The Elliott wave theory, allow the trader project the way that price will move and the levels that are likely to react, based on past price, the patterns repeat and repeat all the time, once the analyst develops the skills to draw the waves on the chart the sky is the limit. The Elliott Wave theory is a powerful technical tool, in the wrong hands can cause a disaster, on the right ones will boost any strategy.
Take my hand and join me to discover the waves on the EUR/USD, on the 4-hour chart price has handled the way to rise under the frame of a big consolidation, the fourth orange wave it´s active, inside this wave the price has behaved in a higher than usual chaotic style. Everything started on August 2nd at resistance 1.1910, and the first leg down was a mere five wave impulse, noted with blue color and shown inside the green wave “A” once the “B” wave started the price decide to give test our skills to understand and label the waves.
The complex irregular Flat kick-off after the green wave “A”, the waves inside “B” are shown by the blue labels “wxy”. The blue wave “x” ended under green “A”, that is why is called an irregular flat, then the price climbed to current levels to make its blue wave “y”. With the red channel that is enclosing the price, it´s possible to follow the upwards trend and use it to identify the end of the wave.
Once an hourly candle closes below the red trend line, short trades will be welcome. A simple buffer could be to wait for the close and then leave a pending order under the “low” of the signal candle (the one that closes under the trend line). If the price starts to drop then manage the trade and capture the most you can, use your skills and strategies combined with this analysis. Do not trade short while the price remains above the trend line. Have a great weekend and get ready for another trading week.
4 – Hour Elliott Wave Chart EUR/USD
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