Strategy for mastering Elliott Wave using EA based on market principles

The principles of the market EA can display target rates for Elliott waves and chart patterns, but this time I would like to explain a trading method that utilizes Elliott waves.

Knowledge required to utilize Elliott Wave Theory in trading

Details about the contents of Elliott waves are written inthisarticle, so this time I would like to discuss how to use this Elliott Wave Theory in trading.Elliott waves exist in both rising and falling trends, but to keep the discussion simple, I will only describe the rising trend scenario here.

Understanding the overview of Elliott Wave Theory

Imagination: …What you should take away here is the knowledge that,Wave 1 moves up, Wave 2 moves down… in short, odd numbers push in the direction of the trend, while even numbers represent the corrective or retracement moves.This is sufficient. Among the rising five waves, Wave 3 is never the shortest

What to capture with Elliott Wave: Wave 3 and Wave 5

In Elliott Wave Theory,waves moving in the trend direction are odd-numbered waves.Waves retracing in the opposite direction of the trend are even-numbered waves, and among them, the first wave moving in the trend direction is very difficult to catch. Why is it difficult? For example, you cannot tell on the right side of the chart whether the upward movement from a downtrend is a return in a downtrend or the first wave of a trend reversal.

the Wave 3 of the rising five waves is never the shortestTherefore, aiming for it is natural.

Predicting retracement levels with Fibonacci retracement

To efficiently catch Wave 3 and Wave 5 and profit,it is important to understand how deep the retracements of Waves 1 and 3 can go.

Thus, what becomes crucial isFibonacci retracement.

Fibonacci retracement, in simple terms, refers to levels where retracements end and rebounds begin, and is standard equipment in MT4 as well.

Very convenient, isn’t it.

Such Fibonacci retracements are almost universally standard tools in the analysis suites offered by FX and stock brokers. In other words,many traders are mindful of using Fibonacci retracement.

Entry rules for targeting Wave 3 and Wave 5 of Elliott Wave

There are many entry rules in trading, but broadly they fall into two types: trend-following (marching with the trend) and counter-trend (against the trend). This holds true when catching waves Wave 3 or Wave 5 with Elliott Wave Theory. I've roughly organized it; basically, this is about right. It also depends on the trader's preference.

If aiming for Wave 3, use trend-following; if aiming for Wave 5, use counter-trend for efficiency

I jumped to the conclusion right away. The reason is simple,Wave 2 depth is unpredictable; Wave 4 depth is relatively easier to read.

Trend-following method and counter-trend method to target Wave 3

As a common premise,both trend-following and counter-trend should wait until the pullback depth exceeds 1/3 of the move. When it comes near the 1/3 retracement, place a stop at the high of Wave 1 and, for strong trends, enter, and until the 1/2 to 2/3 retracement, observe without action.The following actions pertain to the situation around the 1/2 to 2/3 retracement.

Trend-following entry method targeting the point of transition from Wave 2 to Wave 3

Wave 2 often retraces most of Wave 1. Consequently, it frequently breaks the starting point of Wave 1 and the trend premise collapses, sometimes moving significantly in the opposite direction of expectations.Especially when around the 2/3 retracement, it tends to take the shape shown in the image below.
Common shape imagery for Elliott Wave Wave 2

As you can see in the illustrative diagram, there is typically a mark-like wave formed between the high and the deepest retracement. Enter when the line connecting Wave 1 high and this prominent peak closes above.

The idea is to confirm the retracement bottom and enter when the market signals it will go higher, which is the approach of thetrend-following entry when the second peak closes above.

Actual entry image for Wave 2 to Wave 3 transition using a trend-following approach

Entering on the second wave with a counter-trend approach to target the third wave

There are two counter-trend methods in Wave 2.
One is to enter at the 1/2 or 2/3 retracement point.

The second is to enter on Wave 2 of Elliott Wave with a trendline.

The first method is intuitive, so I will skip it and explain the second method with chart images.

Entering Wave 2 with a trendline in Elliott Wave

Trends, in addition to direction, tend to maintain their slope. The method of entering via a trendline leverages this tendency to maintain slope.
With this, the explanations for "trend-following entry aiming at the Wave 2 to Wave 3 transition" and "counter-trend entry mid-Wave 2 aiming at Wave 3" are complete.

Trend-following and counter-trend methods targeting Wave 5

Many blogs and media claim Wave 3 is the most powerful, but I, the site administrator, actually think Wave 5 may be the strongest wave.

Of course, the methods to identify the waves and compute target rates are specialized, but considering easy retracement levels, there seems to be plenty of value in aiming for Wave 5.

Entering at the end of Wave 4 with a counter-trend approach to target Wave 5

Wave 4 levels are straightforward to identify.
This is because the forecast can be made on the left side of the chart.
In other words, you can see the strength of the trend from Wave 3's progress, and depending on the execution, you can skip entries or adjust the depth of pullbacks to enter.

We will specify pullback levels concretely.

Stronger than the expected reach of Wave 3 or right around it	Pullback level ⇒ Wave 3 0.333 to 1/3 pullback
Just shy of Wave 3 reach	Pullback level ⇒ 1/3 to 1/2 pullback
Near Wave 3 definitive rate
Not reaching Wave 3 definitive rate

The bolded points indicate zones with high probability of Wave 5 occurrence and strong trend, making them hot zones.

Entering on the transition from Wave 4 to Wave 5 with a trend-following approach

During the transition from Wave 4 to Wave 5, chart patterns like triangles and ranges commonly form. When entering trend-following, aiming for breaks of these chart patterns is prudent because it avoids risking all retracement levels and tends to yield higher win rates, making it a safe approach.

Study trading strategies with the Market Principles EA

How about that? Up to here, I have described Elliott Wave strategies, including entry methods using horizontal lines and trendline closures, counter-trend entries at retracement levels, or counter-trend entries via trendlines. All of these can be practiced withMarket Principles EA.

How to use Market Principleshere

How to fight with chart patternshere

Please conduct your own research and testing to trade with higher edge and consistency.

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