Elliott Wave Home ELLIOT WAVES Elliot waves are the best way to there is to have an idea where you are at in the current market struture. What we are doing with Elliot waves is labeling market swings with a 1,2,3,4,5 count with the trend and an A,B,C, count against the trend when the market pulls back and makes a correction in the current trend. The key to using Elliot wave counts is to tie it in with our other systems and indicators and this will help us use Elliot waves for greater profits. Elliot waves help make sense of the markets and makes them more fun to follow and trade. MARKET LOW EXAMPLE - BULL SWING WAVE 1 When a market bottoms and the low is in place the first rally up is usually a weak rally because the new trend is really not established and there is still alot of buying and selling going on. The tug of war is still on for market direction. Buyers are just beginning to get the upper hand. WAVE 2 Is a pullback (correction) of wave 1 and a test of the low by the market.People that sold into (shorted) the wave 1 rally thinking the trend is still down now have thier stops at the wave 1 high (last pivot high) and people who bought the low have their stops just below the last pivot low causing lots of market tension. WAVE 3 Takes out the top of wave one and this is where the shorts cover (buy back) their now losing positions and this along with the buyers gaining the upper hand causes the market to take off. Wave 3 is where every body knows the trend and it's up. The market has caught traders attention and the biggest part of the rally (the trend part of the move) takes place. WAVE 4 Is a profit taking decline in which traders have started to close winning long positions. The trend is still up so the traders that took profits at higher prices start to buy back in when prices move lower and traders that missed the wave 3 think this is a good place to get long with the trend so they buy. This buying starts a new rally. WAVE 5 Is a rally to new highs but lacks the enthusiasm and strength that wave 3 had. Prices make a new high but the strength compared to wave 3 is small. When the new buying interest becomes less sellers take over and a market correction or a new down trend begins. Wave 5 has momentum indicator divergences. ================================================= Disclaimer - I am not a commodity trading advisor. The information on this site is for trading education only. There are no trading recommendations for any one individual made on this site and this information is paper trades for trading education. All trades are extemely risky and only risk capital should be used when trading. U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.