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How to count waves and the Elliott waves

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Wave principle trading

This webpage is about a practical application of the wave principle trading.

On 2 November 2015, we have identified an Elliott wave high probability

trade setup on or near the fifty percent Fibonacci retracement level of

the first part of a correction (that is underway).

View chart below

Image = "weekly chart of the British Pound/Australian Dollar (GBPAUD)

currency pair that is showing five Elliott waves (wave one to five) plus a

portion of a corrective wave that is underway.  Also a blue line that is

highlighting the fifty per cent Fibonacci retracement of the first wave of

the correction"

 

To avoid common trading mistakes, we quickly adopted a top-down trading

method. In this instance, we used the weekly chart as the trading setup time

but opted for the fifteen-minute chart for both signals and entry. Note that

technical traders often use three different time frames when they are applying

the multiple time frames trading method.

A trading signal is about knowing if bearish or bullish orders are activated or

filled. However, before one can sell, the price ought to start weakening. The

opposite is also true if one wants to enter a bullish trade. In other words,

the trade entry is about timing the trade when the price-action is confirming

the signal.

On the fifteen minute chart, the signal was clear as we noted that bearish

orders are littered along the blue rising trend line.

 

View the fifteen-minute chart below

Image = "fifteen-minute chart of the British Pound/Australian Dollar (GBPAUD)

currency pair"

 

Watch the video

Title: How to day trade on the fifteen minute chart using

the wave principle

Description:  A day trader is day trading the GBPAUD

currency pair by combining the wave principle, top down

trading and fifty per cent Fibonacci retracement like a

professional trader.

 

It essential to understand that the Elliott wave principle allowed us to count

five waves on the weekly chart and to identify the first part of a correction

that was underway. We then use the Fibonacci tools to highlight the fifty per

cent Fibonacci level (of the first part of the correction). We were aware that

few high impact economic news were due as we checked Forexfactory website.

We controlled the risk by setting a steady stop loss at 21693 as soon as our

limit sell order was filled at 21663.

 

 

Wave principle strategies

The wave priciple procedure was simple and clear:

1/ the British Pound Australian Dollar currency pair was at a fundamental

level on the weekly chart,

2/ that primary level was the fifty percent Fibonacci retracement of the

first part of a corrective wave,

3/ the trending phase of the bullish Elliott Wave cycle ended, it became

clear that most bullish traders will sell together with new bearish traders

for a while at least,

4/ we did not want to be the first sellers,

5/ we waited for big market players to start selling,

6/ we noticed their bearish activities along the blue line on the

fifteen-minute chart,

7/ the price exhibited the first lower high on the 15M chart,

8/ we carefully placed a limit sell order at 21663 after analyzing

the candlestick patterns.

Note that we have combined the wave principle with the following:

a/ economic news

b/ Fibonacci retracement and

c/ a multiple times frame trading method

 

View the power of the wave principle

The fifteen-minute chart below illustrates what has happened.

 

 

Image = "A blue backgroud image with the words: the wave principle"

 

 

 

 

Sky 1

Wave trading

 

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