Elliott wave theory trading basics // Tutorial for beginners, fractals, strategy analysis stocks theory principle charts market indicator fibonacci 101 introduction for dummies forex gold day trading waves forecast david moadel
welcome to looking at the markets with
David Modell today I'm going to give you
a very brief and introductory
explanation of Elliot wave theory so
let's go first let's start with fractals
that's a neat pattern right well let's
take a look at it if you'll notice I
don't know if you could see it on your
screen but let focus on this
medium-sized swirl here you might notice
that the medium-sized swirl is made up
of smaller swirls of the same shape and
each of those smaller swirls is made up
of even smaller swirls of the same shape
and so on infinitely smaller and smaller
and it goes in the other direction to
infinitely these medium-sized swirls
when you put them together make up a
large swirl and you can't really see it
but each of these large swirls when you
put them together make an even larger
swirl and so on okay so they're infinite
patterns and those are called fractals
pretty cool and we're going to talk
about that later but first let's
introduce this man many years ago Ralph
Nelson Eliot developed the Elliot wave
theory which proposed that stocks and
markets are not random and don't just go
straight up or straight down instead
they move in recognizable cyclical
patterns they go in cycles
according to the theory stocks and
markets infinitely repeat in five three
cycles five and then three first five
impulse waves in the overall trend or
direction so imagine a stock or a market
that tends to go up over time well
you've got five impulse waves and
they're like stair steps or zigzags but
we're going to call them impulse waves
so here they are one two three four five
five impulse waves and those are in you
know they're going upward here that's
followed by three corrective waves let's
count them one two three three
corrective waves going against the
overall trend or direction in this case
they're going down so five impulse waves
followed by three corrective waves and
then it would it would repeat infinitely
so that would be followed by five
impulse waves then 3 corrective waves
and five impulse waves and so on
now because this is fractal in nature
remember we talked about that each wave
is itself divide it up into smaller
waves shown in the picture below and I
tried to draw this as best as I could I
hope you'll forgive my artwork but
you'll notice you can see the five
impulse waves and each of the waves is
itself divided into smaller waves those
smaller waves would also be divided up
into even smaller waves too small for me
to draw so you'll just have to imagine
it in your mind and so on okay and also
the corrective waves one two three those
three waves are each divided up into
smaller waves and each of those little
waves would be divided up into even
smaller waves and so on infinitely
according to the theory much like the
fractal pattern I showed you at the
beginning
also because this is fractal and
infinite in nature
each 5/3 cycle is itself part of a
bigger overall 5/3 cycle and so on
alright so if we go back what I did was
I took this this piece here and I Shrunk
it alright and I put it here and then I
repeated it and I made a bigger okay out
of this medium-sized 5/3 pattern I put
them I made a bunch of them strung them
together and made a bigger 5/3 impulse
wave and then he let I didn't have room
here but you'll have to imagine in your
mind that that way it would be followed
by a corrective wave one two three
and so on so let's use a real-life
example this is Starbucks the daily
candlestick chart and we can see and
it's not picture perfect like the the
drawings might be okay but you get the
idea here but the idea because you can
see alright it goes up and then it
retraces but not all the way maybe most
of the way but not all the way and
that's part of the theory it should not
go down further okay it should not just
keep going and going it should only
retrace partially and then it and then
it should go up further above the
previous high here it should make a
higher high and then retrace but only
partially it should not go down all the
way so it retrace is partially and then
another high or high and so here we are
one two three four five the impulse wave
and we might expect it to be followed by
a corrective wave and so here we go down
and then up but only partially it
doesn't go out you know it's not another
higher high and so we might expect we
might expect the next move to be down if
the theory is to hold correctly here and
I would not expect to use this Theory
exclusively as my only charting tool you
want to use your own due diligence you
want to think for yourself and
use other indicators use your own
research investigate the company okay or
commodity or stock or index or whatever
it is and don't just rely on one
indicator this should be one of your
many tools in your toolbox so to speak
all right but this was just an
introduction to Elliot Elliot wave
theory and you can investigate it
further for yourself if you if you want
to learn more all right so I hope this
is helpful to you I took something
complex and just try to make it as
simple and easy to understand as
possible all right so if this was
helpful to you please give this video a
thumbs up on YouTube and leave comments
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videos and if you'd like some help with
technical indicators or fundamentals
trading investing stock options whatever
it might be you can email me at any time
my email address is David Modell at
gmail.com thanks a lot for watching and
listening and I'll talk to you again
soon
different now
you
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