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Elliott Wave Analysis For Beginners

You should not be afraid of this apparently advanced trading topic, Elliott Waves. It is very easy to learn and understand. In this article, I am not going to talk about the history of Elliott Wave and things like that. This information can be easily found over the Internet.

What is hard to find over the Internet, is a clear and easy to understand explanation about the ways you can use Elliott Wave in your trading (1) not to enter against the trends and strong markets participants, and (2) enter at the right time to catch the strong movements and follow the trends. That is why this article was written.

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Do You Have To Learn The Elliott Wave Analysis?

Elliott Wave Theory helps you to understand the market movements and trends much better. Although your trading system may not talk about Elliott Wave, it still helps you a lot not to go against the trend even when a too strong trade setup is formed.

There are good tools like Bollinger Bands and moving averages like Bollinger Middle Band for those who like to follow the trends, but it is still necessary to know at what stage the trend is and when it is more probable to reverse.

So, professional traders have to know what Elliott Wave theory is and what it talks about. At least, they have to know the waves and the strongest part of the price movement, either when the price is trending, or when it is ranging.

Is It Possible To Trade Profitably Without Caring About Elliott Wave?

Yes, it is possible, but only when you wait for the too strong trade setups if you want to go against the trend. Also, if you want to follow the trends, you have to wait for the too strong continuation trade setups that form on the continuation chart patterns like Triangles, or you have to know how to take the continuation trade setups that form above/below the moving averages like Bollinger Middle Band which is a 20 Simple Moving Average, in case of up/down trends. You can also distinguish and follow the support/resistance levels and their breakouts to follow the trends.

In spite of this, Elliott Wave can be a big help. Unlike the bugging information that interfere with your trading system and cause you to make mistakes, Elliott Wave helps you to use your trading system better.

You don’t have to be scared of Elliott Wave. It is not as complicated as you can see on many websites. Some people are used to make the things too complicated, but simplicity is the first thing in everything we want to do.

What Is Elliott Wave?

However, in the current article I am going to explain it in a simpler and more practical way.

As you can see on all the price charts, the price never goes up or down directly and without any noise or ups and downs at the middle of the way. For example, when it starts going up, a few or few bullish candlesticks form, but then it stops going up, forms a few bearish candlesticks, or moves sideways for a while, and then starts going up again.

Ralph Nelson Elliott who is the founder of Elliott Wave Theory, found out that the “ups” and “downs” usually follow a special pattern that repeats itself on all charts and markets, be it one minute or monthly charts, or stock, CFDs, currencies and… markets.

He analyzed more and extracted the main and most visible ups and downs within a movement. These ups and downs are called waves.

Before I show you the waves, first I have to explain what I mean by “movement”.

By “movement” I mean a fresh price movement. For example, imagine that the price has been going sideways for a while, but it suddenly starts going up. That upward movement is because of a special event like an important economic news, otherwise it would never form and the price would keep on moving sideways.

When markets start trending, the movements and the waves that form in trends, can be seen clearly in most cases. But when markets are moving sideways, the waves become too small and cannot be recognized easily. In spite of this, they still exist, but in a much smaller scale.

What Are Those Waves That Form In A Movement?

Let’s start with an upward movement first.

The movement starts when the price starts going up after a downtrend or a sideways movements. Usually the movements start with a buy signal which can be strong sometimes. Having Bollinger Bands on your charts is a big help to identify the beginning of a fresh movement, because in many cases a fresh and strong upward movement starts after a strong Bollinger Lower Band breakout and maybe a strong candlestick pattern.

The initial part of the fresh upward or bullish movement is called Wave 1. As you see on the below chart, it is started at the bottoms of a strong downtrend and after a strong Bollinger Lower Band breakout and a relatively strong candlestick buy signal:

Elliot Wave Analysis - Wave #1

Usually after the first upward movement which can be strong, there is a short down movement which is called Wave 2. I say “usually” because sometimes a wave becomes too small to be seen as a wave on the price chart. So, don’t expect to see the Elliott Waves on all movements under any condition. Sometimes it becomes impossible to distinguish the waves and differentiate them from each other. In spite of this, you can still under such a condition. I will tell you how.

Elliot Wave Analysis - Wave #2

After Wave #2, another upward movement will be started which is usually the biggest wave in an uptrend. That is where most professional traders enter to take the maximum advantage of the uptrend. This important movement is called Wave 3.

