Wave analysis of the market, principles: forex, currency pairs, oil, gold. Application of wave analysis of currency pairs How to learn to identify waves in Forex

Despite the constant volatility of the market, it is predictable. It turns out that if a trader can find out the price movement, then he can make money on it. How to do it? Today there are quite a lot of tools that allow you to conduct high-quality technical analysis. Elliott wave analysis is one of these.

Note that there is only eight market waves, which constantly tend to repeat themselves. This is what allows us to make a profit. If you are really interested in how to make good money using wave analysis in the foreign exchange market, read this material to the end.

Let us immediately note that Elliott wave analysis is not an easy task, which cannot be said about other trading strategies that are used in the Forex market. Only those who have studied the theoretical part in detail can use it on the price chart. Real pros who make money using wave analysis claim that to do this you need to thoroughly study not only the theory, but also consolidate it practically. Just imagine how much more profitable trading will become if a trader knows not only the trend reversal period, but also the market entry points.

Let us repeat once again, not every novice trader is able to study Elliott wave analysis. But if he gets into it, he will be able to achieve great results in the foreign exchange market. Today, wave analysis is carried out according to a more simplified scheme - using special Forex indicators that demonstrate wave fluctuations.

The essence of Elliott wave theory

At one time, this theory was created by a simple economist Ralph Elliott. He worked for a railroad company. One day he was analyzing the dynamics of the market and suddenly discovered an interesting pattern - there is no disorder in price fluctuations, the market moves according to a pattern. In other words, assets on the commodity, foreign exchange, stock markets and even the stock exchange work depending on the mood of their participants.

Thus, the basics of Elliott wave analysis assume the axiom that price fluctuations can be classified into eight wave patterns. In the case when the model is noticed by a trader at the initial stage of its formation, this makes it possible to determine with a high probability the further course of the price, as well as when to open a deal, and even in what places to take profits.

Note that Elliott wave analysis has both adherents and opponents. Its main disadvantage is the fact that It is not always possible to determine the beginning of a particular wave pattern. However, the Elliott wave sequence allows you to identify additional indicators, and this greatly simplifies the entire process of technical analysis.

Advantages and disadvantages of modern Elliott theory

We emphasize that every self-respecting trader should know this theory, since it completely allows you to understand all the patterns of market dynamics. Thus, Elliott wave analysis is a universal method of technical analysis that allows even a less experienced Forex market participant to make decent profits. After all, by opening an order on time, the trader receives an increase in profit.

Those who trade using the Elliott wave theory have probably found the key to understanding the laws by which Forex works. This is undoubtedly true. The knowledge gained after studying this theory will allow you to enter and exit the market on time.

In addition to the significant advantages that Elliott wave analysis has, the theory, like all other trading tactics, is not without its drawbacks. Among the main negative aspects are the following:

  1. Elliott theory, like its fundamental principles, is viewed differently by traders. This theory is purely subjective.. Since each trader interprets the market in his own way, the size of the wave will have its own value for each. As a result, everyone's strategies will be different.
  2. Even an experienced financial market participant unable to quickly assess the situation and respond to price changes. Finding out what wave the Japanese candlestick is currently on is quite difficult.
  3. There is a lot of different literature on wave analysis, as well as a number of studies. It is almost impossible to study all the material. In addition, each author, as part of an individual study, offers his own ideas, which will cause some confusion in the beginner’s head.

Despite these disadvantages, Forex wave analysis continues to be very popular among traders of all types. Moreover, new developments in the world of indicators can significantly simplify wave analysis.

Basic impulse pattern

The basic impulse in the classical sense has 5 wave structure. The impulse ones are 1, 3 and 5. The second and fourth are corrective.

Corrective and impulse patterns together make up full wave cycle. It is designated a-b-c. That is, in the understanding of Ralph Elliott, a full cycle is an eight-wave candlestick formation.

On the market as part of wave analysis, the cycle must constantly repeat. In other words, the impulse should be replaced by a correction and vice versa. But the whole catch and the main difficulty is that more complex corrections are formed on the chart. We will talk about them further.

Schematically, Elliott wave analysis looks like this:

Figure 1. Basic cycle.

And here is the basic cycle on the price chart:

Figure 2. Basic cycle on the graph.

Schematically, the complete cycle is depicted as follows:

Figure 3. Full cycle (diagram).

On the price chart, the full cycle looks like this:

Figure 4. Full cycle on the graph.

