Trading is an exciting art full of opportunities and risks. Analyzing price action and making decisions is a worthwhile challenge. Technical analysis is the study of the chart employing different tools. The novice trader can feel like a child in a toy store. In the world of trading, there are hundreds of tools and methodologies to study the price. A trader who tries to use everything at the same time gets obfuscated and wastes his time. Patience acclaims the wise trader. The way to do things well is with patience, discipline, and dedication.
In the vast universe of technical tools appears the Elliott Wave theory it is not the holy grail. Still, it is an incredible guide to understand price behavior and use that information for trading. Let’s see how it can currently work on the EUR/USD and what it tells us to trade this currency.
Analysis and then trading
We all want to find the precise end of each cycle, but with technical analysis, there will always be a delay because validation does not happen at the last pip. It is necessary to wait for the price to rebound to find the entries. In the EUR/USD we see the four-hour time chart. It looks like a roller coaster. On November 14, the price reached 1.0989 and rose to 1.1097 a little over 100 pips. Then it plummets to 1.0992. It bounces back up, and there we are. What will happen now?
Elliott Wave 4-Hour Chart
According to our Elliott Wave count, the market owes us an impulsive move to the high 1.1180; then, the price may fall. Suppose a glass is being filled with orange juice, if you fill it halfway, you know you can fill it more. The same happens with the cycles of the market. The EURO needs to go up before completing the wave “iv” denoted in black.
Although we know with a high probability that this scenario can happen, the focus is on detecting the end of the bass corrective.
The bearish corrective is called wave “X” in orange. It tentatively ended at support 1.0989 on November 14. The price rises and falls again if, at this time, we see it pass the 1.0989 support, the x-wave will be active. But if the price starts to rise and breaks the 1.1020 resistance, it would confirm that the orange x-wave is over.
Between sword and wall
What do we do now? We must take risks when it comes to winning; the first attempt to climb in the trend was activated in the 1.1010 with a small stop loss. The trade target is at 1.1180. In the alternative case of seeing the price fall beyond 1.0989, we must close the trade and re-enter the next reverse. We are hunting for the low!
Undoubtedly the Elliott Wave theory is a technique that every technical analyst must master if you want to start using it start calmly do thousands of counts and before the difficulties keep trying.
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