Most Elliott traders make money during an impulse pattern and then lose it back during the corrective phase. If only one could accept these corrections as part of the up move/ down move and have a different strategy to deal with it, corrections will be a welcome change to put in place a trading method that will fetch decent returns in the short term & protects the capital. For eg: “Writing a Call” when an impulsive up move ends & a correction starts not only protects the capital but also brings in a decent return.
An impulse pattern consists of 5 waves. With the exception of the triangle, corrective patterns consist of 3 waves. An impulse pattern is always followed by a corrective pattern. Corrective patterns can be grouped into two different categories:
|
| 1. Simple correction (Zig-Zag) |
|
| 2. Complex corrections (Flat, Irregular, Triangle) |
Complex Corrections (Flat, Irregular, Triangle:-)
The complex correction group consists of 3 patterns:
| • | Flat |
| • | Irregular |
| • | Triangle |
Irregular Correction:-
In this type of correction, Wave B makes a new high. The final Wave C may drop to the beginning of Wave A, or below it.
A Zig-Zag correction is a three-wave pattern where the Wave B does not retrace more than 75 percent of Wave A. Wave C will make new lows below the end of Wave A. The Wave A of a Zig-Zag correction always has a five-wave pattern. If you can identify a five-wave pattern inside Wave A of any correction, you can then expect the correction to turn out as a Zig-Zag formation.
Flat Correction:
In a Flat correction, the length of each wave is identical. After a five-wave impulse pattern, the market drops in Wave A. It then rallies in a Wave B to the previous high. Finally, the market drops one last time in Wave C to the previous Wave A low.
Triangle Correction:-
In addition to the three-wave correction patterns, there is another pattern that appears time and time again. It is called the Triangle pattern. Unlike other triangle studies, the Elliott Wave Triangle approach designates five sub-waves of a triangle as A, B, C, D and E in sequence.
I will post more on triangles in my next post with our market charts and the amazing predictive nature of these triangles.
Identify these corrections at the "OB" & "OS" areas and have your strategy in action. Allowing the "A" wave to show itself will also get you some vital clues to the remaining part of the corrections.
Get rich slowly.
(Will post "aarvee's week end analysis by 10.00PM).
10 comments:
Get rich slowly.
BUT Surely :)
Dear Ilango,
All of us must feel grateful for your constant endeavour in sharing your knowledge and enriching ours. Thank you.
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My pervert mind has some questions on the great EW. My doubts/apprehensions are:
Waves being natural phenomenon and that too a "ceaseless" one, how do we trap the beginning or an end ? An upward wave is an end of a trough which was again an end of a downward one ....
Is the process built in that we go to the wave-less deep sea and find the Wave 1...?(the beginning of the wave)
Is labelling a wave pattern a 'defined' process? Always there are multiple labelling of the waves - different numbers or alpha- at the same juncture in the market environment.
If Mr Elliot accepted the Natural Waves as his basis, has he considered the definite high and low tides that are pre-defined occurances in conjucture with "Lunar movements" - if yes then we must also be having expectable wave patterns co-inciding with pre-defined market movements as an "Expiry".
Hope I am in your wave length.
Hi,
By the way will wait for the aarvee9 Night Show. Is it "A" certified, why reserved for the late night slot?
Respected Sir,
In Nifty Hourly chart -ve divergence is seen. pls confirm this.
Regards,
Deepak
@ Rajagopal,
Elliott's book was aptly titled "Nature's law" and it applies whenever a mass participation happens.
We are lucky to identify such beginning and end of waves, thanks to EW in combination with TA.
We did spot the start of the upmove from 2539 in Mar.09 and Diwali top @ 5183. More recently the bottom @ 4675. However, we must also admit the challenges and certain failures to spot the key points owing mainly to the prejudices & opinions we start developing after an excessive analysis.
Larger waves are fairly easy compared to the shorter ones. Traders like us depend more on such shorter version. But investors will do well with the weekly & monthly wave formations and hedge their portfolio once a correction sets in.
Our dear friend Mr. Balanandan of "Vipani sangeetham" has his music touch on the market along with "Planet movements".
Of late we have had some excellent interactions from readers on "Astro" influence. And more in-depth analysis with OI interpretations.
As you rightly said, "all are pre-ordained". But we figure out some and we spot some after their occurences.
Night slot is allotted for the start of "A" wave.(Dn) Would prefer the longs to go to peaceful sleep to break the news.
yes ..Deepak,
There is a "minor" negative divergence in the hour charts. This started from 5214 rise..
Thank you Friend. Good Night.
Newbie here. Thank you for a nice explanation. Where can I find the links to part 1-3 of this series ? Thx in advance.
gd
Dear Thiru Ilongoji,
Thanks very much for referring vipanisangeetham in comments besides giving a permanent place in "My blog List". Hope the blog serves some purpose to the trading community. Thanks once again. You deserve much more credit than any other blogger and it is seen that you visit our Amolji's blog Astro-Nifty and try to see astro angles of market also.
Good article. Pl add one more study with this to make it super & that is Fibonacci ratio
by which one can predict the movement for a very long time
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