Elliott Wave Theory – Basic Rules and Guidelines

The Elliott Wave hypothesis is a technical analysis theory that is used to describe price fluctuations in the financial market. Ralph Nelson Elliott created the hypothesis after observing and identifying repeating fractal wave patterns. Stock price fluctuations and consumer behaviour both demonstrate waves. A refinancing wave is a powerful trend among homeowners to refinance their existing mortgages with new ones with better conditions.

The Rise of Algorithmic Trading

Algorithmic trading is the use of computers and algorithms to make deals that can be done instantly and correctly. They guarantee that the best pricing is chosen and are significantly less susceptible to human or manual mistakes.

The program places orders in various marketplaces at the same time based on a specified set of instructions. Timing, pricing, quantity, or mathematical models can all be used to inform strategies. Algorithms may also analyse real-time events, news, and social media to make better trading judgments. This eliminates human emotion and prejudice, allowing just financial models and statistics to be used.

Basic Principle of the Elliott Wave Theory

Simply said, movement in the direction of the trend occurs in 5 waves (referred to as the motive wave), whereas any correction against the trend occurs in three waves (called corrective wave). The trend movement is denoted by the numbers 1, 2, 3, 4, and 5. The three-wave correction is denoted by the letters a, b, and c. These patterns may be found in both long-term and short-term charts.

Smaller patterns, ideally, can be detected within larger ones. Elliott Waves are analogous to a piece of broccoli in that the smaller portion when separated from the larger piece, resembles the larger piece. This knowledge (about minor patterns fitting into larger patterns), along with the Fibonacci connections between the waves, provides the trader with a level of anticipation and/or prediction when looking for and selecting trading opportunities with good reward/risk ratios.

Though the information might seem overwhelming, if you are looking for the best Elliot wave software on the market, Elite CurrenSea is the place to look. One of the founders of the company, Chris Svorcik has more than a decade of experience with trading and has been named as the expert on Elliot Waves theory.

Fibonacci Retracement in technical analysis

Fibonacci retracement levels are named after the Italian mathematician Leonardo Pisano Bigollo, sometimes known as Leonardo Fibonacci. Fibonacci, on the other hand, did not invent the Fibonacci sequence. Instead, after learning about these numbers from Indian traders, Fibonacci presented them to Western Europe. 

There are no formulae for Fibonacci retracement levels. The user selects two points when these indicators are put on a chart. Following the selection of those two spots, the lines are created at percentages of that motion.

Fibonacci retracements are trend lines formed on a chart between two major points, generally absolute lows and absolute highs. At the Fibonacci levels, intersecting horizontal lines are placed.

Fibonacci retracements are essential tools for traders because they assist them to identify support and resistance levels. They can make trades, define stop-loss levels, and create price goals using the information acquired. Although beneficial, traders frequently utilize additional indicators to create more accurate trend evaluations and better trading decisions.