As part of articles series about Technical Analysis , I'll explain Elliott Waves
: I talked in previous articles about
Elliott Theory
The Scientist Ralph Nelson Elliott At 1920 innovated a way could through it watching prices movements of financial stocks . The theory says that the market moves as waves , and it makes high swings or low swings
Elliott says that the market moves by waves system 5 - 3
First 5 waves called impulse waves
Last 3 waves called corrective waves
Firstly : Impulse Waves
Elliott theory says that each wave show prices case
Impulse Waves
Wave Number 1
Mostly the cause of this wave the existence of little number of investors from who has a desire to buy the stock where the price is cheap at this level
Wave Number 2
At this wave the investors stops about buying the stock ,and take profits stage starts , so the price start to fall for a period of time ,but anyway the price doesn't fall far at low levels
Wave Number 3
Mostly this wave is the strongest and longest .why? because the stock attracts the attention of investors and most of them competing to buy the stock and this lead to rise the price of stock more and more and always the wave number 3 is twice of the wave number 1
Wave Number 4
At this level the investors start to gain the profits from impulse the wave number 3 , the wave number 4 always be weak and this causes price falling to qualify the stock to find new buying chance
Wave Number 5
This Wave is hysterical wave because the stock increases in demand maniacally and it rises To the farthest limits until it reaches to ABC pattern and it's waves to correct previous situations
Secondly : ABC Waves
When the five waves consisted after that the market starts in correcting the matters through forming corrective waves called ABC waves ,as we see at the picture below
ABC Waves
But notice these waves in up markets and down markets ,and you can use these waves on the chart by using Zigzag indicator
To Use Zigzag indicator on the chart : Click on indicators then choose custom then ZigZag
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