The Elliott Wave Edge
Does Elliott Wave analysis offer you, the trader, an edge? And how do Elliott Wave traders win in the market? These are the main questions you need to consider. I recently saw a comment on one of my posts in WaveTimes where a reader asked a very pertinent question. He suggested that Elliott Wave Analysis is like a toss of coin with a risk-reward ratio. If one gets Heads, he will win 10 points. If it turns out to be Tails, he will restrict his loss (stop loss) to 5 points. So out of 10 moves, if he is correct more than 3 times, he makes a profit.
This reader referred to a long-term Elliott Wave chart where I had suggested the possibility of a large down move, and pointed out that we were still edging higher to near all-time highs. Even at this juncture, there were many possibilities, because wave counts are always work-in-progress! So, in this dynamic market there can’t be any fixed set of rules, and making money is very difficult, and that is the reason why most of the analysts are selling their advice, books, memberships, tips etc. Wow! How very neatly put!!
Using Elliott Waves, if I could determine a level that has a high probability of success, isn’t that a better deal than just tossing a coin at any level and deciding to buy or sell? We all know that basically only one of three things could happen. (a) The market could go up from current levels (b) it could go down or (c) it could trade sideways for some more time. All that a trader requires is for some information on which is the more likely outcome.
How do Elliott Wave Traders Win?
Many beginning traders think that there exists a system that will tell us in advance which way a market will move next. Then, all that they need to do is to master that system and they could make money day-in and day-out! Others believe that some of the best traders in the world are privy to some secret methods, or indicators, which is why these traders are so successful.
Let me share with you a secret. I have worked very closely with some of the best traders in the world, and they are just like you and me. i.e. they don’t have any secrets up their sleeves. What they do have is a system that offers them an edge. One of these systems that have proved to be very effective is the Elliott Wave edge. And these Elliott Wave Traders win because they use this edge effectively.
With Elliott Wave analysis, a trader is able to figure out ‘where’ in the big picture the market is currently trading. He/she is then able to move into shorter time frames and determine a reasonably reliable direction for the next move. On top of that, the trader is also able to compute how far the current move is likely to travel before the inevitable change of direction happens. Once these three things are figured out, the trader waits for the markets to come to a per-determined level where it would be possible to take an exposure that keeps the money that is risked to be affordable.
Imagine one is drawing cards from a pack of 52 cards, and after drawing 10 cards, we find that we have drawn 3 Jacks already. Wouldn’t you agree that drawing another Jack from the remaining 42 cards is a low-probability event compared to drawing a Jack when there were 4 of them in a 52 card pack? Knowing that we have already drawn 3 Jacks is an edge that we have, and so we can bet more confidently that the next card won’t be a Jack.
Similarly, if we are in the fifth wave of a move, and we know that there has already been an extended wave earlier, and we know by our Fibonacci ratio analysis that this fifth wave is likely to end at a certain level, then we have an Elliott Wave edge. We can start looking for a reversal around our computed target for the fifth wave. If we take a counter-trend trade near this level, it is not the same like tossing a coin at any stage of the movement and deciding to buy or sell!
Elliott Wave analysis gives us a great deal of clues about the market, so much so that we have an edge at almost every stage of the move. Even not having a trade is sometimes a sound decision, and Elliott Waves could give us that edge. For example, a trader would be well advised to stay on the sidelines when a complex fourth wave is unfolding.
At WaveTimes, you will find hundreds of examples where I have used Elliott Waves to anticipate market turns with great effect. Go ahead and explore. You will soon find yourself making some very sound trading decisions. Even if you are already an experienced trader and enjoying an edge though some other system, you will find your results dramatically improving by incorporating the Elliott Wave edge in your trading activity. So welcome aboard and join the thousands of traders who are already benefiting from the insights given here.
If you would like to learn from me directly, my online course, “How to Profit from Elliott Waves” is a great resouce.
In this article, we have discussed the Elliott Wave Edge and demonstrated how Elliott Wave traders win. Quite simply, they evaluate their odds of winning at every stage of the Elliott Wave cycle. And when they determine their reward to risk trade off is favorable, they take the trade. This is the way they succeed, consistently.