🔴 Most Effective "ELLIOT WAVE and FIBONACCI" Price Action Trading Strategy (Wave Trading Explained)
Summary
TLDRThis trading video teaches viewers about the Elliott Wave theory, which holds that market prices move in repetitive patterns called waves. It explains concepts like impulsive waves that move with the trend vs corrective waves against it. The video outlines rules for identifying valid 5-wave Elliott patterns and recommends entering trades at the end of the 4th wave. It shows examples of Elliott Waves in charts and discusses how to start wave counts, noting it can be subjective. The goal is helping traders use Elliott Wave analysis to identify high-probability entry points and make profitable trades across stocks, forex, and crypto.
Takeaways
- 😀 The video will provide a simple yet profitable Elliott wave trading strategy with practical examples for stocks, currencies and crypto
- 🌊 Elliott wave theory analyzes market trends as a series of impulsive and corrective waves
- 🔢 Impulsive waves move with the overall trend while corrective waves move against it
- ⛰️ Impulsive waves are labeled 1, 3, 5 and corrective waves are labeled 2, 4
- 📈 Wave 2 never retraces more than 100% of wave 1, usually 50-61.8%
- 📉 Wave 4 never retraces more than 100% of wave 3, usually 38.2-50%
- 🚀 Wave 3 always extends beyond wave 1 and is never the shortest wave
- 🎯 The best Elliott wave entry points are near the end of wave 4 to catch wave 5
- 🔍 Start Elliott wave counts at swing highs/lows or end of previous impulsive waves
- 💡 Elliott wave analysis is subjective, experience helps in identifying entry points
Q & A
What are the two main types of waves in Elliott Wave Theory?
-The two main types of waves are impulsive waves, which move in the direction of the overall trend, and corrective waves, which move against the overall trend.
What are the basic rules of the Elliott Wave strategy?
-The three basic rules are: Wave 2 never retraces more than 100% of Wave 1, Wave 4 never retraces more than 100% of Wave 3, and Wave 3 always travels beyond the end of Wave 1 and is never the shortest wave.
Where is the best place to start an Elliott Wave count?
-The best place to start an Elliott Wave count is at an extreme swing high or swing low. You can also start counting from the end of the previous impulsive wave if you want to identify cycles of a higher degree.
What time frames can you use the Elliott Wave strategy on?
-In theory, Elliott Wave patterns apply to any time frame. You can use 1 minute, 5 minute, 1 hour, 4 hour, daily or weekly candles depending on your trading style.
Why is wave counting subjective in Elliott Wave theory?
-Wave counting can be subjective because different traders may have different interpretations of where a wave begins and ends. The lack of concrete rules means it relies on the trader's skill and experience.
What is the benefit of letting the first four wave sequence unfold?
-Letting the first four waves unfold allows you to identify the end of wave four and find a good entry point to catch the final wave of the five wave Elliott Wave sequence.
How can Elliott Wave theory be used for trading?
-You can use Elliott Wave theory to help identify potential turning points in the market. It can assist in determining entry and exit points for trades based on the expected wave patterns.
What was Elliott Wave theory inspired by?
-Elliott Wave theory was inspired by the Dow Theory and observations of patterns found throughout nature.
Why are impulsive and corrective waves useful?
-Understanding the impulse and corrective moves allows traders to identify market structure beyond typical support and resistance. This can increase the probability of successful trades.
What assets can Elliott Wave theory be applied to?
-Elliott Wave theory can be applied to any asset with price action, including currencies, stocks, commodities, and cryptocurrencies.
Outlines
😊 Introducing the video and channel
The host greets viewers and introduces the video which will cover a simple yet profitable Elliott Wave trading strategy. He invites engagement through likes, subscribes, notifications, and sharing to support more frequent content.
😃 Explaining Elliott Wave theory and market structure analysis
The paragraph explains Elliott Wave theory, building on Dow Theory and observations in nature to predict market moves through repetitive wave patterns. It distinguishes impulsive trend waves and corrective counter waves and uses them to analyze market structure.
🎵 Wrapping up and inviting continued viewership
The host concludes by noting there are many Elliott Wave trading strategies and it comes down to experience identifying entry points. He invites continued viewership through subscriptions, notifications, and sharing.
