Predict the Market movements with Elliot Wave Theory and Patterns — Transcript

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1. 0:00[Music]
2. 0:05hey guys welcome back to the channel do
3. 0:07you find it difficult to read the
4. 0:09markets and predict the price movements
5. 0:11for the next day or for a few days even
6. 0:14though stock trading is a game of
7. 0:15probability we can actually predict the
8. 0:18market moves by understanding the market
9. 0:20behavior the elliott wave theory and
10. 0:23patterns can help you in understanding
11. 0:25the market behavior elliot wave theory
12. 0:28was developed by ralph nelson elliot in
13. 0:31the 1930s elliot believed that stock
14. 0:34markets which is generally thought to
15. 0:36behave in somewhat random and chaotic
16. 0:38manner is in fact a series of repetitive
17. 0:42patterns or simply the elliott wave
18. 0:44theory suggests that movements of the
19. 0:46markets follow a sequence of cycles
20. 0:49which are associated with the crowd
21. 0:51psychology the elliott wave principle is
22. 0:53a form of technical analysis that helps
23. 0:56traders in analyzing the financial
24. 0:58market cycles
25. 1:00we have talked about the different
26. 1:01stages of the stock market in our price
27. 1:03action trading course so if you want to
28. 1:05know more about it please check out that
29. 1:07video with the help of elliot wave
30. 1:10theory the traders can actually forecast
31. 1:12the market trends by identifying the
32. 1:15extremes in the prices and the
33. 1:17psychology of investors or the traders
34. 1:19however the elliott wave should not be
35. 1:22considered as a technical indicator but
36. 1:25actually it is a theory that helps in
37. 1:27predicting the behavior of the market
38. 1:29let us understand what exactly is elliot
39. 1:31wave theory the eliot wave theory
40. 1:34suggests that stock prices moves
41. 1:36continuously up and down in the same
42. 1:39pattern now the patterns are formed
43. 1:41according to the ongoing market
44. 1:42sentiment which alternates between the
45. 1:44bullish and beer recycles so these price
46. 1:47swings which forms the same repetitive
47. 1:50patterns in the financial markets are
48. 1:52named as waves and they are formed by
49. 1:54the traders mass psychology now the
50. 1:56elliott wave can be categorized into
51. 1:59motif waves and corrective waves talking
52. 2:02about motive waves these waves moves in
53. 2:05the direction of the main trend that is
54. 2:07if a stock is in an uptrend the moti
55. 2:10waves are in the direction of the
56. 2:11uptrend the motive waves consist of five
57. 2:14waves that are labeled as wave 1 wave 2
58. 2:18wave 3 wave 4 and wave 5. the waves one
59. 2:21two and three moves in the same
60. 2:23direction as that of the trend whereas
61. 2:26the waves two and four move in the
62. 2:28opposite direction of the trend so the
63. 2:31moti waves are usually of two types they
64. 2:34are impulse waves and diagonal waves
65. 2:37talking about the second category the
66. 2:39corrective waves are those counter the
67. 2:42main trend or which moves against the
68. 2:44main trend the corrective waves are more
69. 2:46complex than moti waves now there are
70. 2:49three types of corrective waves there
71. 2:51are zigzag waves diagonal waves and
72. 2:54triangle waves we will talk about all of
73. 2:56them in detail let's take a look at the
74. 2:58first type of motive wave which is the
75. 3:00impulse wave so it is the most common
76. 3:02type of motive way and therefore it is
77. 3:05also the easiest to spot in the market
78. 3:07like all the motive waves the impulse
79. 3:09wave has also five subways there are
80. 3:12three moti waves and two corrective
81. 3:14waves and these are labeled as a 5 3 5 3
82. 3:195 structure however the formation of the
83. 3:22wave is based on a set of rules these
84. 3:25set of rules are really crucial because
85. 3:27if any of them are violated then the
86. 3:29wave formed is not an impulse wave the
87. 3:32three rules for the impulse wave
88. 3:33formation are number one wave two cannot
89. 3:37retrace more than hundred percentage of
90. 3:40wave one second rule is that wave three
91. 3:43can never be the shortest of waves 1 3
92. 3:47and 5 which means that wave 3 has to be
93. 3:50either greater than 1 or 5 or both and
94. 3:53the final rule is that wave 4 can never
95. 3:56overlap wave 1. if all these rules are
96. 3:59satisfied then the wave formed is an