Elliot Wave Analysis - Wave #3

After Wave 3, there are two more waves: Wave 4  and 5.

Wave 4 is a small bearish movement like Wave 2. Wave 5 is another upward movement which is not that strong and is usually smaller than Wave 1. However, sometimes Wave 5 becomes too long and strong when the trend is too strong. We will talk about Waves 3 and 5 more, later in this article.

Elliot Wave Analysis - Wave #4 and #5

After forming the last two waves (4 and 5), bulls get exhausted. That is the time that bears may take the control and the uptrend may reverse. However, a consolidation forms and the price goes sideways when bulls are serious not to give the full control to bears but are exhausted at the same time.

The wave that forms after wave 5, is called Wave A. This wave is a bearish wave which is not usually strong, specially when bulls are really strong. When the uptrend is too strong, then Wave A is a small bearish movement that can be the beginning of the formation of a consolidation like Flag or Triangle, or the beginning of a sideways movement.

After Wave A, another upward movement appears which is known as Wave B. This wave is usually the shortest wave.

Wave C which is the last bearish movement, is usually the biggest downward movement. It is the good chance for those who like to go against the uptrend. However, this wave is long enough only when bulls are not too strong and serious, otherwise it can be a short bearish movement that will reverse after a new buy signal formed by candlesticks.

That last three waves (A, B and C) can be formed when the market is noisy and choppy, in the way that it sometimes becomes hard to distinguish Wave A and the next two waves. Having Bollinger Bands can be a big help in this case too.

Elliot Wave Analysis - Wave A, B and C

What Happens After Wave C?

After Wave C, another set or cycle of Elliott Waves will be started from the beginning (wave 1). The waves length can be different under the different markets conditions. When bulls are stronger, the bullish waves are longer, and when bears are stronger, the bearish waves will be longer:

Elliot Wave Cycles

When bears take the control, the bearish waves (A, B and C) become longer. On the above chart, the first cycle (the yellow zone) was more bullish, and so the bullish waves were longer. The second cycle (the green zone) was bullish too, but bears were stronger and bulls were getting more exhausted compared to the first cycle. Therefore, the bearish waves are longer on the second cycle.

The below chart shows a too strong bear market. As you see, the bearish waves are too long:

Elliott Waves On A Too Strong Bear Market

When a party takes the control very strongly, it becomes too hard and sometimes impossible to distinguish the waves. It is possible that the waves I am showing you on the above chart are marked by me incorrectly, but there is no other way to mark them when the trend is too strong. For example, nobody can say whether the small upward movement that I have marked as Wave 4, is really Wave 4. When fear takes the control, the price collapses very strongly and the small bullish waves get lost under the bears feet!

For example, while it seems EUR/USD has completed a cycle on the daily chart, it is not clear where the bullish waves are on the weekly chart:

A Too Strong Bear Market

It is almost the same when bulls take the control strongly.

The Long Time Frames Movements On Shorter Time Frames

When one of the strong waves is forming on a longer time frame, a cycle is in progress on a smaller scale on a shorter time frame. For example, when Wave 4 is forming on the above chart which is weekly, several different cycles are forming on a shorter time frames. Each of these cycles can be in different stages.

Even on the same time frame, there are smaller cycles forming on the bigger cycles.

Elliott Wave Small Cycles in Big Cycles On The Same Time Frame

How To Have Better Trading Results Using Elliott Waves Analysis

Wave #1 is usually started when a strong trade setup forms by candlesticks. A too strong trade setup which is usually the start point of Wave 1, can be the beginning of a strong trend. Therefore, when a too strong trade setup forms on a sideways or exhausted market, it can be known as the beginning of a new cycle.

That is what we always emphasized on. Although we have not talked about Elliott Wave analysis in our regular trading system, we completely follow and comply with it. When you take a too strong candlestick signal on an exhausted and sideways market, there is a higher chance to enter the market at the beginning of Wave 1. Although it is sometimes impossible to identify the waves properly and correctly, you lower the risk of going against the strong waves, when you take the too strong setups on the exhausted and sideways markets.

Most professional traders try to enter the markets at the beginning or even middle of Wave #3, because it is usually the strongest wave among all the other Elliott Waves. The question is how do they do it?

First, they wait for Wave #1 and #2 to form. This assures them that a party has completely taken the market control. That is why they say trading is about buying high and selling higher, because first you have to wait for the price to go up. Then, you enter when bulls already have the control. So, you buy high, hold, and sell higher. It is the same with going short. Just the direction is opposite.

