As you know, analysis of the Forex market can be carried out by fundamental and technical methods. Wave analysis of the Forex market, which has been very popular for many years, is an important component of technical analysis and, if used properly, allows you to make serious profits by tracking the wave movement of the market and correlating it with other elements of technical analysis: support and resistance levels, indicators and oscillators. .
The founder of the wave analysis of the Forex market is considered to be Ralph Eliot, who in 1946 published his book on wave analysis. It was she who today is used by most traders to predict the market movement. It should be noted that Eliot wrote not only about trading on Forex or other exchanges, but also revealed the general patterns of social processes, which, as his twelve-year observations showed, are of a wave nature and vary according to certain rules, which the scientist described in his book.
What is the theory of Eliot? We give theses conclusions:
1. Any larger movement consists of the same smaller movement. 2. The wave has a trend component, which is replaced by a correction. 3. The trend, in turn, consists of five waves, which were denoted by Eliot by the numbers 1,2,3,4,5. 4. Pulses 1,3,5 correspond to the movement of the trend. 5. Waves 2.4 are a trend correction, which may have a different depth. 6. The correction in turn consists of waves A, B, C, two of which have the direction of the correction itself (i.e., are directed against the trend), and one is the correction within the correction, i.e. in its direction corresponds to the main trend.
How to make a wave analysis of the Forex market? Or where to get training?
At first glance, the Eliot theory may seem simple, and the presence of waves of different directions that follow each other can give excellent ideas about the further movement of the price chart after the next impulse or correction.
However, the use of wave theory in practice is often problematic, since novice traders do not know how to do wave analysis of the Forex market in practice and do not have adequate experience in this direction.
What problems do newbies often face, and what are they connected with?
First, the market moves without any pauses and stops. One wave replaces the other, the pulses constantly follow corrections and vice versa. At the same time, larger waves include smaller waves, which often confuses a person in front of whom a price chart appears.
Secondly, it can be very difficult to distinguish correction from a trend, since both the magnitude of the impulse and the depth of the correction can be different. The duration of a movement can also vary within fairly wide limits, which disturbs the big picture and often knocks the trader down. The classic pattern, which is often given in books on wave theory, is rarely observed in practice, and therefore, to understand the concept of the market and the types of possible movements, you must not only learn the basics of the theory, but also receive training in wave analysis on the Forex market.
How to get training in wave analysis and where to get the right information?
Training in wave analysis in the Forex market today can be done both online and by visiting offline courses. They are conducted by many trading schools, directly Forex brokers, private traders with extensive experience and so on. It is better to start learning from learning the basics yourself, or to find courses for beginners, where they will talk about fundamental fundamentals, and only then begin to explain the subtleties of using wave analysis in practice.
You can also get the proper information on wave analysis of specific pairs on the websites of Forex brokers, where the reports of professional analysts are presented. They can be successfully used for trading on Forex, combining with your own trading systems, individual indicators or elements of fundamental analysis.