Wave fractal analysis
Elliot wave analysis is one of the ways to technically analyse a market. I was developed by Ralph Nelson Elliot in 1934.
Fundamentals of wave forex analysis
If we look at price development graphs, we may observe that they are repeated across several models. In turn, each large model consists of other, smaller ones. Elliot himself was able to describe most such models. He defined the law of eight waves. According to this law, if the market develops as five waves in the direction of the general trend and three other waves going in the other direction, given that the direction has specific periodicity, then the graph contains a complete market cycle with rising prices. In the reverse case, there is a market cycle with falling price.
Particulars of wave market analysis
First, wave market analysis allows a forecast of how the financial graph will develop. It serves as a tool that identifies market changes at various time periods.
Second, it should always be considered that this is simply a forecast rather than a precise picture of the market.
Third, wave forex analysis reflects the financial picture of the market at a given point only. All forecasts based on Elliot waves shift with time.
Fourth, a trader on the stock market cannot make actionable decisions based only on a wave analysis. It is only a simplified graph with a hypothetical price change trend.
