Forex wave analysis is one of the popular methods of technical analysis, which first appeared back in 1934, thanks to the talented US scientist Ralph Nelson Elliott.
Analyzing the stock market, Elliott noticed that the price movement is constantly repeated in certain patterns, and in addition, it consists of the same smaller patterns, in turn, being part of a larger pattern.
Elliott figured out and outlined a huge number of such patterns. After twelve years of work, in 1946 his book “The Law of Nature – the Secret of the Universe” was published, it became a breakthrough in the application of the wave theory in practice, the beginning of further study of this topic and not only to the analysis of Forex, but also all processes associated with the psychology of the masses , including the history of human development in general.
What did Ralph Elliott discover , what is the epoch-making of his work in the context of forex wave analysis:
Each trend movement includes 5 waves, which consist of 3 impulse waves. They are directed towards the main trend, and 2 corrective waves, they look in the opposite direction. Elliott marked the waves of this area with the numbers 1,2,3,4,5. After the end of the trend movement, this movement is corrected, which in turn consists of 3 waves, 2 of which are driving and 1 corrective. Elliott marked the waves of this segment with the letters A, B and C. Of course, the methods we have presented are fundamental. There are many different variations and deviations from this classic forex wave analysis method, but the general message is always present.
Forex wave analysis is not even a trading element, it is the foundation of forex trading, it is the foundation of the basics. Just the same forex wave analysis gives an understanding of the market, forex ceases to be chaotic. Wave analysis will give the trader the opportunity to calculate preliminary variations of the continuation of the movement, the approximate and minimum potential of these options, and, knowing the criteria for their confirmation, take any of them to make a profit, realizing which wave is taken into profit, and conduct this wave until the close of his trade. …
Note that the topic of wave analysis on Forex is the most voluminous, and all analysts and traders always “revolve” around it, some trading methods only help in a clear wave analysis.
The most important analysis tool is the price itself (chart), and the purpose of forex wave analysis is to use the patterns of its movement in work.