After Wave #2, if a too strong signal which is against Wave #2 direction forms, be it a strong candlestick pattern or a support/resistance breakout, professional traders take it as the beginning of Wave #3. If Wave#3 starts without a strong signal, then a support/resistance level breakout can help them to enter the market when Wave #3 has already started to form a while ago.

When trend is too strong, Wave #5 can also be as long and strong as Wave #3. You can enter the market at the beginning or middle of Wave #5 if a too strong continuation signal forms. Like the beginning of Wave #3, this continuation signal can also be formed by a support/resistance level breakout or a too strong candlestick pattern to start Wave #5.

Support Level Breakout While Wave #3 Is Ongoing

Some professional traders use other tools or indicators to track the formation of Wave #3. For example, a 50 Simple Moving Average sometimes can be a big help, specially when the trend, and so Wave #3, are supposed to be too strong.

For example, on the below chart which is the same EUR/USD daily chart you saw above, when the price crosses the 50SMA and Bollinger Upper Band at the same time, and then the price goes against Wave #2, it indicates that most probably Wave #3 is started. Similarly, when it does the same when Wave #4 is forming, and then the price goes against this wave, it means Wave #5 is started which can be too strong also on the too strong trends.

When you are in doubt even when tools like 50SMA or Bollinger Bands have formed the signal, methods like support/resistance levels breakouts can be help a lot:

50SMA + Bollinger Bands + Support Level Breakout To Follow Elliott Waves

Elliott Waves Prevent You From Going Against The Trends

Those who miss the trends and all the continuation signals to join the trend, have to wait for the reversal signals. Also, those who are already in while a trend is forming, have to be careful to get out on time, not to lose the profit they have made. On the other hand, they have to know how to maximize their profit and not to get out too early.

Elliott Waves help you to do all of these. How?

When a strong trend is formed on the chart, the first strong reversal signal is the beginning of Wave A which is usually short. So, if you take this reversal signal, chances are it goes against you very fast and hits your stop loss. That is why we don’t take the reversal trade setups that form on a bull market and when bulls are still too strong and the uptrend is sharp, or on a bear market and when bears are still too strong and the downtrend is too steep.

We ignore these setups even when they look too strong, because they are usually the beginning of Wave A that will reverse very soon. Sometimes when the trend is too strong, Wave A is too small to be seen. Its movement can be seen on the shorter time frames, but not on the same time frame that the trend is ongoing.

Wave A Reversal Signal That Has To Be Ignored

After Wave A, Wave B starts forming which is agreeable to the trend direction, but usually it is not strong enough also and closes around the same level that Wave A was opened. These movements (Wave A + B) usually form a consolidation on trends. They can be ended to a complete reversal which is Wave C. So, if you want to take the reversal setups and go against the trend, first you have to wait for Wave A and B to form. Then you enter the market when Wave C starts forming:

Wave C Reversal Signal That Can Be Taken Sometimes

Sometimes you think you are at the beginning of Wave A, B or C, whereas the trend is too strong, and so, Waves 1, and 3 have been too long and even Wave 5 is not completely yet. Going against the trend under such a condition can be too risky. The below chart shows that most probably the market has not started the Wave 5 yet. Still we have to wait to make sure that whether the uptrend will be continued or will be reversed. If it moves sideways and forms a consolidation, then starts going up again, it mean a new cycle is started and the uptrend will be continued. If it forms a too strong reversal signal by candlesticks while it has already moved sideways for a while or formed a consolidation, then it can be known as the beginning of Wave C, and  so we can go short:

A Too Strong Uptrend

Does it look too hard and confusing?

Then let me give you a simple formula: Don’t go against the trends and don’t take the reversal trade setups when the markets have not moved sideways yet:

Which Reversal Signal Is Safer To Take?

A real example of a strong reversal signal that was taken safely:

Safer Reversal Signals

Taking the too strong candlestick signals while considering the Elliott Waves and the trends situation, helps you to have a higher success rate and take the big movements. If you learn how to do that, you can even follow the too strong and unexpected movements, because these movements follow the Elliott Waves and strong setups on the long time frames. The below chart is one of the examples. I think you remember that trade setup. Look how a too strong trade setup started the Wave 5 on a bearish market, and then how a too strong and sudden movement happened while Wave 5 was forming:

Taking The Too Strong Candlestick Signals At The Right Place Right Time!