We analyze the wave structure

Each wave within the framework of Elliott's theory can be disassembled into sub-waves, while the integrity of the theory itself will not be violated.

It's time to talk about What rules are used to construct waves in an impulse:

  • The second wave will not roll back more than 100% of the first wave. If this happens. This will be a correction for the downward trend.
  • The fourth wave should not retrace more than 100% of the third wave. Otherwise, the wave that was taken as the fourth is an impulse for a downward trend.
  • The third wave is the longest, since it cannot be short within the framework of all other waves. By the way, it may be second in length, but not last.
  • The third wave will always be further than the first wave.
  • The fourth one will not move to the location of the first wave.

A priori, the third wave cannot be the shortest. It will always be larger than the first or fifth wave. The waves are schematically detailed below:

Figure 5. Detail of waves in the diagram.

And here is the same detail of the waves, but in candlelight design:

Figure 6. Detail of waves on the chart.

Formation with broken rules

Deep correction

In wave analysis, we will consider corrective Elliott waves, which look in the opposite direction from the main impulse, as pullback movements. With the help of three-wave structures, all correctional formations develop. They can have a variety of shapes and appearances. Perhaps the most common is the deep correction.

Trading using wave analysis involves presence of deep corrections, sometimes by a large impulse value (Fibo levels 61.8 and 78.2).

A deep correction can look like:

  • double zigzag;
  • zigzag;
  • triple zigzag.

The waves must correspond to the zigzag:

  • Wave C = 0.618.1, 1.618 (A) (Fibonacci extension);
  • Wave C = 1.272 (B), if B is a deep correction (Fibonacci grid);
  • Wave C = 1.618 (B), if B is a flat correction (Fibonacci grid).

When a Forex wave analysis is carried out, but the price does not reach the target, a more complex technical analysis pattern is formed, say a double zigzag or triple (less often). In such conditions, the use of such markings will help: (y), (x), (w), (x), (z).

The waves must correspond to the following pattern:

Figure 7. Wave matching.

Double and triple zigzag

Figure 8. Double and triple zigzag.

When a wave analysis of the Forex market is carried out, a stronger Fibo level of 61.8 can be used:

Figure 9. An example of working out the 61.8 Fibonacci level.

About flat corrections

You should not expect this type of correction to roll back deep enough. This will not happen especially in relation to the previous impulse movement. We are talking about triangles, various planes and combinations of triangles. Often, as part of wave analysis of the Forex market, you can count on a price rollback to Fibonacci levels of 23.6 and 38.2.

Flat corrections quite often form the fourth wave, sometimes the second. The ratio is: at wave C = 0.618, Fibonacci extension 1.618 (A).

Note that when we are looking for entry points in wave analysis at the time of a strong price surge, the presence of a flat is very striking. It often preceded the stretch or this movement.

A flat will always be short during a strong trend movement. However, if flat short corrections are observed, then you should expect a stronger price movement. Their structure is classified as follows: 3-3-5. Schematically it looks like this:

Figure 10. Schematic example.

Graphically like this:

Figure 11. Flat correction.

So, we were able to briefly talk about how to correctly conduct Forex wave analysis for profitable trading. In particular, Elliott waves were analyzed in detail and the rules by which they are constructed were analyzed. Now you can easily apply these rules for more profitable trading.

Considering technical analysis, we can highlight one of the most popular methods in trading - wave analysis. Wave analysis is based on charts on which price movements occur, marked by analysts into main waves and sub-waves. Based on these markings, forecasts are made about the upcoming price movement.

Just imagine how simple and easy it would be to trade on the Forex market, if the price constantly moves according to the five-wave principle, even a schoolboy could make money.

But this doesn’t happen, the lion’s share of traders lose their trading accounts, but what is the reason?

Is it really that difficult to grasp the five wave principle?

The 5th wave model is the basis, but the classics of this analysis did not limit themselves to it. Classical wave analysis , contains a large database of impulses, corrections, as well as their types and subtypes.

For example: truncations, extensions, diagonal and leading triangles, and the like. Corrections: horizontal corrections and triangles, zigzags, triples and double triples. Figures of reversal and continuation of the market trend and so on.

Classical wave analysis, in essence, is a theory that has an extremely superficial relationship to practical application.

Directly in trading, the figures will be visible only when the trend forms them on history. During the formation of price models, you can get confused several times; the price can resemble two or three patterns at once.