97. 4:01impulse wave now let's take a look at
98. 4:03the second type of motive wave that is
99. 4:05the diagonal wave like all the motif
100. 4:08waves the diagonal waves also consist of
101. 4:11five sub waves and it moves in the
102. 4:14direction of the trend the diagonal wave
103. 4:16looks like a wedge that may be either
104. 4:18expanding or contracting type all the
105. 4:21three rules of the impulse wave also
106. 4:23applies to the diagonal waves like each
107. 4:26subway of the diagonal wave does not
108. 4:28fully retrace the previous subway the
109. 4:31subway 3 of the diagonal is not the
110. 4:33shortest wave etc the diagonal waves can
111. 4:36be further divided into ending and
112. 4:38leading diagonals
113. 4:40now let's start our discussion on the
114. 4:42corrective waves let us start with the
115. 4:44first type that is zigzag waves the
116. 4:47zigzag is a corrective wave that is made
117. 4:49up of three waves labeled as a b and c
118. 4:53that moves strongly up or down the a and
119. 4:57c waves are the motive waves whereas the
120. 5:00b wave is the corrective move zigzag
121. 5:02patterns are sharp declines in a bull
122. 5:05rally or advances in a bear rally that
123. 5:08substantially correct the price level of
124. 5:10the previous impulse pattern or the
125. 5:12previous motive pattern another
126. 5:14speciality about this zigzags is that it
127. 5:17can be formed in a combination which is
128. 5:19known as a double or triple zigzag where
129. 5:21two or three zigzags are connected by
130. 5:24another corrective wave between them
131. 5:27the second type of corrective wave is
132. 5:29the flight wave the flat is a three wave
133. 5:32correction in which the sub waves are
134. 5:34formed in a 335 structure which is
135. 5:36labeled as an abc structure in a flat
136. 5:39structure both the waves a and b are
137. 5:42corrective and waves c is the motive
138. 5:45having five sub-waves this pattern or
139. 5:47this wave is known as flat as it moves
140. 5:50sideways on technical charts most flats
141. 5:53usually don't look clear as there are
142. 5:55variations on the structure so if you
143. 5:58observe a flat may have a wave b
144. 6:01terminate beyond the beginning of wave a
145. 6:04and the c wave may terminate beyond the
146. 6:06start of the wave b this type of flat is
147. 6:09known as an expanded flat and the
148. 6:12expanded flats are more common in
149. 6:14markets as compared to normal flats the
150. 6:17final type of corrective wave is the
151. 6:19triangle waves the triangle wave is a
152. 6:21pattern consists of five subwaves in the
153. 6:24form of three three three three three
154. 6:27structure which is labeled as a b c d e
155. 6:31the triangle wave can be either
156. 6:33expanding in which the following subways
157. 6:36get bigger or it can be the contracting
158. 6:38type which is in the form of a wedge the
159. 6:41triangles can be categorized as
160. 6:43symmetrical descending or ascending
161. 6:45based on whether they are pointing
162. 6:47sideways or up with a flat top or down
163. 6:50with a flat bottom so theoretically it
164. 6:53is easy for spotting a triangle pattern
165. 6:55but it generally takes a lot of practice
166. 6:57for identifying them in the market now
167. 6:59these combination of elliott wave
168. 7:01patterns occurs in the market regularly
169. 7:04and repeatedly over a period of time so
170. 7:06if we can learn to spot them it will
171. 7:09really improve our skill set as a trader
172. 7:11and it will definitely help with our
173. 7:13market forecast even though elliott wave
174. 7:16practitioners stress that the market is
175. 7:18simply a collection of repeated patterns
176. 7:21does not make the market easily
177. 7:23predictable even scientists recognize a
178. 7:26tree as a combination of patterns which
179. 7:28repeats over and over again but that
180. 7:30does not mean anyone can predict the
181. 7:32path of its branches the important thing
182. 7:34to note is that it takes time and
183. 7:37practice to master the elliot waves and
184. 7:39patterns and the elliott wave theory is
185. 7:41open to interpretations in different
186. 7:43ways by different traders so it is up to
187. 7:46you to decide your style and interpret
188. 7:49the elliott waves according to your
189. 7:51convenience that's all for this video if
190. 7:53you learnt something new do like the
191. 7:55video and don't forget to subscribe the
192. 7:58channel
193. 8:01[Music]