Elliott waves.

The behavior of the crowd is subject to certain laws and changes according to certain rules. Any freely traded assets are inextricably linked with the will of a large number of people, a kind of same crowd.

It would be logical to find your own patterns here and try to develop methods of successful trading. This is what accountant Ralph Nelson Elliott did at the beginning of the last century.

Studying the bizarre movements of market quotes, he came to the conclusion that the market, as a product of crowd psychology, has a unique, constantly repeating wave structure. And, having established that the ratios of the waves in this structure obey the Fibonacci proportions, Elliott produced a subtle and immortal tool for analyzing commodity and financial markets. What is the essence of this work? The main Elliott patterns consist of impulse and corrective waves. An impulse wave has five smaller waves and moves in the same direction as the higher order trend. The correction wave ( Forex pullback ) contains three subwaves and is directed against the trend. Connecting with each other, these structures form larger formations of the same figures, which, when combined, create even larger specimens... And this process is endless.

 Thus, in the Elliott wave theory, any wave can be considered part of an older wave, dividing itself into younger waves. In order to recognize each wave as accurately as possible, the teaching pays special attention to their individual characteristics and proportions of construction. However, wave identification is the main difficulty of wave theory. Individual waves are clearly visible on already worked charts; forecasting the future is often problematic and requires certain skills.

In its pure form, the Elliott wave law does not pretend to be a complete forex trading system ; it would be more correct to call it an analytical method for forecasting the foreign exchange market.

The practical purpose of this method will be to determine the moments of market reversal that are most suitable for making transactions. The wave concept is especially well suited for this, because by identifying the first impulse wave, you recognize the direction of the trend and, after waiting for the end of the second corrective wave, you can successfully enter the market. Market analysis using the Elliott wave theory opens up the opportunity to understand changes in the psychology of participants in currency trading, identify emerging sentiments and make the right decisions.

The Elliott Wave Law lifts the veil on the mysterious mechanism that moves exchange rates and is a powerful tool in a trader’s arsenal.