Regardless of how new you may be to Elliott wave analysis, you know that it's easy to follow professionally produced wave counts in market charts – such as the ones you see in Elliott Wave International's publications, for example. But if you've ever tried to do your own wave counts – especially under pressure, while trading – you know how big a challenge it can be for beginners.
Yes, we all know that "it's all about 5-wave impulses and 3-wave corrections":
But as easy as it looks on this idealized diagram, counting waves in real-time is not. Why? Because you never know for sure what kind of Elliott wave structure you're dealing with until it's complete.
That's a sobering fact for many Elliott wave beginners. They often expect to count perfect five and three-wave structures in charts all the way down to milliseconds. But you just can't. For one, it has to do with the limitations of your data feed. But even if your data were perfect, some ambiguity with real-time wave counts would still remain. Don't let that stop you, though.
Here's how you handle it: Weigh all the probabilities and eliminate the weakest ones – until the strongest one emerges.
Think of it this way. The future holds an infinite number of probabilities. Based on your forecasting method and experience, when you select one or two of those, you narrow down your choices to something you can actually work with as a trader. That's a big, huge step towards eliminating uncertainty from your trading. And it's exactly what EWI's Big 5 Flash service analysts do every day.
Dozens of Markets Scanned, Daily. EWI's Flash services constantly scan various markets and contact you with exact instructions when an opportunity is ripe. Click for details.
For example, currently our Big 5 analysts are watching a potential opportunity in the S&P futures. And here is how their thinking goes as they are trying to "catch" it for you:
August 5: "The S&P from the July the 15th low has been volatile. (See the area circled in red, below.) Last week, we had a strong feeling we were at the beginning of wave c of a in a simple zigzag. Since then the Elliott wave pattern has become more complex; it could now be three different patterns: a triangle, a double zigzag, or the start of a large wave 3 down. The preferred opinion is that we are working a double zigzag – still a correction, just a more complex one."
August 6: "Today, the market finally appears on its way to the projected price targets. Plus, look at the Fibonacci ratios between waves. From the all-time high on Oct. 8, 2007 to the low of July 15, 2008, the S&P retraced a Fibonacci .382. And on a weekly chart, from the high bar of May 19, 2008, to the low on July 14, there is a .618 retracement, spot on. Also, at 1326, the ostensible wave A and C Wave will have reached equality. It might take the market until later part of this week, or even next week, to reach our destination. But once it does, we will be looking for a very big move in the S&P."
That's the process. Of course, any market forecast is just that – a forecast. Markets love to surprise and disappoint. What's the point of forecasting then, you ask? Here's the point: you eliminate the weaker probabilities. In the example above, our Big 5 Flash analysts take an infinite number of probabilities and, by using Elliott wave analysis, shrink them down to just three (or fewer).
And if you know your Elliott, you now know exactly how the S&P should behave under each of these scenarios. And that's something our analysts – and you, the trader – can work with.
Stay tuned for the developing opportunity in the S&P with EWI's Big 5 Flashes. Details.