Concluding:

Knowing the Elliott Waves is a big help to (1) increase your success rate and (2) have bigger gains. But, to be a consistently profitable trader, it is not a must to know the waves in details. Keep in mind that sometimes it impossible to differentiate the waves from each other, and knowing the waves doesn’t help you under such a condition. However, you can easily enter the markets if you take the too strong candlestick trade setups, or the support/resistance line and levels breakouts, under the conditions that was explained above.

You can avoid taking the reversal trade setups and signals, even when they are too strong, when the trend is still strong and probably is forming the strong waves like #3 and #5. You can go for the too strong reversal trade setups when they are placed in a position that they are probably at the initiation of Wave C.

If you follow the above tips, you can trade, make profit consistently, and control your risks properly.

Hope Elliott Wave analysis doesn’t look mysterious and complicated anymore.

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118 thoughts on “Elliott Wave Analysis For Beginners
  1. Rumen Rasheev says:

    Thank You Chris for this wonderful article. May be my question will look stupid (I am a novice trader), but would it be easier to see these waves if someone uses Heikin Ashi charts on the long time frames? Thank You!

    • Rumen,

      That is a good question.

      As Heikin Ashi eliminates the price noise, sometimes it doesn’t let you see the small waves like 2, 4, A and B. But it is good to follow the long waves.

  2. moaied suhail says:

    thank you Chris for your endless help, GOD bless you

  3. Jae Task says:

    Amazing. Thanks Chris. So clear and concise.

  4. Jan du Plessis says:

    Hi Chris, very helpfull. Was not sure about the waves.
    Regards

  5. B. Hairro says:

    Hi Chris,

    How about using the ZigZag indicator as the “wave”?

  6. Mike Yin says:

    Chris,

    Now I understand why you said “AUD/NZD hasn’t completed Elliot Waves yet” in your previous comment.

    Is AUD/NZD at wave B now after pull back from weekly strong resistance?

    Thank you! Good learning!
    Mike

    • Mike,

      It seems it is at the end of the Wave A on the monthly chart. Therefore, it will probably start the Wave B which means it can go down once again. The next buy signal it forms will be a great chance to go long above the support levels on the monthly time frame, because it will be the beginning of Wave C.

  7. Azharul Islam says:

    Thank you for a good article that clear me why we shall wait for an exhausted strong market and what is the actual use of support/resistance line/level breakout.

  8. Ted Mahachi says:

    Thank you so much Chris! Brilliant article indeed. l really enjoy your explanations.. just marvelous!

  9. Zakaria SANTOS says:

    The bottom line is take the too strong trade setups and follow with waves

  10. marek herde says:

    That’s absolutely Fab article after the one about stochastic. Its all look so much simpler now and less troubling. Thanks for that! I will practice it diligently 🙂
    May I ask you a question about GBP/CAD weekly and monthly chart. Do you think, that the wave number five is being formed right now? The first wave would be the long uptrend, then 2 is the long consolidation, then 3rd would be the movement after resistance breakout, then 4th is the downwards movement after the strong signal and 5th after bounce of the support which worked as a resistance for a long time. If so, the immediate resistance line could work as a reversal and beginning of the wave A, unless bulls break through that, make a new high, and then create the reversal wave. I hope its clear? Thanks.
    If my way of thinking is correct, then it looks like I entered the wave number 5. Here is the chart!

    https://charts.mql5.com/8/211/gbpcad-w1-pro-financial-services.png

    • Marek,

      Thank you too.

      Yes, GBP/CAD is forming Wave #5 on the weekly and monthly charts. You are right 🙂

      Of course, maybe some traders say we are wrong, but that is something that looks obvious to us. Not all Traders agree on the waves and there are always some traders who think differently.

  11. Hills Jandu says:

    Great article Master. but it seems hard to draw the wave correctly.
    wait for your advise.
    Thank You Chris

  12. Muhammad Hassan` says:

    wow great ,,,the article that i am trying to find that taught me clearly but i was failed,,,thanks chris sir,this is only LuckScout, where we can read and teach that we want and become a profitable trader

    Thanks again

  13. Paul Br says:

    Thanks, Chris.
    Sorry, but the 13th image “Wave C Reversal Signal That Can Be Taken Sometimes” do not open.

  14. MOHAMED FADL says:

    Wonderful article Mr. Chris.

