GANN TOP SECRET: ELLIOT-WAVE

ELLIOT-WAVE

Learn advanced Elliot Wave Theory for trading the financial markets

Are you a trader looking to increase your returns?
Well here is the opportunity to study and research what a full time professional trader uses to analyse market trends.
Less than 1% of retail traders have a applicable knowledge of Elliot Wave Theory.
What is Elliot Wave Theory?

Ralph Nelson Elliott developed the Elliott Wave Theory in the late 1920s. Elliott believed that stock markets, thought to behave in a somewhat chaotic manner, in fact traded in repetitive cycles.
Elliott proposed that market cycles resulted from investors' reactions to outside influences, or predominant psychology of the masses at the time. He found that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided further into patterns he termed waves.
Elliott's theory is based on stock prices move in waves. Because of the fractal nature of markets, however, Elliott was able to break down and analyze them in much greater detail. Fractals are mathematical structures, which on an ever-smaller scale infinitely repeat themselves. Elliott discovered stock trading patterns were structured in the same way. He then took the next obvious step and began to look at how these repeating patterns could be used as predictive indicators of future market moves.. Price action is divided into trends and corrections or sideways movements. Trends show the main direction of prices while corrections move against the trend. Elliott labeled these "impulsive" and "corrective" waves.

Elliott Wave Theory was originally designed to forecast stock price movement. Overtime however, the theory has been applied to a variety of markets, particularly foreign exchange. Elliott Wave Theory is now a very popular analytical strategy frequently used by the technicians of leading investment banks and intermarket players. The Elliott Wave Theory is founded on the notion that markets are not perfectly efficient. As a result, prices from one moment to the next are not random but rather subject to changes in overall investor behavior—changes that can be predictable with an understanding of mass psychology.

The center of the Elliott Wave Theory rests on the idea that security prices move in waves: impulsive and corrective . As indicated in the diagram below, there are five waves defining the direction of the near term trend followed by three corrective waves.

To fully understand the Elliot Wave Theory, it is important to understand the psychological rationale for each of these waves since the zigzag movement of prices represents the ebb and flow of investor optimism and pessimism. Given in an up trending market:

Wave 1 (Impulsive): Minor Up wave In Major Bull Move – In Wave 1, prices rise as a relatively small number of market participants, pushing prices higher.

Wave 2 (Corrective): Minor Down wave In Major Bull Move ‐ After a significant run‐up, investors may get fundamental or technical signals indicating the market is overbought. At such time, Wave 2 develops when original buyers decide to take profits while newcomers initiate short positions. Price action reverses, but generally does not retrace beyond its initial low that attracted buyers at Wave 1.

Wave 3 (Impulsive): Minor Up wave In Major Bull Move ‐ Often the longest wave of the five, Wave 3 represents a sustained rally, as a larger number of investors use the Wave 2 dip as a buying opportunity. With a broader range of buyers, the security enjoys a stronger push higher, with prices extending beyond the top formed at Wave 1

Wave 4 (Corrective): Minor Down wave In Major Bull Move ‐ By Wave 4, buyers begin to become exhausted and again take profits in reaction to overbought signals. Generally, there is still a fair amount of buyers, so the retracement here is relatively shallow.

Wave 5 (Impulsive): Minor Up wave In Major Bull Move ‐ Wave 5 represents the final move up in the sequence. At this point, buyers as a whole are motivated more by greed than any fundamental justifications to buy, and bid prices higher irrationally. Prices make a high for the move before a correction or reversal ensues. The high in Wave 5 often coincides with a divergence in the relative strength index (RSI) or MACD.

Wave A: Correction To Rally – Initially Wave A may appear to be a correction to the normal rally. However, if it breaks down into five subwaves, it indicates that a new market trend may have developed.

Wave B: Bear Market Correction – Wave B tends to give bears an opportunity to sell as others take profit on their short trades or exit their long positions.

Wave C: Confirms End Of Rally – Wave C is the last wave of the cycle. At this point, Wave 3 typically breaks key support zones and most technical studies confirm that the rally has ended.

While determining waves in real time can be challenging, there are three rules to counting waves that always hold. These rules form the basic tenets of Elliott Wave Theory.