A lot of you guys have asked me like where do you begin labeling the chart, that what’s makes Elliot wave to be complex to a lot of people if you also had the same question well today is your lucky day. That the biggest problem new traders face with Elliot wave, I also went through the same phase. So I’ll take you to step by step from monthly chart to hopefully 1-day chart using a current chart. A lot of so-called forex gurus these days will teach you with a chart from 1900 century that agrees to them but me I’m not guru so ill teach you guys with a current chart that by the time we reach the 1 day time frame, it will be easy for you to go to lower time frame if you want to. Me personally I prefer higher time frame they are less noise in the markets, and news doesn’t affect that much. But you need patience in a longer time frame you get paid more pips but the waiting is hard for new traders, after a while I’m used to it. Without wasting time let get to it, this below is an NZD/CAD chart on a monthly time frame.
So looking at the chart where do you start, me I prefer to start from the monthly chart and make my way down to 1 hour or 4 hour depending on the chart. So here I have shown you with an arrow where I started, I started on the left bottom of the chart, I could have started on the left top as well but I preferred to start on the bottom, it unnecessary to start at the top you will see. So looking at that big bullish move I try and figure it out if it a motive wave or it correction wave, I started from the bottom and counted till I reached the top and I saw that we have impulsive 5 waves. From there we still not sure whether the impulsive 5 waves was wave 1 or wave A. When you counting Elliot wave, we always start from bottom to top or top to bottom depending on the chart.
After 5 impulsive waves, I started looking for 3 waves down according to what I know about Elliot wave that after 5 waves up we have 3 waves down to correct. The red a, b, c represent my correction waves, from there, to be honest, I would have bought the pair. Since I wouldn’t have known that we have complex correction wave. Notice where the wave c end at the resistance of wave 1 in motive waves. That wave (W) by the way, since that the old price range we know but that would be some crazy complex correction. The bulls kick in then the price moved up to (X) then it moves 3 waves down to complete wave (Y). You see how crazy complex waves can cause problems for us, tell if you would have been able to predict that after wave x we would still come back to finish wave Y because at that time you wouldn’t be sure that we are not in wave C or wave 3 on a bigger time frame. The good thing that comes from complex patterns is that they make our entry to have even small stop-loss that means great risk to reward and more money for us.
I repeated this image so that you can still see the chart even after scrolling down, so let continue now. Looking at the chart above we see that we finished correction wave now we are starting wave c or wave 3 we are still not sure which one. So we start counting again for impulsive waves, we get wave one, that price correct back to wave 2. Wave 3 kicks in till the end of it, please note where it ends and you must see the resistance in the past price around that price area. End of wave 3 and start of wave 4, wave 4 seems simple zig-zag pattern like wave 2 or is it. If that end of wave 4 that would be great since it ended just before it reached wave 1, and our Elliot wave rules are still not violated. Notice after wave 4 a, b, c we have another a, b, c and it breaks the end of wave 3. Is that wave 5? I don’t think so. I think we could be having complex wave 4 or we could be in an ending diagonal wave 5. That the only thing that can explain those 3 waves after what I thought to be wave 4. Let go down to lower time frame to see if we can spot what happening because we are in the current action of the monthly time frame.
Weekly time frame (option A and option B or option C)
Looking at the weekly chart above we can see option A that we could still be in complex corrective wave 4, we could be in a flat complex pattern. We have 3 sub waves in wave A, 3 on sub wave B and we could be having wave c as ending diagonal, with 5 waves. I’m sure you understand now why some traders don’t trade correction waves as they can give you a headache.
Option B – looking at the second scenario is that we could be in an ending diagonal wave 5, that would explain why we have those 3 waves I talked about. After wave 1 in wave 5 which is a zigzag, we got wave two which is also zig-zag and we are in wave 3 now which is expected to be zig-zag. Basically, we expecting zig-zag till the end of sub wave 5 in wave 5 of ending diagonal pattern.
Option C – Both option A and option B says that we are going bullish with the price. This one is the last option I see is that we could be in a correction after the end of wave 5, wave 5 could have ended at 0.99224. If this is true we could have 3 waves down or we could wave 5 waves down. Depending on the wave count on a bigger time frame.
CONCLUSION: I hope you got the idea of how to start in any charts, I’ll make a video to explain more if they is a need, but I think it straight forward. The method I use is to start from the monthly chart and work my way till one day which is where I make my entries, sometimes when I want cheaper entry I’ll go to 4 hr or 1 hour, but nothing below that. Please note that every trader has his preferences.
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