  15. Sefako Isaac says:

    Wonderful article thanks Chris you did make it simple.

  16. _Ben _ says:

    Wonderful piece of information here. Beautifully constructed and easy to understand article. Everyday another piece of the puzzle comes together and I can understand the market more and more. Thank you kindly, Chris.

  17. Andy Aristiyanto says:

    Hi Chris,

    Been read some books on this subject and you’ve explained it better. Especially on how you combine it to our trading plan.

    Given the above explanation, no wonder that some traders combine Elliot Wave with Fibo to predict the target point.

    Thank you for the another great article.

  18. Nadi brh says:

    Chris Thank you for the article.

    Would you please set some exams on the Elliot wave to get our hands dirty? 🙂

    Many thanks

  19. fasih ahmad says:

    thanks for the great article chriss!! it will be nice if u give some other examples to identify waves in real time , as on lot of occasions , it can be very subjective..
    thanks a lot!!

  20. Shalewa A says:

    Hi Chris, thanks for all you do.

    • Shalewa A says:

      Hi Chris,

      Thanks for this Elliot Waves article. You have taught us different trading systems, which is good in my opinion. It gives us choices as individuals with different preferences to study and concentrate on what we feel comfortable with.

      God bless you!

      • Shalewa A says:

        I really cannot thank you enough for what you do for us on this site 🙂 .

        It is interesting that back in July I couldn’t combine this with all I was assimilating in as it seemed quite a lot but now looking at the Zigzag lines on the charts I am beginning to identify the Waves 🙂 and seeing how useful they could be in decision making regarding entry, holding and closing a trade just as Youness said.

        Thanks again Chris.

  21. alaa mahmood says:

    hi chriss great help thank you

  22. kehinde emmanuel says:

    i love this article it came in at right time. please , sir can you write basically on the method bank traders use. because based on my little knowledge i think our method here on LuckScout site is similar to the bank traders.

    • Kehinde,

      Bankers almost use the same method as we do. They use the long time frames (weekly and monthly) and look at the the too strong support/resistance lines and levels and follow the strong candlestick signals. They also use 200 and 50 moving averages to follow the trends better.

  23. Amanda L says:

    So enlightening! In our trading system, differentiating a trend from exhaustion or consolidation has been my Achilles heel. Moreover, I didn’t fully appreciate why these are so important when we are looking at an otherwise strong candlestick pattern.

    This article so clearly explains why WHERE the setup occurs matters so much. Now I will take trends with more peace of mind and “ignore” weak setups with greater confidence. 🙂

  24. MUSTAZAH ABDUL RAHIM says:

    Thanks Chris..another great article, very clear now.

  25. Abbu Zabbu says:

    Thanks Chris for the great article i was waiting anxiously,
    chart AUDCHF weekly 3rd wave cannot be shortest of wave 1 and wave 5, (as per EW principles) probably wave 5 is still wave 3.

    • Abbu,

      Wave #3 wouldn’t be shorter than Waves #1 and #5 if the 15th Jan strong movement didn’t happen.

    • Chris Hodgson says:

      Abbu,

      When it comes to the basic wave formation that most people are only taught then you are correct. But there are other wave formations where those rules don’t apply, for example there is one where wave 1,2,3,4 are roughly the same length and wave 5 is the biggest and equal to the length of 1 to 3.

      I personally think the lengths of waves don’t matter because the market will decide how long a wave will be. As long as we get the 1-5 abc correct we can benefit from it when we incorporate candlestick patterns.

      Cheers

  26. gbade afolabi says:

    It is clear that to be able to teach simply , you have to learn the difficult part, use it then simplify it. This in my opinion is the best article so far as it explains a complex topic simply.Thank you sir. You are a master not only in but in the art of teaching.

  27. Chris Hodgson says:

    Very good article Chris, thank you for sharing.

    I’ve always avoided Elliot wave because it is too subjective.

    Perhaps the solution is to only draw waves on the weekly time frames to eliminate the noise and subjectivity. Would you agree?

    • Chris,

      You are welcome. Thank you too.

      Yes, I agree. Like all the other systems, indicators and…, Elliot Waves also work better on the longer time frames. It is much easier to locate the waves on the weekly and monthly time frames, than daily and shorter ones.

