Elliott Waves and where to start with them

Beginner Questions
1

Over the past few months, I’ve been learning a lot about how to trade forex successfully… and during my adventures into it, unsuccessfully too!

I’ve been through the School of Pipsology, which is a fantastic resource, and have started to apply those lessons into demo accounts. I’ve picked up some valuable insights from the Cowabunga system too and these have helped accelerate my understanding of how to trade forex.

I now have a basic understanding how Fibonacci indicators work and can see when I plot these onto my charts and trade with the trend, I can pick up 15-20 pips reasonably easily - my initial target is to trade just +30 pips per day consistently.

However, where the wheels seem to come off the wagon is when the markets turn and I loose my gains. And this, I guess, is where Elliott Wave comes in.

I’ve found some really clear examples where the start point is defined as, say, the lowest low and then goes up in five steps as per the text books. But then there are more confusing examples such as AUD/USD between August 22/24, 2010 where the market seems to just rise to a high point before falling back to the previous low with no obvious 1-2-3-4-5 steps.

So to my questions. I assume that the start point to count Elliott Waves is the previous lowest low or highest high. Is this right?

What time scale is best to use?

Also, could someone recommend where I could find some educational stuff that will enable me to learn ho to use Elliott Wave in my trading?

So far I’ve figured out that to trade currency pairs, first thing to do is look at the overall trend (I generally look at the Cowabunga system’s 4-hour chart for that info), do “something else”, and look at the Fib retracements to determine my entry point (if the candles move through the 0.382 level and then head back that way, this seems to be the entry point).

The “something else” I feel is to assess where Elliott Wave suggests where a turn in the market might be in order to trade with the trend, or wait to see what happens.

If anyone can help or offer any advice, I shall be eternally grateful!

Many thanks,

Steve.

2

here’s the issue with elliot waves, they are too ambiguous, making it hard to learn.

3

From a quick search on the forum

http://forums.babypips.com/newbie-island/34870-trading-elliott-wave-principle.html

also from the www

Elliott Wave: Introduction

4

Thanks. Will take a look.

5

The best EW resource would be at Action Forex.com, they’ve got someone whose been taking it to higher levels. They also provide labeled charts which go a long way to get the learner started. Here’s the link to the tutorial, I’d advice to print it, you’ll need to pencil it a lot! Strain through lesson 1 and from there you won’t feel to put it down.

Free Elliott Wave Tutorial from EWI - Forex Analysis, Currency Forecast, FX Trading Signal - Action Forex

I could run you through doing the AudUsd fro MN1 timeframe up to trading it on h4 and h1? It will require hard study, practice and experience to make EW unambiguous.

6

Elliott Wave is fascinating … like Astrology :slight_smile:

Ok I’m joking, I think it’s too subjective for most people and so not suitable for beginners if ever it really works.

7

Elliot wave theory assumes a ranging/trending market. If the market just had a breakout, Elliot waves wont be on that same timeframe (they will be above and below to some degree however)

They are also not perfect, there is no such thing as an exact science. There are other factors at play at any given time. Remember its a guidline just like support and resistance. It infact is heaviley influenced by support and resistance.

Sometimes its a long time between very visible waves, sometimes its short. This usually happens because the lower time frame has well defined waves, and you see it on the higher timeframe, or the higher timeframe is in a very visable wave and you see it as a large run on your lower timeframe. Keep in mind, there are many many different time frames.

Elliot Waves are math/science as much as it is art. It takes discression, and my interpritations may not fit yours, or somebody elses. This is why you can see many different patterns. Whichever is stronger is usually “right” and followed. This is where the art part comes into play. The mechanics of picking the spots are easy, the art is knowing which spot correlates to which timeline and wave.

You can see Elliot Waves on a tick chart 90% of the time, the higher up the harder it becomes because, in essence you have several things all working in concert, when they agree they are strong and Elliot Waves are easy to see, when there not the waves are harder to identify.

Its like a sine wave, its very round up and down very predictable. Take that wave and run it through a jigsaw wave generator and it will look close to a forex market, but its still very predictable. Take that and add to it 2-3 other wave generators all in concert some in parallel some in series. That is what the forex is like, each on their own is 100% predictable. Mix them all up and its hard to tell which is causing what when. Just something to think about…

8

I myself is interested in learning the depth of this theory as some other indicators are related to this as well.

I know someone who teaches and makes a lot of money with EW theory only. The way they trade is based on the cycle theory, usually riding on the 3rd wave.

It seems those who have studied with this have good eyes to see the waves, which is not something you can learn. It is done by experimenting and experiencing a lot of tradings.

9

Does he make a lot of money from teaching EW or from trading EW that’s kind of different thing :wink:

10

Both. The only reason I have not taken his method in my trading is that I do not do swing trading.

According to him, there is a huge wave in every 3 months. And he basically rides only the big waves to earn big pips. It seems this would be much safer, according to him as well as not stressful…

But I guess because I am not so familiar with EW theory, I just can’t trust so much of the cycle theory.