How to Trade with Elliot Wave Theory

Elliot Wave Theory is far easier to spot in our diagrams than it is in the markets. Markets don’t always make very perfect patterns. In fact, this is what you might see when looking at an Elliot Wave in action in the foreign exchange market:

Elliot Wave Theory’s Correction Patterns

Elliot was mostly open-ended on the interpretation and application of his wave theory. When it comes to corrections, however, Elliot had very firm guidelines for how these corrective wave patterns would look.

What Is Elliot Wave Theory

The Elliot Wave Theory suggests that market movements can be described with waves. Inside a large up or downtrend are several smaller trends that make up the whole of the market movement.

Reversals, Retracements, and Waves

If you have yet to notice, technical analysis focuses on trends. Remember: the market does trend 70% of the time, and that amount of trending is enough to make serious profits in the market.