In 1938 RN Elliot opined that the price patterns develop in a specific set of waves that through study can be learned and used to forecast future price direction. The basic concept is that each market cycle in the direction of the current trend develops in five waves and counter trend moves typically retrace out in three wave patterns. This theory has a psychological basis. Investor psychology and sentiment is a key to Elliot Wave Theory. Crowd behavior is the key to how and why the waves of prices develop.
Elliot wave Theory is a very difficult to implement in real time. A lot of study of the basic and advanced concepts is necessary. Moreover a lot of practice in real charts is needed. A lot of technicians believe that Elliot Wave Theory is subjective. They say that "if you give a chart to 12 Ellioticians you will have 12 different wave counts." I believe that they are exaggerating.
Elliot Wave Theory is difficult to learn and master. Neverheless the result to your trading can be very fulfilling. Imagine having a method that can allow you to forecast future price movements with hi accurancy. Imagine having a roadmap to where price is and where it should move in the future.
But it is not only this. Elliot Wave Theory principles include Fibonacci symmetry in price movement and future price projections. Wave counting has no meaning without the knowledge of Fibonacci projections and objectives between the waves. This knowledge reveals great symmetry in price action. You will also know how to choose the correct beginning and ending points of Fibonacci retracements. You could also learn how to correctly assess classical technical patterns like head and shoulders, wedges, flags and so on. Many so called continuity patterns in classical technical analysis can be reversed points in Elliot Wave Theory depending on wave counting. I believe that Elliot Wave Theory is the base for all Forex trading techniques. You should take the time to study it and you will not miss.
I have studied Elliot Wave Theory for many years. I am fascinated by the implications of this theory in my trading style. You could click here for more information on how I apply Elliot Wave Theory in my Forex Trading. [http://www.easytradeforex.com/advanced-fibonacci-patterns-forex-trading-system/]
Thank you for sharing your interest in forex with me
Louizos Alexander Louizos