Just discovered that Elliott Wave is a relatively deep theory for trading analysis, and it’s not as complicated as I thought. This theory originated from studies by Ralph Nelson Elliott, an American in the 1930s. He found that the stock market isn’t as randomly chaotic as it seems, but rather has repeating wave patterns.

What’s interesting is that Elliott Wave is a system that explains price movements through investor psychology. When people buy, sell, panic, or hope, prices tend to follow their behavior, and these behaviors create repeating patterns called "waves."

These waves are divided into two main types: Impulse Waves, which move in the direction of the trend and consist of five smaller waves, and Correction Waves, which move against the trend and consist of three smaller waves. Once you understand what Elliott Wave is, you can identify entry points more precisely.

What makes Elliott Wave a useful tool is its connection with Fibonacci Ratios. Fibonacci numbers help us determine target price levels accurately. For example, Wave 2 often retraces 50-61.8% of Wave 1, and Wave 3 is often 161.8% of Wave 1. This data helps us set clear entry and exit points.

The advantage is that it allows us to identify entry points more accurately, increase profit opportunities, and understand market sentiment. The downside is that it relies on personal experience; interpretations of waves can differ from person to person, and sometimes it’s hard to distinguish between real waves and noise.

In the Forex market, it works well. For example, in a downtrend A-B-C: A is a strong decline, B is a small rebound, and C is a continued drop. If you recognize you’re in Wave C, you should avoid shorting or look for other opportunities.

In summary, Elliott Wave is a valuable tool, but not a guaranteed method. It should be used alongside other techniques and good risk management. If you’re interested, study more and practice with a demo account before trading live to gain a better understanding.