In classical wave analysis there is a large set of different patterns and options, which in most cases justify the direction of the trend in one direction or another. In order to take a movement into profit, you need criteria to confirm this method of analysis, even before your method is implemented, and not those templates that even work in history in 50 percent of cases.

It happens that either the model ceases to be a reversal and, relying on it, you will suffer a loss. The figures are clearly visible only from history. Classic analysis is more suitable for the description that Forex currency exchange analysts use.

Wave analysis is so complex that only a few professional Forex traders master it perfectly. But every successful player in the market must know its BASICS.

Why do we need the basics of wave analysis? Then, to understand and see:

  • algorithm for the movement of your working currency pair;
  • the point at which the currency pair is located at THIS minute during this movement;
  • prospects for further movement.

Let's look at the CAD/JPY (H4) chart from the point of view of wave analysis of the MF (modification of Elliott's VA), combined with other MF instruments.

Rice. 1. Price movement using the example of the CAD/JPY currency pair

Comments MasterForex-V:

Once again, carefully examine and then analyze the picture from the closed forum of the MasterForex-V Academy. We understand perfectly well that this is very, very difficult. But now you have the opportunity to make an informed choice and decide what to do next:

How much can you earn by choosing the path of study at the MF Academy?? As the experience of autocopying transactions of Academy students who use this service during training shows, on average they get from 250 to 500% per year in foreign currency and on break-even, win-win VIP accounts, allowing you to combine opportunities:

  1. Earnings of the trader himself (100-200% per year).
  2. 150% of the NordFx bonus involved in the drawdown (with a 3K deposit, you are credited with 7.5K to your account with the right to withdraw profits above this amount), or 100% of the bonus from other brokers. This bonus increases your profit by 2.5 times for every dollar invested. So, 100% of the profit from 7.5K turns into 250% of the money you invested (3K).
  3. and 15-20% of the profits, which are transferred to managing traders by numerous investors from Israel and the EU to the USA and China.

So is wave analysis worth learning or should you skip it? Those who answered “yes” will read further:

  • This chapter is about the common features and differences between technical and wave analysis (the same models of trend reversal and continuation through the eyes of a “wave analyst”).
  • In the next chapter - (a summary of the books by Frost and R. Prechter, Balan, Vozny, etc.).
  • In the third chapter -.

What does wave analysis give a trader and how does it differ from classical technical analysis?

Wave analysis:

  1. Helps to find the beginning of a trend, considering the movement currency pairs not from the point of view of reversal and trend continuation patterns, but from the position of the internal algorithm - waves of impulse (trend) or correction (flat).

    Let’s compare the “head and shoulders” trend reversal pattern in classical technical trading analysis (in Fig. 2 on the left) and the same trend reversal pattern from the point of view of wave analysis. It turns out that the drop down was only a correction (rollback). Therefore, at the end of wave C, you need to open a buy deal.


    Rice. 2. An example of technical and wave analysis of the same market situation

    This wave marking helps to understand why there are numerous complaints about the head and shoulders figure. As soon as a trader opens a sell order, the market moves... in the opposite direction.

  2. Helps you CONSCIOUSLY take profit by determining in real time WHERE and on WHAT wave you open an order on the market. Wave marking more accurately suggests entry points into the market than “ ” or any other method of technical analysis.
    Rice. 3. Selecting points to enter the market using wave analysis
  3. Shows impulse targets (138-162% and above) along the trend and in correction (38-76%).
    Rice. 4. Targets of impulse 3rd and 5th trend waves
    Rice. 5. Correction targets - 38-62%, or maximum 76%

    Thus, the Forex trader understands what levels the price is tending to, where and why it is necessary to open and close transactions.

  4. Helps you easily find a flat ( a-b-c waves round trip).
    Rice. 6. The market is flat

    None of the traders like flat trading. Wave analysis helps to determine it online, when CORRECTIVE waves go both up and down (a-b-c). This means that there is a correction of the SENIOR TF, after which a strong and powerful impulse will begin.

    It is better to wait out this correction while outside the market, which will always be suggested to you on the closed forum of the MF Academy.

  5. Makes it possible to IDENTIFY any trend continuation figure (flag, pennant, etc.) as corrective waves.
    Rice. 7. Trend continuation pattern in the form of corrective waves

    Allows you to understand where to place your feet (locks, locks). Wave analysis provides a clear answer to this important question. For example, when the price is below the base of the first wave (the trend is canceled) or under the base of the wave of the older TF.