  28. Hoss Goharian says:

    Thanks Chris for your excellent article about Elliot Waves theory and its use in the market.
    As I understand, Elliot waves theory can be mostly used in the higher time frames( weekly and mainly monthly) to be visible correctly. Therefore if we are using daily TF for trading using all the LuckScout instructions and rules,we need to draw the waves in let’s say weekly and as long as the current trade in daily TF conforms with the waves (#1,3,5 for uptrend and #2,4 for downtrend) then the trade will be profitable, please correct me if I am wrong.

    • Hoss,

      Thank you too.

      Like all the other systems, indicators and…, Elliot Waves also work better on the longer time frames. It is much easier to locate the waves on the weekly and monthly time frames, than daily and shorter ones.

      While the market is forming, for example, Wave #3 on the monthly, a new cycle can be started on the daily chart and complete all the waves while monthly is still working on Wave #3. Knowing the forming wave on the longer time frames like weekly and monthly, and so the market direction on these time frames, is a big help to trade the daily time frame properly and to take the right direction which is agreeable with the longer time frames.

      For example, when the market is bullish on the weekly or monthly, and wave #3 is forming which is expected to be a long bullish wave, then we’d better not to go short on the daily time frame, even if we are at the end of the cycle and a sell signal is formed to start Wave C, unless the sell signal is too strong and we move our stop loss to breakeven.

      Hope my answer helps.

  29. Prakash Raj says:

    Chris,

    Thank you. I am finding little difficult in understanding current Elliot wave pattern. If I read this article couple of times, hope I will understand.

    I mean, I understand what Elliot wave is, but how to find what wave a current trend is?

    For Example: In daily GBPNZD pair, current uptrend(from 22April), I consider it as Wave 1, so can we expect as bigger wave 3 in future or the current wave is 3?

    If you have time, please share few ccy pairs’ current wave pattern formed/forming/will form.

    Thanks again.

    thanks,
    Prakash.R

  30. Siniša Matrix says:

    Thanks Chris, I finally became friends with Elliott thanks to you!

  31. Nicolaas Kolz says:

    Hi Chris thank you so much for another great article. I didn’t like Elliot Waves but how you explained it here opened my eyes to see it can really help us to be profitable consistently. Thank you.

  32. Goran says:

    WOW, How everything make sanse. Thank you for sharing your knowledge and helping us for our better understanding of Market condition.

    Is it there any tool or indicator which can help us to determin and count the waves? ZIG-ZAG is cross my mind.
    Maybe something better?

    Thank you 🙂

  33. Chris Long says:

    Thanks again for a very good article, Chris, Have found a book by R.N Elliott and am reading, he says waves 2 & 4 can be alternate , meaning different length of pullback.
    So this can be very technical, but interesting, but as you say, many different views and interpretations to Elliott waves.

  34. Tim Clarke says:

    Really great explanation I look forward to your posts they are always so helpful for a developing trader.

    Thanks Chris

  35. Jean M says:

    Hi Chris

    Again i want to thank you for sharing your knowledge so willingly. I read regarding the GBPCAD being in wave 5. Can you please tell me if my understanding is correct from the pic I have drawn

    http://prntscr.com/7maa1d

    many thanks in advance

  36. Juraj Tatar says:

    Thanks for clear and clever explanation of Elliott waves. All your articles are very educative and highly useful. God Bless You Chris.

  37. fawaz bamakrait says:

    thanks Chris it’s been long time for me waiting for some one to simplify the Elliott waves,what made it so simple to be understood is i am applying the some method with ABCD fibonacci (game):(after drawing the trend)
    A-B rally
    B-C retracement
    C is where u should enter the market if it retraced to
    38,50 or 61 ,target will be 161 fibo ,if it retraced to 78.6 target will be 127 fibo,if it retraced to 86.target will be 118. now (game over)
    new game stars by moving A TO C
    B TO D, then wait for retracent to form C AND SO ON,till the trend break.

  38. Hoss Goharian says:

    Hi chris,
    Thank you so much.
    Different shapes of EW in Daily, weekly and monthly TF become much more understandable when you explain it in such simple terms.
    I salute you for your tireless efforts.

  39. Kumaran Rahavan says:

    It Is very crystal clear teaching about Elliott Wave theory with good examples of charts.

    Thanks Chris.

  40. kid says:

    hai chris sir,beautiful article..i think we have crossed level 1 & u r teaching us level2(advanced topic than level 1)…thank u.

  41. Paul P says:

    Thanks Chris!

