What's the application of this theory?
Source
. Understanding market trends; for traders/investors in the market using Elliot wave theory can help in taking advantage of market movement it helps in knowing when is the right time to make entry such as when sellers are getting weak in the market and when it's right to make buy position.
. Market entry; using Elliot wave traders can easily make a proper market entry for instance when the wave trend makes a lower low the trader can easily open a position depending on the market trends either bull or bear
. Conservatives way of trading; using this principle traders will be very cautious when it comes to entering a market he has to wait for a clear affirmation before opening a position.
. Stop-loss position; with a proper understanding of how Elliot wave theory works a trader can be able to make a proper stop loss no any traded position.
What are impulse and corrective waves?
**Impulse wave**
Impulse wave are one in five first wave that aligns or flow with the market trend in these the market tends to moves in a bullish/bearish and correlate in a corrective wave pattern.
Wave one there is a little movement in price in a bull direction indicating the sellers are taking profit and allowing the buyers to take dominance in the market.
Wave two Since wave one the movement was very little there will be a price reverse leading to buyers taking profit and the market can go down a bit but will not reach the same level as wave one.
Wave three here the buyer has taken control of the market which leads to a sharp increase in buying and the market trend will move up quickly.
Wave four market moves down again as buyers being to take profit.
Wave five here the market moves upward again as buyers take control of the market-leading price increase.
Note impulse doesn't necessarily mean the market must be bullish it applies to both bullish and bearish market trends.
**corrective waves**
As the name implies corrective waves are used as price reversals to correct the impulse wave movement in the market trends. they are represented by an alphabet ABC.
**Zig-zag waves**
Here wave b is the shortest compare to a and c leading to a very steep move in price.
**Flats waves**
In these waves, all the length of the wave line seems to be equal in length here wave b is reversing wave a and wave c reverse wave b.
**Triangle waves**
they move sideways against the trending market. they are decreasing as the market moves.
What are your thought on this theory? Why?
Personally, the Elliott wave theory is a very good tool that can be used to monitor market movement as traders who want to make profit in the market having a prior understanding of how this theory works can help in making market proper entry and help reduce the risk of losing the invested asset on trades.
Choose a coin chart in which you were able to spot all impulse and correct waves and explain in detail what you see. Screenshots are required and make sure your name which cryptocurrency you're analyzing.
The chart above is the perpetual future trading chart XRP from my Kucoin trading app.
I used number 1-5 to indicate the wave movement
1 from the chart represents wave one showing the beginning of the price trend in an upward direction.
2 represents reverse in price
3 represent buyers controlling the market
4 represents a downward movement
5 represents another upward movement in price
The a, b, c represent price correction
Conclusions
Elliott wave theory is a very important tool in trading as it guides traders on how the market moves and correct with this tool traders can easily know-how take market entry position.
Screenshots and information sources
Babypips pdf
Kucoin exchange
https://blog.roboforex.com/blog/2020/03/24/practical-application-of-elliott-wave-theory-in-trading/
initially posted by me here