Mindmap
Keywords
💡Elliott wave theory
💡Impulsive waves
💡Corrective waves
💡Fractal nature
💡Fibonacci ratios
💡Wave count
💡Wave rules
💡Entry points
💡Swing high and low
💡Timeframes
Highlights
The movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves
Elliott was able to analyze markets in greater depth identifying the specific characteristics of wave patterns
Elliott wave theory requires looking for a pattern of five consecutive waves before making a trading decision
Impulsive waves move in the direction of the overall trend, while corrective waves move against it
Understanding market structure is key besides obvious support and resistance levels
Any trending movement can be broken down into a five wave sequence
Wave 2 never retraces more than 100% of wave 1, wave 4 never more than 100% of wave 3
Best entry is near the end of wave 4 to catch wave 5 of the 5 wave Elliott sequence
Start Elliott wave count from an extreme swing high/low or from end of previous impulse wave
Elliott wave count can be subjective, so experience identifying entry points matters
Can use Elliott Wave price action on any timeframe depending on your trading style
To find cycles of higher degree, start counting waves from weekly and monthly charts
Example of Elliott Wave price action showing full sequence and entry point
Many strategies to trade Elliott Wave, comes down to experience identifying entries
If learned something new, subscribe and share to support more trading videos
Transcripts
hey guys welcome back to another episode
in this video we will be going through
our very simple yet profitable elliott
wave trading strategy as usual we'll
have plenty of practical examples the
idea is to fully understand this
wonderful trading strategy and to make
the most out of it if you want more
videos more often please smash the like
button subscribe and turn on the
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across your whatsapp facebook accounts
or twitter to show your support
the very important point before we start
everything we discuss in this video can
be used for currency trading stock
trading and crypto because price action
stays relatively consistent across
different assets so we're going to go
very in depth in this video
elliott wave theory inspired by the dow
theory and by observations found
throughout nature elliott concluded that
the movement of the stock market could
be predicted by observing and
identifying a repetitive pattern of
waves elliot was able to analyze markets
in greater depth identifying the
specific characteristics of wave
patterns and making detailed market
predictions based on the patterns
elliott-based part is work on the dow
theory which also defines price movement
in terms of waves but elliott discovered
the fractal nature of market action
impulsive waves versus corrective ways
elliott wave theory will require looking
for a pattern of five consecutive waves
before making a trading decision elliott
wave theory begins by identifying two
different types of waves
first impulsive waves impulsive waves
move in the same direction as the
overall trend and are trend supportive
second corrective waves on the contrary
move against the overall trend these
waves occur in a series of five
elliot wave theory will require looking
for a pattern of five consecutive waves
before making a trading decision
impulsive waves and corrective waves are
perfect opposites however the trading
theories that make them useful remain
unchanged the impulse moves versus
correction are one of the basic
underlying principles of market
structure and understanding market
structure besides the obvious support
and resistance levels
we will now explore how you can use
impulsive and corrective waves in order
to increase the probability of earning
strong returns
learning how to trade elliott wave
the basic principle of the elliott wave
theory is that over a certain period of
time prices move in certain patterns
ralph nelson elliot found out that any
trending movement can be broken down
into a five wave sequence he labeled
these waves one through five one of the
elliott wave strategy rules is that
waves one three and five often formed in
the direction of the trend waves two and
four are price movements against the
prevailing trend
in this example elliott wave observed
this after a five wave move in the
direction of the prevailing trend there
is a corrective three wave movement in
the counter trend direction labeled a b
and c
an elliott wave theory the five wave
moves in the direction of the trend it
is also called motive waves while the
three waves corrective move against the
five wave move is also called corrective
waves
this is quite useful because we can now
break any price trend movement into this
basic five to three wave pattern each
impulsive and corrective move is a
series of waves oscillating up and down
this shows that we have waves within
waves
this means that a five wave sequence in
a one time frame might be simply the
first wave in a longer time frame in
other words this is simply confirming
the fractal nature of market theory
let's lay down some of the rules of the
elliott wave strategy it can assist us
in determining to find good elliot waves
entry points
but what time frame should you use with
the elliott wave strategy
in theory elliott wave patterns are
fractal and should apply to any time
frame therefore the best time frame to
use is the one you're most comfortable
trading if you're a day trader you may
use one minute five minute or one hour
candles
if you're a swing trader you may use
four hour daily or weekly candles if you
don't know what your strength is then
try multiple time frames in a demo
account to see which one works best for
you
the basic rules of elliott wave strategy
the elliott wave strategy needs to
satisfy and abide by some strict rules
in order to validate the five wave move
the three basic rules
rule number one
wave two never retraces more than one
hundred percent of wave one typically
the retracement is between fifty percent
and sixty one point eight percent of
wave one
rule number two
wave four never retraces more than one
hundred percent of wave three typically
declines between thirty eight point two
percent and fifty percent of wave three
rule number three
wave three always travels beyond the end
of wave one and it's never the shortest
one wave three will normally extend one
hundred sixty one point eight percent of
wave one
our favorite way to play the elliott
wave strategy is to let the first four
wave movement unfold then you have to
find good elliott wave entry points near
the end of wave four this is in an
attempt to catch the last wave of the
entire five elliott wave sequence
and now where to start elliott wave
count
there are different methods traders can
use to start an elliott wave count
however the best method to start an
elliott wave count is to begin the count
at an extreme swing high or an extreme
swing low
so if you start your elliott wave count
at the high you're basically identifying
the movement to the downside
conversely if you start the count of the
low you're identifying the movement to
the upside
however if you want to find the elliott
wave cycles of higher degree you need to
start counting the waves from the weekly
and monthly charts
according to the elliott wave principles
you need to start your elliott wave
count from the end of the previous
impulsive wave
another challenge faced by elliott wave
practitioners is the fact that the wave
count can be subjective
here are other examples of the elliott
wave price action trading to fully
understand this wonderful strategy and
to make the most out of it
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so there are many different strategies
on how to trade elliott wave and
ultimately it all comes down to your
experience and how good you're at
identifying elliott wave entry points
as always if you learn something new or
if you want more videos more often make
sure you subscribe click the
notification bell and share this video
across your whatsapp facebook accounts
or twitter to show your support see you
next time
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