  42. TJ says:

    Thank you Chris, I have already read Elliott wave articles, but never in a such comprehensive, way.
    I am looking forward for the example that you plan to show us. 🙂

    Thank you sir.

  43. manuel reguera says:

    Thank you Chris!

    I have one question.. This Elliot waves as you mention are sometimes impossible to read, or maybe simply they are not followed by the market. If this is the case, how we can notice when do we have to start a new cycle? I mean, do we only start a cycle when a strong buy/sell signal appears after an exhausted market, or can a cycle start, before the end of the previous cycle, interrupting it ?

    I hope I can get a better understanding of this concept, due to the fact I find it crucial for being consistently profitble..

    Thank you in advance Chris!

    Regards,

    • > … I mean, do we only start a cycle when a strong buy/sell signal appears after an exhausted market…

      Exactly. Strong setups on the exhausted markets help us enter the market even when we know nothing about Elliott Wave analysis.

      > or can a cycle start, before the end of the previous cycle, interrupting it ?

      That is impossible.

  44. ~ Youness ~ says:

    Hi Chris,

    Thank you for the explanations.

    For me, the only useful thing Elliott waves will probably be in helping me decide whether to hold the winning trades when retracements begin (waves 2, 4, A and maybe C) or take profits and stand still 🙂

    Apart from the point above, if I use it in any other way, I will complicate my trading system.

    Cheers.

  45. Ray Lovett says:

    Thanks Chris,

    My question is how to plot a reversal? 1,2,3,4,5 up to 1,2,3,4,5 Down Does the C become a one?

  46. Ray Lovett says:

    Chris,

    If we have a five wave up and then a reversal what is in between wave 5 up and wave 1 down? How do we recognize the difference between a reversal and an a,b,c?

  47. Chris Kyambadde says:

    Can someone help me how to attach a chart?

    Thanks

  48. Jordi Pararols says:

    Dear Chris,

    Thank you for this great article that enlightens, and helps to understand, the price behaviour. Thanks a lot!

  49. Ray Lovett says:

    Thanks so much Chris,

    Sorry for seeming not to get this. Everything you said I understand. I am wording my question wrong, If I am in an uptrend and see a reversal how do I know when it is now a down trend or just a correction to the up trend?

    Thanks for your patience!!
    Ray

    • Ray,

      If it is based on a too strong candlestick pattern, then it is strongly possible that it forms a downtrend. When the uptrend is too strong, then weak short trade setups are just corrections and they don’t usually end to forming a downtrend, and the uptrend will be continued. The best example now, is the USD/JPY uptrend on the daily and weekly charts.

      Please don’t hesitate to ask as many questions as you want, until it becomes completely crystal clear. Sorry if my answers are not good enough, or I don’t understand your questions sometimes.

  50. Toto Sugiarto says:

    Dear Chris,

    How much or how to decide SL if using Elliot Wave trading system ?

    Thank you

    • Toto,

      SL has nothing to do with Elliott Wave. SL depends on the trade setup and is based on the trading system you are following. For example, whether you use candlestick patterns or support/resistance breakouts, SL can be different.

  51. Chris Kyambadde says:

    Thanks Chris, this is has been a wonderful piece of information. I have attached a chart kindly tell me if the marked wave is #1.

    https://charts.mql5.com/8/226/eurnzd-d1–choice-limited.png

  52. Eric Sarayar says:

    Nice article. Thanks Chris

  53. Thomas P. says:

    Great article Chris, thanks a lot for making these Elliot Waves understandable!

    Would you consider the Elliot Waves on this monthly AUDCAD chart are drawn correctly (C being not defined yet) ?

    https://www.tradingview.com/x/94z7KFam/

    • Thomas,

      That makes a lot of sense. Good for you.

      It seems C is forming. If it breaks below the head and shoulders neckline while C is forming, then it will go much lower.

  54. isaac paditey says:

    thank for the article and stay bless

  55. mehdi fallah says:

    hi chris. i have 2 questions:
    Q1: how bollinger bands and its MA shows the trend? if you mean the direction of upper and lower bands and MA do show, i think it could not be right because in retracement of a trend ,the direction of the bollinger change while the main trend is against it
    Q2:do professional traders sell in a wave4? if yes why they do that? the main trend is upward and should not do against the trend . and if yes why they ignore this profit?
    thanks for reply.

    • Mehdi,

      1. If this question is related to using Bollinger Bands as a help to find the waves, then it is not because of locating the trends. It is because of locating the beginning of the fresh movements.

