Hello, everyone. This is Jim Martens.
When we consider the idealized wave progression that R.N. Elliott outlined — that is, a five-wave rally in the direction of the trend, or better said, a five-wave movement in the direction of the trend, followed by a three-wave (or corrective) movement against the trend — we can conclude that the best trading opportunities occur in the direction of the trend at one larger degree.
Those waves being Wave 3, Wave 5 and Wave C. Each of those is in the direction of the trend. As the old saying goes, a rising tide lifts all boats. And to me, this suggests that trading with the trend adds a level of safety to our endeavors.
So, if we’re looking at waves 3, 5 and C as the waves that offer opportunity, then we need to understand the setup waves — the waves that come before each of those opportunity waves.
These waves are waves 2, 4 and B. And you’ll notice that each of them unfolds in three waves, which signals that they are all corrective in nature.
Again, we want to trade with the trend, and waves traveling the direction of the trend at one larger degree unfold in five waves.
Why We Like Waves 2, 4 and B – And You Should, Too (Video)
Yes, Elliott waves help you identify market opportunities. But before that opportunity starts, there is something our Chief Commodity Analyst and trading instructor, Jim Martens, calls “setup waves.” Watch him explain what they are – and then go see if you can spot them in your own charts!
See 48 Real-Market Wave Setups Happening Right NOW
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