Tips on using the Elliott wave

Do you want to perform well in stock or finance trading? Well, you may rely on the Elliott Wave theory. Fully understanding the theory and its implication can help you make the right decision at the right moment.

The Elliott Wave Theory is developed by Ralph Nelson Elliott in the late 1920s. In short, the theory states that the performance of stock markets is just like waves—they perform in repetitive cycles. This has important implications on how we should trade.

Elliott figured out that the swings of mass psychology—whether upwards or downwards—showed up in a repetitive patterns similar to market cycles. Therefore, he concluded that the performance of the market is due to investors’ predominant psychology at that period which may change due to external influences. He called the repetitive patterns ‘waves’, and this becomes the name of his famous theory, note that the Neo Wave Theory is similar but different theory.

The first very implication is that you can predict market trends accurately. For example, the main trend always shows five waves in the pattern, and they move in the direction of the main trend before there are another three corrective trends. This completed one full cycle. This pattern, according to the theory, is constant although the time span may vary.

So, now let’s go to the main dish of this essay—the tips using Elliott wave.

First of all, you should follow the main trend. Fighting against the main trend is a stupid direction, and you will end up losing more than you gain. This is because the least resistant can be found on the path. So, what you need to do is identify the trend, and employ the wave patterns of Elliott wave to predict the market movement.

This always means that moves that are contrary to the trend can easily be detected. This allows investors to stand in a position, being ready when the large trend comes back, and then you can resume your trade.

Another very important tip is that Elliott wave can tell you when the trend is matured, and sell the stock. Correcting referring to Elliott can tell you the best time to sell the stock since the trend is matured, and a sharp decline is coming. This can potentially prevent you from gigantic losses! A famous example is a sharp decline in oil prices in 2008. While regular people are still hoping for higher prices, Elliott waves clearly send a red flag to the market. By the way, oil prices dropped by 80% in 2008—painful.

Lastly, you can target your price using Elliott waves. They provide you with the answer—at what price should I buy and sell, and can help you to make targets that are highly profitable.

Of course, I am not saying that the Elliott Waves theory is perfect in predicting every move of the market. If this is the case, then everyone will gain a lot, and there will be no market. However, it is fair to say that with this tips on using the Elliott wave, you can predict the market trend more accurately than others.

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