      2. They don’t. The prefer to wait for a continuation to form at the end of wave 4, to enter at the beginning of wave 5 and follow the trend.

  56. mehdi fallah says:

    hi chris. concerning Q2 : the traders that entered at the beginning of wave3, they will not go out of the market at the end of wave 3? if yes they ate going to sell.selling at this point is against the uptrend. that is my mean. but for those who do not have the pairs and want to go short , i agree with you that they will not. am i right?
    many thanks

  57. Ray Lovett says:

    Chris,

    After going through Eliot wave on a few different charts and then looking at the Fibonacci abcd which seems popular it looks as though with both systems are still taking trades on the 3 wave. but the fibo system carries c to d and bypasses the 4 wave just goes from 3 to the top of 5 or bottom which ever way it is headed. Does this make sense?
    https://charts.mql5.com/8/261/gbpcad-d1–choice-limited-2.png

    • Ray,

      Not all the time.

      If we know the waves, we don’t have to mix them with Fibonacci numbers. We’d better not to make the work too complicated.

  58. Hosea Tumewu says:

    So there’s actually no particular method in spotting those waves then? and we can only “guess” the waves and hopefully our guess is correct, yes?

  59. Chris Kyambadde says:

    Hi Chris,

    Kindly help me if this is right.

    https://charts.mql5.com/8/316/gbpcad-w1–choice-limited.png

    Regards

  60. RUBENS SOUZA says:

    What a great articles.

  61. RUBENS SOUZA says:

    Hi Chris

    Could you please have a look in my Elliott Waves
    https://www.tradingview.com/x/iQIbTN8W/

    Thanks
    Rubens

    • Rubens,

      Everything looks good but the last part. Where you have marked as the beginning of wave A is indeed the beginning of Wave 1 from the new cycle. Wave A starts from 2015.03.11 and ends at 2015.03.24. Wave B start from 2015.04.02 and ends at 2015.03.24. And, wave C start at 2015.04.02 and ends at 2015.05.14.

      This is how it looks to me. I can be totally wrong.

  62. Charles Booth says:

    Quality artical kind sir thank you for sharing your knowledge and talents.

  63. Nadi brh says:

    Chris

    I am practicing the Elliot waves, I think in order to correctly identify the Waves, we’d better identify the previous Elliot waves cycle.

    Am I right?

    • Nadi,

      We don’t have to. Sometimes it is also too hard to identify the previous waves in the previous cycle too.

      The best and easiest thing to do is that first we wait for a too strong trade setup. Then, our Elliott waves knowledge can help us to know whether the setup is formed at the right place and whether we can take it or not.

      We have been doing this on LuckScout for several months without talking about Elliott Waves. I mean it is also possible to trade without knowing about Elliott Wave Theory.

  64. Nadi brh says:

    And also, I have an idea but I’m not sure about it. After identifying the Wave the price is in, can we use the system in the article “” to maximize our profit?

    Thanks a lot Chris

    • Nadi brh says:

      Sorry I missed the article name : “best- -trading-system-to-have-small-losses-and-big-gains/”

      • If you mean we refer to the shorter time frames to maximize the profit, then I cannot agree, because you will see reversal signals on the shorter time frames more. They don’t allow you to hold your positions for long. Referring to longer time frames can help you to maximize your profit.

    • Of course we can. It helps to hold the positions longer and maximize the profit.

  65. titanium says:

    Hi Chris, have you seen the strong bullish signal formed on CAD/CHF chart? I can’t understand if it’s wave two or wave three. Plus, I think this setup is a reaction toward the 0.71397 level on the monthly chart. So, I think chances are good it will go up. Or do you think it will go down and test the 0.68991 level, the strongest CAD/CHF support level ever. Please, share your thoughts.

  66. Arin Davidian says:

    I don’t use anything but candlesticks BB R/S lines and levels.but after reading about Elliot waves I think mastering them gives the trader a better and different view and understanding of the market.i think it’s really important .Thanks Chris for the beautiful way that you explain and teach everything to us.

  67. N A says:

    Hi Chris,
    very understandable explanation!!

    Could you please have a look on the below screenshot?
    It is GBPCHF Daily chart. Do you think that on this chart appears Elliott Wave 1?
    https://www.mql5.com/en/charts/5726465/gbpchf-d1-pepperstone-group-limited

    Thank you