Elliot wave trading is one of the most profitable trading system for the trend trader. Trader take the advantage of the extended wave and rides the major part of the trend. Generally, the third wave is the largest wave in Elliot wave trend trading system.
There are various rules, however this article will concentrate on three key rules of Elliot Wave theory. As opposed to standards, rules ought to remain constant more often than not, not as a matter of course constantly.
- Rule 1: When Wave 3 is the longest motive wave, Wave 5 will be equivalent to Wave 1.
- Rule 2: The structures for Wave 2 and Wave 4 will be same in terms of correction. But the nature of correction will be opposite in terms of direction.
- Rule 3: After a 5-wave motive advance, the end of the correction will be around the area of the low of wave 4.
Let’s see an example
Figure: Three rules of Elliot wave
Despite the fact that this article just begins to expose what’s underneath of Elliott Wave Theory, chartists can incredibly enhance their trading rules and execution level by applying the three tenets and three rules recorded. Elliott Wave numbers begin with a procedure of termination. Apply the tenets for the principal number endeavor and after that apply the same rules on the second wave. Indeed, even with precise analysis and depth knowledge, traders will sometimes re asses their drawing of Elliot wave.
Some trader uses previous support and resistance level inured to identify the swing high and swing low of a current trade. After successfully identifying the swing high and swing low trader put their Elliot wave number to see how accurate their wave setup is. Professional trader masters the Elliot wave only to ensure that they can ride the big trend in the market.