In the days of the old school out there in the 20's and 30's, there was this great genius named Ralph Nelson Elliot. Elliott discovered that stock markets do not really work in a chaotic manner as previously thought.
Elliot found that markets operating in repetitive cycles, which, who were influenced by the emotions of investors and traders who in turn were influenced by external factors such, or dominant in psychology mass at that time.
Elliot wave theory explains that changes up or down given by the mass psychology always show the same repetitive patterns, which in turn are divided into patterns he called: waves.
5-3 Wave Patterns
Elliot showed that market trends are moving in a way that he called: 5-3.
The first 5 are grouped into the pattern of pulse waves. And the last 3 are called corrective waves. Take a look at the waves of momentum.
Elliott Wave Theory
This is a brief description of what happens during each wave. Elliot wave theory was used primarily for actions, which is what Elliot also used, but does not really matter.
Can easily be currencies, bonds, gold, oil. The important thing is that this theory can also be applied to the foreign exchange market.
Wave # 1
The market initially moves upwards. This is usually because a small group of people who suddenly feel (for various reasons, real or imagined) that the share price is very cheap so it's the perfect time to buy. This causes the price to rise.
Wave # 2
At this point, enough people bought by the previous wave, think that the stock is overvalued and take profits. This causes the market to go down. However, market will not reach its lowest previous point before the action is considered a bargain again.
Wave # 3
This is the longest and strongest wave. The stock has caught the attention of the public. More people inquire about the action and want to buy it. This causes the stock price rises more and more. This wave usually exceeds the point reached in the wave number 1.
Wave # 4
People take profits because the price is high again. These waves tend to be weak because usually there are more people that is still selling and still waiting to buy on dips.
Wave # 5
This is the point which is operated primarily by hysteria. Usually you see the head of the company on the cover of a major magazine where he is named the "Person of the Year".
People begin to have ridiculous reasons to buy stocks and to want to strangle you when you disagree with them. This is when there is extra. Who's the other side, begin to sell, which begins the pattern "ABC".
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Elliot found that markets operating in repetitive cycles, which, who were influenced by the emotions of investors and traders who in turn were influenced by external factors such, or dominant in psychology mass at that time.
Elliot wave theory explains that changes up or down given by the mass psychology always show the same repetitive patterns, which in turn are divided into patterns he called: waves.
5-3 Wave Patterns
Elliot showed that market trends are moving in a way that he called: 5-3.
The first 5 are grouped into the pattern of pulse waves. And the last 3 are called corrective waves. Take a look at the waves of momentum.
Elliott Wave Theory
This is a brief description of what happens during each wave. Elliot wave theory was used primarily for actions, which is what Elliot also used, but does not really matter.
Can easily be currencies, bonds, gold, oil. The important thing is that this theory can also be applied to the foreign exchange market.
Wave # 1
The market initially moves upwards. This is usually because a small group of people who suddenly feel (for various reasons, real or imagined) that the share price is very cheap so it's the perfect time to buy. This causes the price to rise.
Wave # 2
At this point, enough people bought by the previous wave, think that the stock is overvalued and take profits. This causes the market to go down. However, market will not reach its lowest previous point before the action is considered a bargain again.
Wave # 3
This is the longest and strongest wave. The stock has caught the attention of the public. More people inquire about the action and want to buy it. This causes the stock price rises more and more. This wave usually exceeds the point reached in the wave number 1.
Wave # 4
People take profits because the price is high again. These waves tend to be weak because usually there are more people that is still selling and still waiting to buy on dips.
Wave # 5
This is the point which is operated primarily by hysteria. Usually you see the head of the company on the cover of a major magazine where he is named the "Person of the Year".
People begin to have ridiculous reasons to buy stocks and to want to strangle you when you disagree with them. This is when there is extra. Who's the other side, begin to sell, which begins the pattern "ABC".
related posts
- mt4 adx indicator
- rsi settings
- stochastics macd
- super scalper indicator
- volatility mq4
Forex is simple follow the trend and you will rich.
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