This is quite useful because we can now break any price trend movement into this basic 5 – 3 wave pattern. It is also called motive waves, while the 3 waves corrective move against the 5 wave move is also called corrective waves. In Elliott Wave theory, the 5 wave moves in the direction of the trend. There is a corrective 3 wave movement in the counter-trend direction labeled A, B, and C. Next, Elliott Wave observed this after a 5 wave move in the direction of the prevailing trend. Waves 2 and 4 are price movements against the prevailing trend. One of the Elliott Wave strategy rules is that waves 1, 3, and 5 often formed in the direction of the trend. Elliott found out that any trending movement can be broken down into a five-wave sequence. The basic principle of the Elliott Wave Theory is that over a certain period of time, prices move in certain patterns.
#Motivewave trade wave 2 how to
Also, read the guide on how to trade using the best Wolfe Wave Strategy. The theory is based on the cyclical pattern of market events.Įven if there is a disastrous recession, sooner or later, the existing conditions should revert back to how they were before the recession. One reason Elliot Wave is so popular is that it combines technical and fundamental news. Also, read the hidden secrets of moving average. We will now explore how you can use impulsive and corrective waves in order to increase the probability of earning strong returns. And understanding market structure – besides the obvious support and resistance (levels). However, the trading theories that make them useful remain unchanged. The impulse moves versus correction are one of the basic underlying principles of market structure. Impulsive waves and corrective waves are perfect opposites.
#Motivewave trade wave 2 series
He noticed that the market was trading in a series of three and five waves. He described some of the patterns he observed as different types of waves. After careful study of the markets, he began to notice some repeatable patterns.Įlliott believed the market was much less “chaotic” than many traders assumed. In 1930, Ralph Nelson Elliott set out to learn about the stock market after experiencing losses in the 1929 stock market crash.Įlliott’s discoveries were impressive. You will learn why the Elliott wave strategy is so popular today. Before we begin our discussion on how to trade Elliott Wave, let’s learn how the Elliott Wave theory was discovered.