What is Elliott Waves pattern?
Developed by Nelson Elliott in 1920s, this pattern indicates repetitive nature of market trend hence traders can consider future direction of trend on a certain basis, however it needs profound knowledge and experience.
This pattern is based on “Dow Theory” in wave scheme that has Fractal nature.
Through mathematical structure of Elliott Waves pattern, due to its Fractal characteristic, it can be repeated infinitely on smaller scale even within bigger pattern without any time limitations.
It is comprised of 5 major and 3 corrective waves with the following labels; 1, 2, 3, 4, 5 and a, b, c.
Elliott Wave Technical Analysis
There are diverse conclusions out of this pattern with continuation and reversal characteristics.
Despite of different conditions, frequently continuation technical analysis can be generated when 2nd wave has been formed and 3rd wave is going to appear hence traders can place agreeing orders with the current trend.
Other technical analysis from this pattern can be generated after 5th wave has formed and a reversal point is being detected. Traders can order an opposite trade against 5th trend direction that can have other confirmations by various patterns.
The reversal analysis generated from Elliott Waves pattern has extremely more validity rather than the continuation technical analysis due to the fact that continuation analysis is generated while all waves has not been yet formed.
The reversal technical analysis will be generated only after all major waves have been established.