Contact Us
Your Cart
Your Account

Trading Basics
Learn Swing Trading
Stock Market Stages
Trading Stock Trends
Moving Averages
Candlestick Charts
Stock Chart Volume
Support & Resistance
Relative Strength
The Strategy
Trading Strategy Traders Action Zone
Trading Pullbacks
Entries and Exits
Market Timing Strategy
Chart Patterns
Money Management

Elliott Wave Pattern

Learning the basic elliott wave cycle

The elliott wave pattern is a structure that defines how a stock behaves. All stocks tend to move in a basic five wave structure that consists of a motive phase and a corrective phase.

For swing traders, the motive phase is what we are interested in. You will see that the elliott wave theory falls neatly into my favorite type of trade: The First Pullback Trade.

First, look at the following graphic to to get an idea of what the pattern looks like...

elliott wave

The Phases

The motive phase of an elliott wave cycle consists of five waves. You can see the waves labeled on the chart above numbered 1 through 5. Think of the motive phase as a detailed view of an uptrend.

The corrective phase is labeled on the chart above as Wave A, Wave B, and Wave C. This is the phase that "corrects" the uptrend. We are not really concerned with this phase, but I wanted you to learn the basic cycle!

Wave One

This wave breaks the previous downtrend and begins a new uptrend. This marks the beginning of the trend. You want to start watching for a pullback when this wave starts.

Wave Two

The pullback! Now you want to start looking for an entry using candlestick patterns. This sets up our First Pullback scenario. You are hopping on board at the beginning of an uptrend.

Wave Three

Wave three of an elliott wave cycle is the longest and the strongest of all five waves! That is why we want to get on board during wave two (the pullback) right as wave three is beginning to unfold.

When you can find stocks that are beginning a wave three, you want to hold on to your position for a longer time frame. Don’t treat is at a little swing trade, instead, treat it as a trend trade. You want to ride this powerful wave to completion! Why? Because you will make the most amount of money in the least amount of time. Ya, gotta love that!

Wave Four

This wave is pretty disappointing for those that bought this stock too late. The stock moves a lot slower and is a signal that the best part of the trend is over.

Wave Five

Again, this wave is usually sluggish and not near as dynamic as the third wave of an elliott wave cycle. This also marks the last burst of buying before a new downtrend starts.

Wave A, B, and C

These waves finally start the downtrend. You will notice that wave A looks like just a regular pullback. Nope. This is a bull trap. You will also notice that wave B doesn't get higher than wave 5. This is the first pullback of the downtrend and wave C is the third wave in a downtrend!! This is where you would look for shorting opportunities.

This is the basic structure of an elliott wave pattern. There is a lot more to elliott wave theory, but some of it can get very complicated. Also, sometimes it can be very difficult to identify exactly which part of the cycle a stock is in!

Your Cart is Empty

The Five Most Reliable Candlestick Patterns
How To Read Charts
How To Start Trading Options
Dividen Calendar
Trading Journal
24 Rules of Trading
How To Scan For Stocks
How To Read Charts
How to Trade Gaps
Multiple Time Frames
How to Short Stocks
Fibonacci Retracements
Stock Trading Lessons
Trading with TICK & TRIN
List Sectors & Stocks
Tools of the trade
Master Bollinger bands
Audio Webcast Course
Position Sizing Calculation
Option Strategies
Option Playbook
ForexFreedom formula Video
Money Management Video
REO Listings for Bank
Buying REO property
Get Free Credit Reports
find your home value

Submit Your Site To The Web's Top 50 Search Engines for Free!

Powered by D2 StoreFront.

free spam filter

Page Rank Checker | The Link Exchange