Only a few traders know how to trade with Elliott Wave well. In fact, with the help of it, professional traders can map price movement projections on all Pairs in any Timeframe.
What is Elliott Wave?
Ralph Nelson Elliott discovered the Eliot Wave in the late 1920s. According to Investopedia, Elliott Wave Theory is a method of technical analysis that looks for redcurrant long-term price patterns related to persistent changes in investor sentiment and psychology.
In other words, Elliott Wave is price wave marking lines, which traders use to map in which direction the price will most likely move.
The analogy is almost the same as an online map plan that can predict the bottleneck or the long journey to the destination. Basically, these wavy lines highlight the recurring price patterns that often occur in the Forex market.
According to its creator, prices tend to always move in two conditions, that is:
If prices are moving in one direction for a certain period, that is a simple example of an impulse wave. The term impulse wave describes an imbalance in market sentiment that ultimately drives prices in only one direction.
During the upward trend, the market is generally in a state of euphoria so prices are pushed upward. Conversely, when a downward trend, traders in a panic to keep pressing prices until it continues to plunge.
The imbalance of prices during the impulse wave period, will correct to return to the equilibrium point. Thus, the faster the price skyrocketed, the greater the potential for a price correction. Conversely, if prices plunge too fast, it is also likely to increase.
In practice, impulsive market conditions are represented by Elliott’s Impulse Wave. Traders use these waves to get trading opportunities while the trend is still ongoing. This is one of the secret weapons of professional traders to gain large profits. Next, after the Elliott Impulse Wave has finished forming, the trader prepares to anticipate the correction or reversal of the price direction by mapping the Elliott Corrective Wave.