    Rice. 8. End of trend

From all of the above, we can conclude: without knowing the BASICS of wave analysis, your profit on Forex can only be random.

What does a trend look like in real time (from materials of the MasterForex-V Academy)

Pay attention to clear signs of a bullish trend(Fig. 9):

  • 1st bull wave(purple color) has a 5-sub-wave structure. This is a sign of momentum and a POSSIBLE trend change from bearish to;
  • 2nd wave(yellow color) has CORRECTION a-b-c structure and does not break through the base of a new bullish wave. When its maximum is broken, the 3rd wave, beloved by all traders, begins;
  • 3rd wave(gray), also having a five-wave structure on lower timeframes (1st in the 3rd, 3rd in the 3rd, etc. with targets above 162% up from the 1st wave).

Rice. 9. Signs of a bullish trend according to wave analysis

AO or MACD indicators for the 1st wave (purple background) confirm the beginning of a bullish trend. The following conditions are required:

  • 1st subwave: the histogram goes above 0 in a bullish trend;
  • 3rd sub-wave: AO histogram is above the 1st wave;
  • 5th subwave: divergence. The histogram is below the top of the 3rd wave (it can go below 0).

How Bill Williams increased his trading deposit from $10 thousand to $198,977 using wave analysis

Bill Williams in his book “Trading Chaos” gave perhaps the most powerful impetus for the popularization of wave analysis of trading. In a simple and accessible form, he showed how to determine the 1st wave (point 0 on the chart). Then, in his opinion, you just need to follow the trend, opening trades in accordance with the main direction of price movement (see Fig. 10).


Rice. 10. The beginning of the first wave and the trading plan according to Bill Williams

For their part, the teachers of the MasterForex-V Academy drew up a detailed plan for capital management (money management), explaining the logic of opening and closing transactions (see Fig. 11).


Rice. 11. Money management according to the MasterForex-V Academy system

For those who are already convinced of the need to study the basics of wave analysis, we suggest that you familiarize yourself with special literature on this topic and visit the following Internet resources:

  • Free illustrated magazine of traders "Exchange Leader".

For a more in-depth study of the Fundamentals of Wave Analysis, we recommend reading the following books:

  • A. Frost and R. Prechter. A Complete Course on Elliott Wave Law
    B. Williams “Trading Chaos.”
  • R. Balan Elliott wave principle - application to the FOREX market.
  • D. Vozny. Elliott code. Wave analysis of the Forex market.
  • G. Neely. Mastering Elliott Wave Analysis.
  • C. Miller. Study of the relationship between the theories of cycles and Elliott waves.
  • R. Fisher. New Fibonacci trading methods.
  • R. Fisher. Subsequence. Applications and strategies for traders.
  • E. Peters. Fractal analysis financial markets. Application of chaos theory in investment and economics.
  • D. Di Napoli. Trading using Di Napoli levels.
  • R. Swannell. Market forecast using a new refined pattern recognition system based on the wave principle.
  • A. Frost and R. Prechter. The Elliott Wave Principle is the key to understanding the market.
  • T. Joseph. Simplified Elliott wave analysis. Practical use mechanical trading system.
  • D. Murphy. Technical analysis of futures markets.
  • A. Cherepkov. Theory of Long Waves by N. D. Kondratiev.
  • E. Nayman. Small encyclopedia of a trader.
  • A. Kiyanitsa, L. Bratukhin (eds.). Fibonacci levels. Where the money is.
  • M. Chekulaev. Fractals.
  • V. Safonov. Practical use of Elliott waves in trading.

You can easily find all these books by searching Yandex or Google. We recommend starting with these books:

  • A. Frost and R. Prechter have truly provided the most "Complete Course on Elliott Wave Law." This is the main fundamental work on wave analysis of all areas of trading (commodity and commodity markets, stocks, futures, Forex).
  • The books by D. Vozny (translator of Prechter into Russian) and Balan are the applied application of wave analysis to the Forex market.
  • Bill Wilms' work "Trading Chaos" is a more popular publication for a wide range of potential traders. It provides the basics of wave analysis. The author combined them with his Profitunity trading system, consisting of indicators: Alligator, Awesome Oscillator (AO) and Fractals, as well as the bullish/bearish reversal bar pattern.

In order not to get confused in the many smart tips from these books, before reading them we strongly recommend that you study the material in our next chapter: Here you will find a brief summary of the works mentioned.

