Wave Analysis – Wave analysis is nothing else than the “wave theory” of Ralph Nelson Elliott The basic theory is an assumption that is the psychological state of social behavior. are represented by the model. Elliot uses the equity markets as input data. He realized that the range of price movement provides a structured view of the balance between supply and demand. based on this, Elliot found a unique way to analyze of the market with the ability to use it in the Forex currency market. he identified more than ten graphic model of the price movement after the “waves”, which hence the name “wave analysis” appears cried.
Forex currency market
The main principle of the “wave analysis” says that the rate of movement of an asset consists of 5 waves, after which total model modified by the other, which consists of three waves which move in the opposite direction Avatrade feedback.
Waves as indicated by the numbers called “head” by Elliot and are “impulse”, while the wave is indicated by the letter called correction wave or “triples”. Wave “2” is a correction of an impulse wave wave “1”, so the wave “4” is a corrective wave of the wave “3”. ABC is a correction to the entire sequence of 1-2-3-4-5 models. On a larger time interval, the entire sequence 1-2-3-4-5 represents a wave of that interval and pulse wave “1”, “3” and “5”. In addition, the sequence abc corrective wave shaping “2” and “4” on the larger interval. Elliot identified three main lines of wave analysis:
A correction is called the price movement in the opposite direction this time. In the wave analysis, this is called “corrective waves” .Elliot formulate the main rules governing the movement of this kind, which says that the wave correction can not be the fifth wave model, as opposed to the impulse waves. Therefore, the fifth wave of the price movement of the wave larger interval not a full correction, but only became part of it.
Model correction of price movement may look different. This may be between sharp spike against the current trend or a movement of the price of a long and wide. All other models of the behavior of prices and sales, and where it is derived from the basic model Elliot and include various combinations. Wave analysis is a tool that is very strong, which helps good profits, which can be used in the financial market such as Forex generate. However, it is not so easy.
The main drawback of this theory is that you need to spend a lot of time to gain valuable experience to do and adjust trading strategies are common to yourself so that you can apply to the activity of real money to succeed and a decent profit. How to analyze price movements largely a matter of the most difficult to be learned by the novice. That’s why, if you want to use as the basis of the wave theory trading mu strategy, be prepared to work hard over a long period of time. As a result, you will have a deep understanding of getting the current situation in the market and you will begin to understand the logic of the market, and will continuously improve deposit in time .