ABC Correction

The 5-wave trends are then corrected and reversed by 3-wave countertrends. Letters are used instead of numbers to track the correction. Check out this example of a smokin' hot corrective 3-wave pattern! Just because we've been using a bull market as my primary example doesn't mean the Elliott Wave Theory doesn't work on bear markets. The same 5-3 wave pattern can look like this: Types of...

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The 5 - 3 Wave Patterns

Mr. Elliott showed that a trending market moves in what he calls a 5-3 wave pattern. The first 5-wave pattern is called impulse waves. The last 3-wave pattern is called corrective waves. In this pattern, Waves 1, 3, 5 are motive, meaning they go along with the overall trend, while Waves 2 and 4 are corrective. Do not confuse Waves 2 and 4 with the ABC corrective pattern (discussed in the next section)...

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Elliott Wave Theory

Back in the old school days of the 1920-30s, there was this mad genius and professional accountant named Ralph Nelson Elliott. By analyzing closely 75 years worth of stock data, Elliott discovered that stock markets, thought to behave in a somewhat chaotic manner, actually didn't. When he hit 66 years old, he finally gathered enough evidence (and confidence) to share his discovery with the...

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Summary: Pivot Points

Here are some easy-to memorize tips that will help you to make smart pivot point trading decisions: Pivot points are a technique used by traders to help determine potential support and resistance areas. There are four main ways to calculate for pivot points: Standard, Woodie, Camarilla, and Fibonacci. Pivots can be extremely useful in forex since many currency pairs usually fluctuate between these...

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Using Pivot Points to Determine Market Sentiment

There is one other way to incorporate pivot points into your trading strategy, and that's to use it to gauge market sentiment. What this means is that you can tell whether traders are more inclined to buy or sell the pair. All you would need to do is to keep an eye on the pivot point. You could treat it like the 50 yard line of a football field. Depending on which side the ball (in this case,...

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Playing the Breaks with Pivot Points

Just like your normal support and resistance levels, pivot point levels won't hold forever. Using pivot points for range trading will work, but not all the time. In those times that these levels fail to hold, you should have some tools ready to take advantage of the situation! As we showed you earlier, there are two main ways to trade breakouts: the aggressive way or the safe way. Either method...

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How to Calculate Pivot Points

The first thing you're going to learn is how to calculate pivot point levels. The pivot point and associated support and resistance levels are calculated by using the last trading session's open, high, low, and close. Since forex is a 24-hour market, most traders use the New York closing time of 4:00pm EST as the previous day's close. The calculation for a pivot point is shown below: Pivot point...

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Forex Pivot Points

Are you all excited? It's your last year in junior high before you head off to high school! Professional traders and market makers use pivot points to identify potential support and resistance levels. Simply put, a pivot point and its support/resistance levels are areas at which the direction of price movement can possibly change. The reason why pivot points are so enticing? It's because they...

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Chart Patterns Cheat Sheet

Like we promised, here's a neat little cheat sheet to help you remember all those chart patterns and what they signal. We've listed most of the chart patterns, when they are formed, what type of signal they give, and what the next price move will be. Check it out! Chart Pattern Forms During Type of Signal Next Move Double Top Uptrend Reversal Down ...

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How to Trade Chart Patterns

That's a whole lot of chart patterns we just taught you right there. We're pretty tired so it's time for us to take off and leave it to you from here... Just playin'! We ain't leaving you till you're ready! In this section, we'll discuss a bit more how to use these chart patterns to your advantage. It's not enough to just know how the tools work, we've got to learn how to use them. And with...

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Chart Patterns Schmatterns

By now you have an arsenal of weapons to use when you battle the market. In this lesson, you will add yet another weapon: CHART PATTERNS! Think of chart patterns as a land mine detector because, once you finish this lesson, you will be able to spot "explosions" on the charts before they even happen, potentially making you a lot of money in the process. Chart patterns are like that funny feeling...

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Summary: Leading and Lagging Indicators

Here's a quick recap of what we discussed in this lesson: There are two types of indicators: leading and lagging. A leading indicator or an oscillator gives a signal before the new trend or reversal occurs. A lagging indicator or a momentum indicator gives a signal after the trend has started. If you're able to identify the type of market you are trading in, you can pinpoint which indicators could...

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Lagging Indicators (Momentum Indicators)

So how do we spot a trend? The indicators that can do so have already been identified as MACD and moving averages. These indicators will spot trends once they have been established, at the expense of delayed entry. The bright side is that there's less chance of being wrong. On GBP/USD's daily chart above, we've put on the 10 EMA (blue), 20 EMA (red), and the MACD. Around October 15, the 10 EMA...

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Leading Indicators (Oscillators)

An oscillator is any object or data that moves back and forth between two points. In other words, it's an item that is going to always fall somewhere between point A and point B. Think of when you hit the oscillating switch on your electric fan. Think of our technical indicators as either being "on" or "off". More specifically, an oscillator will usually signal "buy" or "sell", with the only...

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Leading vs. Lagging Indicators

doing great so far? Awesome! Let's move on. In this lesson, we're going to streamline your use of these chart indicators. We want you to fully understand the strengths and weaknesses of each tool, so you'll be able to determine which ones work for you and which ones don't. Let's discuss some concepts first. There are two types of indicators: leading and lagging. A leading indicator gives a signal...

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