Wave analysis is one of the most popular methods for determining the current situation on the market. The basis of this technique of technical analysis is the currency charts on which the price level. During the analysis, the price movement on the chart is usually divided into subwaves and waves, which are used to predict the movement of the price level.

Wave analysis. Peculiarities

If you decide to use Forex wave analysis to determine the current situation in the foreign exchange market, you need to remember the following rules:

  1. This method of performing analysis is not directly related to any trading systems. The wave analysis algorithm does not allow determining the appropriate moments to enter the market and to close previously opened orders. For this reason, the forecast of price level changes created as a result of wave analysis is not recommended to be used as a signal for creating transactions.
  2. Wave analysis is a fairly effective tool that, when used correctly, can significantly improve the trading strategy used by a trader. This method of analysis allows you to understand the peculiarities of the behavior of the price level. Wave analysis allows traders to identify benchmarks with which they can accurately determine the behavior of the price level.
  3. Today, wave analysis is rightfully considered the most universal tool, since it can be used to create forecasts of market trends on any time frame.

Wave analysis of currency pairs has a fairly low degree of formalization; for this reason, conclusions drawn using this method of market study are subjective. This happens because the situation on the foreign exchange market is constantly changing, for this reason the results of the analysis are relevant only at the time of their receipt.

Wave analysis. Basic principles

When conducting wave analysis, it is customary to distinguish two main types of waves:

  1. Pulse waves. They are longer lasting. Most traders use them for trading. The duration of impulse wave fluctuations, depending on the market situation, can reach three hundred points.
  2. Corrective waves. Since they are short in duration, it is not recommended to use them for trading. Corrective waves are very short, for this reason it is almost impossible to use them for profit. Professional traders sometimes use these waves to trade, but they run the risk of serious losses.

Practice shows that the optimal moment to create an order is the beginning of an impulse wave, but, unfortunately, identifying its base is very problematic. When using an impulse wave for trading, in order to avoid serious losses, it is recommended to set a Stop-Loss at its base.

Almost all professional traders use wave analysis to predict changes in price levels, since this method is significantly superior to other analogues in accuracy and efficiency.

Wave analysis. Application

Any fluctuations in the price level form waves. At the moment of its inception, any trend consists of five waves; as it develops, it acquires a three-wave structure. After this, the trend can either continue or reverse.

According to wave theory, the longest wave is the third wave, which is usually indicated by the number “3”. It is this wave that provides the most opportunities for creating orders.

During the movement of the price level, impulses always alternate with corrective waves. An impulse always has five waves: waves numbered 1, 3 and 5 move the price level in the direction of the trend, and waves numbered 4 and 2 reflect a correction.


The picture above shows a downward impulse. Waves marked with numbers 5, 3 and 1 move the price level down, and waves marked with numbers 4 and 2 have a direction opposite to the trend and are corrective. A standard impulse is characterized by a situation when the second wave does not go beyond the first, and the fourth does not go beyond the third. The exception is situations when figures such as a wedge and a diagonal triangle appear on the chart, since the waves in them intersect each other. After one impulse ends, it is followed by a correction or a new impulse, which will have the opposite direction. In the picture above, you can see that after the completion of the downward impulse, a.


In the picture above you can see the wedge chart pattern, which is usually the first wave of an impulse. Once a wedge forms on the chart, a powerful price movement occurs.


In the picture above you can see an example of a corrective wave called “Zigzag”, which includes three waves. Typically a zigzag is the second wave of an impulse. After its appearance on the currency chart, it can be assumed with a high degree of probability that the price level will soon make a strong jump in the direction of the main trend.

Despite the fact that the method of analyzing the market situation described in this article is quite effective and accurate, it cannot be called simple, since the results obtained are subjective and directly depend on the qualifications and experience of the trader. For this reason, it is more suitable for professional traders than for .

If you decide to use wave market analysis for trading on the Forex market, it is recommended to test it on, otherwise, you may suffer significant losses due to an illiterate assessment of the situation on the currency chart.

I hope this article will help you become a truly successful trader.

Elliott wave analysis is very popular among traders, as it helps to quite accurately determine the further direction of price movement and make high profits.

Elliott waves, named after the discoverer of this theory, are a fundamental element in the structure of the Forex market. Analysis based on these waves is probably the most accurate. Although at the same time, this is one of the most complex types of market analysis.

