Applying Elliott
Wave Theory Successfully
Elliott
Wave Theory Articles
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The Elliott
Wave theory over time has been extensively used in predicting
the direction of the financial markets. You must however, keep a few
points in mind when it comes to using this theory. At any given point,
there are two valid interpretations of the waves that will exist. You
therefore, as investor must look into each of them to understand a
probability equation on their outcome.
The Elliott Wave Principle should be referred to as a map of sorts for
the financial market. The investment plan you have is more like the
trip that you will take on this road. There are several things that may
alter the course of investment plan. The Elliott Wave principle will be
able to offer you alternate counts or off beat roads on which to take
your investment plan.
The Elliott principle is governed by a number of very specific rules
and therefore the valid number of possible interpretations is kept to
the bare minimum. As an analyst you must take the one interpretation
that clears all the necessary guidelines. Another simple addition to
using the Elliott Wave Principle is the use of the Fibonacci ratios.
There are very few investors who truly comprehend the Fibonacci
analysis of markets that was created by R.N. Elliott. Very often, it is
the Fibonacci ratios that allow a valid Elliott wave interpretation to
be found at the beginning point of a move.
There are two main understandings to the use of Fibonacci
relationships and Elliott waves. To begin with corrective
waves will have a tendency to go back to prior impulse waves almost to
the same level as that of the Fibonacci proportion. Some of the usual
wave relationships are 38%, 50% and 62%. The other thing is that
impulse waves in a similar degree in the bigger impulse sequence will
relate to each other in a Fibonacci proportion.
The rules of wave interpretation as well as relationship with Fibonacci
bring together a powerful tool to help create and establish the rules
for investment based strategies, all the while bringing down the risk
exposure. Using Elliott’s Wave Principle will help investors decide on
when to get into something and when to get out. You will also be able
to understand when to get out of a particular strategy. The Elliott
Wave Principle will therefore allow you to find the highest probability
for the future direction meant for the market.
Once you have applied the principles of Elliott
Wave theory, you will find investment strategies in the
financial markets much easier to formulate.
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