HOW TO INTERPRET EACH ELLIOTT WAVE CHART FORECAST |
Risk-Reward?If you want to join a particular trend that has been already in progress for a considerable price swing, but anticipate it continuing in line with the EW forecast, ensure you first isolate the maximum negation level by first checking what permutations exist. If too far away compared to the obtainable target level, giving a small risk-reward or even a negative ratio, then simply abandon this trade, alternatively, leave this time-period and instead examine the next shorter time-period. The shorter-term pattern should provide a closer entry level but will obviously have more limiting targets than the longer-term scenario viewed before. There is always a trade-off, but at least you will be assigning a healthy trading plan utilising the correct risk-reward ratios to your trading. Await Price-Rejection & a Reversal Signature at Pre-determined Price LevelsIt sounds obvious but cannot be stressed enough. The Elliott Wave Principle is a robust, dynamic system of price prediction, very accurate but can be misinterpreted. There will be key price levels that the market is attracted to, and this may be a great time to cash in on profits, at least some of them. But the ‘golden rule’ is to await price-rejection then a reversal signature before taking a position in the opposite direction. If you are neutral heading into a transition/reversal point identified in the charts, ensure you see some form of price rejection at or close to the pre-determined price area. This will increase the probability that the pattern identified is correct so that your trading position can be adequately protected beyond the price extremity that ended the pattern. There are various technical reversal signatures to look out for – key reversal, closing reversal, island reversal to name but a few. Or a break beyond a previous level of support/resistance of the preceding trend – or the safest strategy, await an EW five wave impulse pattern to unfold in the opposite direction of the preceding trend. In essence, DON’T ATTEMPT TO TRADE THE EXACT TOPS OR BOTTOMS. |
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