🔴 Most Effective "ELLIOT WAVE and FIBONACCI" Price Action Trading Strategy (Wave Trading Explained)

Summary

This 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

00:00

😊 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.

05:00

😃 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.

10:04

🎵 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.

Keywords

💡Elliott wave theory

A technical analysis theory that stock market prices move in predictable patterns called Elliott waves. It identifies 5-wave upward price movements followed by 3-wave downward corrections. The script shows how to identify these waves and make trading decisions based on expected wave sequences.

💡Impulsive waves

The 5 waves in an Elliott sequence that move in the direction of the main trend. They are labeled as waves 1, 3 and 5. The script explains they move in sync with the prevailing market trend.

💡Corrective waves

The counter-trend waves labeled A, B and C in an Elliott sequence. They move against the direction of the main trend, usually as a correction after impulsive waves.

💡Fractal nature

The self-similar repeating patterns seen in Elliott waves, wherein waves form within waves across timeframes. As the script mentions, a 5-wave sequence on lower timeframe could be the first wave on a higher timeframe.

💡Fibonacci ratios

Specific ratios like 38.2%, 50%, 61.8% and 100% that are used to measure typical retracements in Elliott waves, based on Fibonacci number sequence. The script lists Fib ratios in wave retracement rules.

💡Wave count

The labeling and numbering of different Elliott waves in order, usually starting from an extreme swing high or low. It is key for applying trading strategies based on expected wave sequences as per Elliott theory.

💡Wave rules

Guidelines about characteristics of valid Elliott waves regarding the ratios for wave retracements, extensions etc. The script lists 3 basic rules waves need to follow to qualify as an Elliott sequence.

💡Entry points

Ideal locations to enter trades based on identified or expected Elliott waves. The script mentions finding entries near end of Wave 4 in anticipation of the final Wave 5.

💡Swing high and low

The peaks and troughs in price charts that can be used to start wave counts. The script advises starting Elliott wave count from extreme highs or lows which indicate trend reversals.

💡Timeframes

The script advises using Elliott waves across multiple timeframes based on one's trading style, like intraday or long term. It states Elliott wave analysis can apply to charts from 1 minute to weekly or monthly.

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

notifications bell and share this video

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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