Discovered or invented by an American nationality . Ralph Nelson Elliott , born on July 28, 1871 Marysville . His career as a professional accountant makes Elliot familiar with the data , figures , and statistics . This is what ultimately makes Elliott found the price movement analysis system ( stock , forex , etc. ) are now very popular among the traders .
Theory invented by Elliot 's not finished in a day / month or year . But has spent most of the time in his life ( 75 Years ) .
This analysis system ( theory ) is now known as the ' Elliott Wave ' , which was published in the book title ' The Wave Principal ' . Broadly speaking, Elliot argues that ' Shares , the market allegedly behaving disorderly or erratic , but not ' . Elliot further found that the pattern of trade in the market always moves in a repeating cycle .
Price swings up and down due to the collection of the collective psychology of traders and swing it by Elliott called ' Wave ' or waves , and interesting Elliot stated that this wave will be repeated in the same patterns , and he's confident when you are able to identify wave then you can predict where the next price direction .
What is proposed by Elliot no doubt make the traders are very interested . With this theory seemed very easy for traders to look at the points where the prices are likely in a position most expensive or cheap , or in other words , it allows traders to capture peak and basic information .
Up here , what's on your mind ? Would you believe ?
If this theory is correct , as will the money already waiting in front of your eyes ?
Inhale deeply, need not suppose , essentially , this will certainly add to your knowledge , and we know there's nothing wrong with either .
Well, let's start learning Elliott Wave .
Before you go deeper , we must first be familiar with what Elliott raised about Fractals . Fractal is also commonly used in the world of mathematics and is known as " self similarity / self - similarity " .
So Fractals is a structure , where the structure can be divided into several smaller parts which have properties very similar to the whole.
Elliot strongly emphasizes the role of Fractals , why ?
Elliot states that every Elliott wave is Fractals , and they can be divided into waves Eliiott smaller .
Still confused with Fractals ? The parable is a simple and obvious , and it can be found all around you , sea scallops are Fractals , Lightning , Clouds , and even snowflakes are also fractals .
Elliott stated that the market is moving in a trend that will have a wave pattern , which he calls a 5-3 wave pattern . Where wave 5 ( first phase ) will be followed by a 3 wave to the next phase . Let us discuss one by one
Wave Pattern 5-3
Wave 5 wave pattern called Impulse ( Impulse Wave ) , this wave is divided into 5 waves and models mentioned each with numbers and sequence.
1,3,5 wave is called the motive usually represents the overall trend direction , and 2.4 is the correction wave .
The meaning of each wave :
Wave 1 : Price made the initial upward movement . This is usually caused by a small number of people ( for various reasons , whether real or imagined ) feel that the price was cheap so this is a great time to buy . This causes prices to rise .
Wave 2 : At this point , quite a lot of people who previously had been in the original waveform ( rise ) to consider the price was too high and take advantage . Lead prices go down .
3 waves : These waves are usually the longest and strongest . In this phase the stock has attracted much public attention . Resulted in increasingly inflated prices , usually the price will soar higher than at the time of wave 1 .
Wave 4 : In this phase, some people taking profits , and felt the price was expensive . But there are some people who still feel that the price is still in an uptrend ( bullish ) , so this wave tends to be weak .
Wave 5 : This is the phase in which the price was too high to be collected / purchased , and the power which is able to make the prices continue to rise is because of sheer hysteria .
Keep in mind that the length of the wave masing2 not always exactly correspond to the ratio in the image , can be longer or shorter , it's natural .
ABC correction
Furthermore Elliot describes that 5 wave pattern above will be followed by a 3 wave , ABC correction pattern . Look at the picture below.
Price trend up / down price trends Bullish / Bearish
According to Elliott , there are 21 ABC correction pattern ranging from simple to the most complex . Well if ya bother until there are 21 kinds , how do I memorized . Fortunately Elliot has been simplified and formulated into a pattern that is much simpler and easier to be understood and remembered . So what does the correction patterns :
1 . ZIG - ZAG Formation
Zig - zag formation moving very sharply in price as opposed to the dominant trend . Wave B is usually shorter than wave A and C. The pattern of zig - zag can occur twice or even three times in a correction phase .
2 . Formation Flat ( Flat )
Flat formations formed as a wave that moves to the side , the length of each wave is generally the same . Difference in length is usually not too large .
3 . Formation Triangle ( Triangles )
This formation is moving against the trend and consists of 5 waves moving sideways . While the dimensions can tilt down , narrowing or expanding .
Waves in the wave
As in the beginning of the discussion above , mention of fractals , which is a structure that can be broken down into smaller parts that have a pattern such as the overall structure . And this also applies to the Elliot wave theory . You will find wave 5 or 3 smaller in a wave pattern . See the illustration below :
From the picture we can see that the wave 1 3 5 , in which there are 5 patterns , and from wave 2 4 , in which there are ABC correction pattern ( wave 3 ) . So from here it easier to imagine where the intended meaning of Fractal like that . Elliot stressed that there is always a wave of smaller than each wave , and this pattern is always repeated .
Elliot wave scales divide into :
* Grand supercycle
* supercycle
* Cycle
* Primary
* Intermediate
* Minor
* Minutes
* minuette
* Sub - minuette
Of which the largest Grand supercycle to its smallest sub - minuette
Well , let's see how the implementation and realization in which the real and actual price . Look at the picture below .
Figure 1 above shows the perfect cycle of elliot wave , namely the 5-3 pattern that is followed by the ABC correction pattern . It is seen that there is a wave which is imperfectly formed , wave 3 for example , there is little corrections in it . But yes, like that in real life .
For those of you , who are still not familiar . Reading bentuk-bentuk/pola will probably be very difficult . But if you practice and you will quickly get used to and not as difficult to identify who imagined .
Few Tips to make it easier to read wave patterns :
* Wave 3 must be longer when compared with Wave 1 and 5
* Wave 2 will not move or smaller fall below the start of wave 1
* Wave 4 will not move until the fall at the end of wave 1
src:seputarforex
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