The wave market structure was first discovered in 1934 by accountant Ralph Nelson Elliott. After several years of illness and retirement from work, he concentrated his activities on learning the basics stock market. As a result of these studies, Elliott waves were discovered and developed wave theory.

While observing market trends, Elliott noticed that they were subject to certain sentiments that arose as a result of the psychological perception of the situation by trading participants. The market experienced six stages of psychological changes over different periods:

  1. Expansion
  2. Enthusiasm
  3. Euphoria

After these three stages, the market fell into the following three:

  1. Calm
  2. Decline
  3. Depression

As a result of such changes, wave-like patterns are formed on price charts. As it turned out, the construction of these waves has a completely logical pattern.

These observations formed the basis of a method called wave market analysis.

Basic postulates of wave analysis

Since the waves are arranged in a regular sequence, this makes it possible to predict the birth of each new wave and, as a consequence, the direction of the trend movement . This is the main postulate that characterizes wave analysis of the Forex market and price behavior on charts.

The main principle that is the basis of wave theory is the principle of fractality. According to its definitions, a set of several waves of a smaller order, located in a lower time frame, forms one wave with a longer duration, which is located in a higher time frame.

In turn, this wave is part of a multi-wave pattern in the process of forming an even larger Elliott wave.

  • A bearish trend is when the trend is downward.
  • A bullish trend is when the price intends to rise.

The next principle according to which Elliott waves are formed is that after active growth there is necessarily a period of decline.

The alternation of waves of different directions is a prerequisite for the formation of wave patterns. In addition, Elliott noticed another circumstance - wave patterns also replace each other after stages of rising and falling prices.

The wave pattern forming a bearish trend is necessarily replaced by bullish sentiment in the market and, accordingly, a bullish wave formation.

Carrying out a relationship with fundamental indicators, the author of this theory derived the axiom that no economic news can be a fundamental factor for the formation of a new trend over a long period.

And one more circumstance was taken into account when developing the theory of wave analysis and is used to this day - waves can begin and end with different trading volumes and different levels of volatility. However, for individual waves in patterns there are inherent features:

  • Second waves most often have reduced volume
  • Elliott third waves usually show high trading volume
  • The fifth wave is one of the most dynamic

The use of this theory and the Elliott wave itself as a means of analysis can occur for different purposes.

Watch a short video from which you will learn the basics of wave analysis:

Elliott wave categories

The classification by which Elliott waves are distinguished includes the direction of the trend. In addition, all waves have their own specific meaning for the market and its analysis. Some of them are formed in the direction of the main trend and have a longer stage. The second part is formed in the opposite direction. Therefore, it is customary to distinguish:

I. Pulse waves

II. Corrective waves

Based on these definitions, on the basis of these two categories of waves, trend wave models are formed, which, taking into account the principle of fractality, represent Elliott waves of a higher order - longer.

Impulse waves consist of five smaller waves and are formed in the direction of the main trend. In this case, it does not matter at all what sentiment prevails in the market - an impulse wave can be part of both a bearish and bullish market.

Elliott wave analysis in each five-wave implies the presence of three impulse waves and two correctional ones.

The correctional wave, in turn, consists of three waves, two of which are impulse, and one is corrective. As a rule, corrective waves occur after the impulse wave has traveled the full distance.

Sets of impulse and corrective waves have the ability to form wave patterns, or figures:

  • Wave extension
  • Double pass
  • Pulse
  • Zigzag
  • Triangles
  • Pennants
  • Diagonal triangles
  • Multi-extension Elliott wave
  • Wedges
  • Truncations

This incomplete classification of wave patterns is supplemented by individual varieties of each pattern.

Watch a video about what an Elliott wave is and how the structure of price movement is formed. This will help you predict the movement of exchange rates and increase the profitability of your trading.


In addition to the characteristics given in this section, it is necessary to note one more property of trend waves according to Elliott theory - they can characterize wave analysis of the market by contraction or expansion.

Practical use of wave theory

In currency and stock trading, wave theory can be used as a basis or an additional tool in the structure trading strategy. Most trading tactics using fractal principles, on which Elliott waves are based, have excellent trading returns.

In some cases, a trader can use these Elliott waves as a forecast of the end of a trend, in order to prepare for the formation of a new trend and optimize deposit management.

In other situations, wave analysis is used to recognize an already formed trend and is used to confirm the forecast and more rationally enter the market.

Also, using the waves, you can determine the current state of the market at the time of making the forecast.

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