Enhance Your Stock Trading Strategy And Double Your Returns Using Elliot Wave Analysis
Something all investors should consider before to making an investment decision is this: What is the current trend direction of the market right now? A working knowledge of Elliott Wave analysis can help to answer this question. By understanding the waves, we can often confidently know if the market is most likely to go up, down or sideways.
A good reason to take the time to understand Elliott Wave Theory is that it can help you to identify whether the market is trending, or is it in a reaction to the current trend. Understanding these patterns of market behavour can help you to accurately forecast where the market is likely to go next, and position yourself accordingly.
There are three primary elements to Elliott Wave Theory
Pattern - Is the trend currently up or down? Is it in an impulse move or a correction?
Price - When the market has completed an impulse move, how far will it pull back before resuming the trend?
Time - How long will the market continue to trend in its current direction before it's next reaction, or before the trend changes entirely?
A normal bull or up trend has a series of higher highs and higher lows, while a bear trend is characterized by a series of lower lows and lower highs. These regular wave patterns can be seen in the market at all time periods - intra day, daily, weekly, monthly and even yearly for major trends.
When a market has a correction, the major support and resistance ratios are at .382, 50% and .618 and 100% of the previous range in both time and price. In other words, if a bull market were trending upwards strongly, you would expect a normal healthy correction to retrace on average 50% of the previous leg up in both time and price.
The smaller retracement before the trend resumes, the stronger the trend, so if a stock rallies $5.00 in 60 days, you would estimate a 'normal' correction to be $2.50 in 30 days. If the market retraced only .382 in price ($1.91) and time (23 days), then gave a signal it was preparing to rally, it would put the Stock in a very strong (bullish) position.
As I said, the major importance of understanding the Elliott Wave pattern in the markets you trade is to determine the direction of the dominant trend. We always want to trade with the main trend, and if possible, enter at the end of corrections to the main trend, so we can maximize our profit from the next move. The problem for many people however is this - how do you know the correction is ending and the major trend is resuming?
There are any number of 'entry signals' traders use to enter trends - watching for higher highs and lows on our Swing Charts, entering on a Moving Average crossover, trading trend line breaks or new highs (or lows), etc. Your critical goal as a trader is to find an entry trigger you are comfortable with, something that has reliably identified the resumption of fast moving trends, and then take every entry signal that system gives you. Once you have found your signal and entered a trade, implement a trailing stop loss system that takes you out of your trades when each trend comes to an end.
This is how professional traders beat everyone else, and when you do this too, your trading will become much less stressful and your account balance will have a chance to consistently grow over time. - 23196
A good reason to take the time to understand Elliott Wave Theory is that it can help you to identify whether the market is trending, or is it in a reaction to the current trend. Understanding these patterns of market behavour can help you to accurately forecast where the market is likely to go next, and position yourself accordingly.
There are three primary elements to Elliott Wave Theory
Pattern - Is the trend currently up or down? Is it in an impulse move or a correction?
Price - When the market has completed an impulse move, how far will it pull back before resuming the trend?
Time - How long will the market continue to trend in its current direction before it's next reaction, or before the trend changes entirely?
A normal bull or up trend has a series of higher highs and higher lows, while a bear trend is characterized by a series of lower lows and lower highs. These regular wave patterns can be seen in the market at all time periods - intra day, daily, weekly, monthly and even yearly for major trends.
When a market has a correction, the major support and resistance ratios are at .382, 50% and .618 and 100% of the previous range in both time and price. In other words, if a bull market were trending upwards strongly, you would expect a normal healthy correction to retrace on average 50% of the previous leg up in both time and price.
The smaller retracement before the trend resumes, the stronger the trend, so if a stock rallies $5.00 in 60 days, you would estimate a 'normal' correction to be $2.50 in 30 days. If the market retraced only .382 in price ($1.91) and time (23 days), then gave a signal it was preparing to rally, it would put the Stock in a very strong (bullish) position.
As I said, the major importance of understanding the Elliott Wave pattern in the markets you trade is to determine the direction of the dominant trend. We always want to trade with the main trend, and if possible, enter at the end of corrections to the main trend, so we can maximize our profit from the next move. The problem for many people however is this - how do you know the correction is ending and the major trend is resuming?
There are any number of 'entry signals' traders use to enter trends - watching for higher highs and lows on our Swing Charts, entering on a Moving Average crossover, trading trend line breaks or new highs (or lows), etc. Your critical goal as a trader is to find an entry trigger you are comfortable with, something that has reliably identified the resumption of fast moving trends, and then take every entry signal that system gives you. Once you have found your signal and entered a trade, implement a trailing stop loss system that takes you out of your trades when each trend comes to an end.
This is how professional traders beat everyone else, and when you do this too, your trading will become much less stressful and your account balance will have a chance to consistently grow over time. - 23196
About the Author:
For a Free stock market trading strategy Video that reveals a trade entry signal that's right up to 77.4% of the time, and will sa simple way you a simple way to predict breakouts in the Stock Market days before they actually occur, visit http://www.stocktradingexperts.com
posted by X - Men @ 5:58 AM
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