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Trading Forex: How the Elliott Wave Principle Can Boost Your Forex Success
Chapter 1 -- A Useful Trading Methodology
Below you see an idealized Elliott wave with five waves trending up and three waves trending down. Which waves offer trading opportunities? Waves 3, 5, A and C offer the best opportunities... If I had to choose just one wave, it would be wave 3, because the third wave is usually the longest and the most powerful of the impulse waves. Trading the most powerful wave also offers the opportunity to trade with the best risk-reward ratio.
Figure 1-2
The setup waves (below) -- the waves we’re trying to identify in order to prepare for the trading opportunities -- are wave (2), wave (4), and wave (B). You can see that I have marked them as either bullish or bearish trade setups on this more detailed wave chart. Let’s concentrate on trading wave (3), since it is usually the strongest and longest wave, and its trend is clear. That means that we want to identify the wave (2) that will lead into a strong third wave.
Figure 1-3
When considering a forex trade, you always want to answer this question first: Where could I be wrong? The point is to know your risk before you get started.. Based on one rule of the Wave Principle, I know where the count becomes wrong. ... (continued)
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