How Does The Elliot Wave Theory Work in Trading?

by Traders Gurukul Stock Market Training Institute

The trading market works according to an algorithm. It would be pertinent to mention here that Elliot Wave comes relatively close to translating the algorithm for the people. However, some variables have been lost or not deemed in that translation. Nonetheless, it is of great importance. Do you wonder what the price would do in such a situation? What resistance and support lines should you consider? Most people would argue that a technical trader could not consider all variables, as they would be required to add fundamentals. However, it would not be wrong to suggest that fundamentals would work for the people on the top and not for the people on the street.

As per the Elliot Wave theory, you would come across eleven patterns and there would be specific rules and guidelines required to be followed strictly and mark those patterns on the chart. It would be relatively difficult to observe those patterns with the naked eye. It would be important for you to use a specific tool for measuring every move and mark the numbers and letters accordingly. An array of combinations of patterns could form next. Therefore, it would be a hit and miss to predict what would happen next.

EW would tell you about how much you should risk. Rest assured that your risk would be clear despite you enter the trade. You would be aware of the levels that you should not go beyond lest the pattern would become invalid. Therefore, you could keep tight stop losses at specific levels. In the event you get it wrong, you could quickly adjust the marketing and enter again. Rest assured that there could be two or more possible outcomes anytime. As a result, you should be aware of all possible outcomes and be quick to adapt to specific changes. You would be required to fix the stop loss before choosing the profit target. Where your pattern becomes invalid, that would be your SL. It would remove stress from trading, as you would not have to change your SL every time your trade moves against you. You would be aware of when to get out. Rest assured that no other tool would cater to you with such precision.

It would not be wrong to suggest that the success rate in using EW is average. Despite you being sure of forming a pattern, you may end up forming a triangle. You could be unsure of what happens, until it has been completed, and the next pattern is formed. When following EW, you could not be comfortable with your markings. You would require having a backup plan if it does not work out.

EW is the best tool made available that tells you instantly if you were wrong. You should track your progress and adhere to changes. It needs patience and plenty of work. It would be pertinent to mention here that EW is not for everyone. Only a few traders or investors learning EW would stick through it. Others would call it a scam. The rewards it offers would keep bringing you back to EW. It predicts the move or turns accurately.

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Created on Dec 11th 2020 01:35. Viewed 245 times.


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