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If you have been trading for a while, you must have heard about the Elliott Waves. Elliott Wave Analysis originated in the stock market but it applies to the forex market really well too. Elliott Waves are a sort of a crystal ball that can help you understand the coming turning points in the market with surgical principle.

Elliott Waves were discovered by Mr. Elliott when found a certain price pattern repeating over and over again in the stock market on the longer term. However, Elliott waves is a fractal concept that works on all time frames from day trading to swing trading and position trading.

An Elliott Wave Cycle from a bullish to a bearish market or from a bearish to a bullish market will always comprise of eight waves. Impulse waves are the ones that move with the main trend. They are five in numbers. Corrective waves move counter to the main trend and are three in numbers. This pattern has been found to be repeated in the stock market as well as all the other markets repeatedly over and over again making the Wave Principle a Universal Law of the Nature.

Within each cycle there can be sub cycles while at the same time that cycle can be part of another bigger cycle. But all these cycles follow the same 5/3 rule meaning each cycle will have five impulse waves and three corrective waves.

Wave one is the shortest impulse wave. Wave two is a corrective wave that should never reach the start of the wave one.

Wave Three is the strongest and the longest of the five impulse wave. Wave four is a corrective wave while wave five is again a impulse wave in the direction of the main trend and represents the peak of the bullish or bearish sentiment in the market.

It is important for you to understand that Elliott Wave Principle can be applied on all time frames whether you trade intraday or longer term.

Mr. Ahmad Hassam has done Masters from Harvard University. Get this highly profitable Magic Breakout Forex Strategy by Tim Trush and Julie Lavrin FREE. Get these Correlation Trading Cheatsheets FREE.

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