Elliott Wave Theory: A Simple Guide for Beginners

How Elliott Waves Work

The market moves in two types of waves:

• ✔ Impulse Waves (5 Waves) → These move in the direction of the main trend (like an uptrend in a bull market).

• ✔ Corrective Waves (3 Waves) → These move against the trend before the next impulse wave begins.

Think of it like a cricket match—a batsman hits continuous boundaries (impulse waves), then takes a few defensive shots (corrective waves) before going for big hits again!

Each larger trend consists of smaller wave patterns, meaning that what looks like a correction on a 1-year chart might actually be a strong trend on a 30-day chart.

How to Use Elliott Waves in Trading?

• 📈 Spot Market Trends: If a stock is in Wave 3 (strong uptrend), traders often buy, expecting further rise.

• 📉 Catch Market Reversals: If Wave 5 is completed, traders may sell before a correction begins.

• 🔍 Combine with Other Indicators: Many traders use Fibonacci retracements, RSI, and Moving Averages to confirm Elliott Wave patterns.

• 💡 Example: If Nifty 50 is in Wave 3, traders expect a bull run, but after Wave 5, they prepare for a correction.

Elliott Wave vs. Other Indicators

📊 Works Best with Fibonacci Retracements → Helps traders predict support and resistance levels (like 38% or 62% pullbacks).

⚡ Market Psychology-Based Analysis → Unlike moving averages, Elliott Wave focuses on how investors behave, not just price history.

🚀 Used in Multiple Markets → Stock market, forex, and even crypto trading (like Bitcoin and Ethereum price movements).

Final Thoughts

If you’re into intraday trading, swing trading, or long-term investing, learning Elliott Wave Theory can give you an edge in predicting market cycles, trends, and corrections. However, no strategy is foolproof. Smart traders combine Elliott Waves with other indicators to increase accuracy.

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