Elliott Wave Analysis - a Useful
Tool in Analyzing the Market Moves
Many traders use the Elliott concept to analyze
trend changes. Tradecision offers them a
special study that identifies Elliott wave and corrections.
Even though some professional traders do not agree with some
of Elliott’s findings, he definitely must be admired
for the ideas he contributed to the trading theory, many of
which are very useful.
Elliott wave analysis is one of Tradecision’s
core analytical studies designed specifically
for devoted Elliott Wave analysts. This study uses the simplified
Elliott Wave theory, stating that a price usually makes a
5 wave pattern in one direction, followed (in the majority
of cases) by a corrective pattern, and, finally, by a new
5 wave pattern in the opposite direction.
The Elliott wave study uses a special mathematical
algorithm to resolve conflicting situations and identify
waves and corrections as precisely as possible. The experts
can fine-tune this algorithm. For example, it’s possible
to specify a parameter that indicates the percentage for which
Wave 4 can overlap Wave 1 before the Wave count is considered
The way the study can be presented, colors and style can be
Custom Elliott Wave Toolbar
If you need to make a custom Elliott Wave-based analysis,
you can use the Custom Elliott Wave toolbar to manually mark
the wave numbers over a chart. Once added, it can be repositioned
any where by clicking and dragging it to its new position.
A Brief Overview of the Elliott Theory
In 1939, Ralph Nelson Elliott published a
pattern-recognition technique, which holds that the stock
market follows a rhythm or pattern of five upward waves and
three downward waves to form a complete cycle of eight waves.
The three downward waves are referred to as a "correction"
of the preceding five upward waves.
Wave is a movement in the market, either upwards or downwards.
The size of the wave depends on the period of time that is
being analyzed. Impulse Wave is a wave that moves in the direction
of the main market trend. It subdivides into 5 smaller waves
(1-2-3-4-5). Waves 1, 3, and 5 move in the direction of the
main market trend. Waves 2 and 4 move against the main market
Corrective Wave is a wave that moves in the direction opposite
to the direction of the main market trend. It subdivides into
3 smaller waves (a-b-c). Waves a and c move against the main
market trend. Wave b moves in the direction of the main market