty easy to fathom, the actual application to the real market situations is not that easy. In fact, it takes years of experience to be able to mark the waves correctly and then anticipate the subsequent market movements.
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