Forex Trading Course (Part 4)

It can easily be currencies, bonds, gold, oil, or Tickle Me Elmo dolls. The important thing is the Elliott Wave

Theory can also be applied to the foreign exchange market.Wave The stock makes its initial move upwards.

This is usually caused by a relatively small number of people that all of the sudden (for a variety of reasons,

real or imagined) feel that the price of the stock is cheap so it’s a perfect time to buy. This causes the price to rise.

At this point, enough people who were in the original wave consider the stock overvalued and take profits.

This causes the stock to go down. However, the stock will not make it to its previous lows before the stock is considered a bargain again.

Wave 3 This is usually the longest and strongest wave. The stock has caught the attention of the mass public.

More people find out about the stock and want to buy it. This causes the stock’s price to go higher and higher.

This wave usually exceeds the high created at the end of wave 1.Wave Traders take profits because the stock is considered expensive again.

This wave tends to be weak because there are usually more people that are still bullish on the stock and are waiting to “buy on the dips.”

Wave 5This is the point that most people get on the stock and is most driven by hysteria.

The 5-wave trends are then corrected and reversed by 3-wave countertrends. Letters are used instead of numbers to track the correction.

Check out this example of a smokin’ hot corrective 3-wave pattern! in the forex market of insta trading..

Just because we’ve been using a bull market as my primary example doesn’t mean the Elliott Wave Theory doesn’t work on bear markets. The same 5-3 wave pattern can look like this:

According to Elliott, there are 21 corrective ABC patterns ranging from simple to complex.Uh 21? I can’t memorize all of that! The basics of the Elliott Wave Theory are already mind-blowing!”