Technical studies do a good job of illuminating the way for traders, yet they each fall short for one major reason: they limit the scope of a trader's understanding of current price action and how it relates to the overall picture of a market. Most technical studies simply don't reveal pertinent information such as the maturity of a trend and a definable price target -- but the Wave Principle does.

 

Here is one way the Wave Principle provides perspective:

Determining the Maturity of a Trend   Wave patterns form larger and smaller versions of themselves. This repetition in form means that price activity is fractal, as illustrated in Figure 2-1. Wave (1) subdivides into five small waves, yet is part of a larger five-wave pattern. How is this information useful? It helps traders recognize the maturity of a trend. If prices are advancing in wave 5 of a five-wave advance for example, and wave 5 has already completed three or four smaller waves, a trader knows that an important turn is approaching.

 

 

 

 

Once a countertrend move unfolds in three waves (A-B-C), this structure can signal the point where the dominant trend is about to resume.

 

See 4 more ways the Wave Principle improves trading – plus the kinds of trading opportunities Elliott waves identify and how to use waves to set protective stops – in our free Special Report, Learn How the Wave Principle Can Improve Your Trading.

 

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