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.
The goal of understanding Elliott Wave Theory is to identify whether the market is trending or is in a counter-trend to the major trend. Understanding these patterns can help you to profitably forecast where the market is likely to go next, and position yourself 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?
A normal bull or up trend has a series of higher highs and higher lows, while a bear trend is characterized by a series of lower lows and lower highs. These regular wave patterns can be seen in the market at all time periods - intra day, daily, weekly, monthly and even yearly for major trends.
When any market corrects, the major support and resistance ratios are .382, 50% and .618 and 100% of it's previous ranges. And it's important to remember that these reactions can be measured in both time and price. So if a bull market were trending strongly, you would expect an average correction to retrace around 50% of the previous leg up in both time and price.
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.
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 any number of 'entry triggers' people use to enter trends - Moving Average crossovers, trend line breaks, higher highs and lows on our Swing Charts, etc. Your main goal as a trader is to find an entry trigger you are comfortable with, something that has a proven history of reliably identifying the beginning of fast moving trends, and then take every signal that system gives you. Once you are in a position, implement a trailing stop loss system that takes you out of your trades when each trend comes to an end.
This is how professional traders beat everyone else, and when you do this too, your trading will become much less stressful and your account balance will have a chance to consistently grow over time. - 23217
The goal of understanding Elliott Wave Theory is to identify whether the market is trending or is in a counter-trend to the major trend. Understanding these patterns can help you to profitably forecast where the market is likely to go next, and position yourself 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?
A normal bull or up trend has a series of higher highs and higher lows, while a bear trend is characterized by a series of lower lows and lower highs. These regular wave patterns can be seen in the market at all time periods - intra day, daily, weekly, monthly and even yearly for major trends.
When any market corrects, the major support and resistance ratios are .382, 50% and .618 and 100% of it's previous ranges. And it's important to remember that these reactions can be measured in both time and price. So if a bull market were trending strongly, you would expect an average correction to retrace around 50% of the previous leg up in both time and price.
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.
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 any number of 'entry triggers' people use to enter trends - Moving Average crossovers, trend line breaks, higher highs and lows on our Swing Charts, etc. Your main goal as a trader is to find an entry trigger you are comfortable with, something that has a proven history of reliably identifying the beginning of fast moving trends, and then take every signal that system gives you. Once you are in a position, implement a trailing stop loss system that takes you out of your trades when each trend comes to an end.
This is how professional traders beat everyone else, and when you do this too, your trading will become much less stressful and your account balance will have a chance to consistently grow over time. - 23217
About the Author:
For a Free stock trading strategy Video that reveals a trade entry signal that's right up to 77.4% of the time, and shows you how to position yourself breakouts in the Stock Market days before they actually occur, visit us at http://www.stocktradingexperts.com
posted by X - Men @ 1:19 AM
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