The Elliott Wave Silver Trading Theory
This is a form of technical analysis that Silver traders and other investors use to forecast trends in the xagusd trading markets by identifying extremes in investor psychology, highs and lows in xagusd trading prices, and other collective activities. This silver trading theory model shows that collective human trading psychology develops in natural patterns over time, through buying and selling trading decisions reflected in market xagusd prices.
This theory of analysis was developed by Ralph Nelson Elliott that is based on the theory that, in nature, many things happen in a five-wave pattern. These patterns are also applied to technical analysis trading, to analyze the behavior of Silver market trends using this technical analysis theory.
When this theory is applied to Silver, the assumption is that the xagusd trading market will advance in a pattern of five waves - three upward ones, numbered 1, 3 and 5 - which are separated by two downward ones, number 2 and 4. When the three up moves (1, 3, 5) are combined with the two down moves (2, 4), they form the 5 Wave trading pattern.
The technical analysis theory further holds that each five-pattern up move will be followed by a down move also consisting of a three-pattern down moves - this time, three down ones are not numbered but use the letters A, B and C. So as to differentiate them from the 5 ones for the up move.
5 and 3 Wave Pattern
The main silver trend will comprise five moves while the retracement will comprise three moves.
Five pattern (dominant trend) - uses 1, 2, 3, 4, 5
Three pattern (corrective trend) - uses A, B, C
This article is about how to trade online silver markets using the Elliott Theory as the driving force of silver trading instruments. This model relies heavily on looking at xagusd trading price charts. Technical analysts use this theory to study developing Silver trends to identify the waves and discern what xagusd trading prices may do next.
By analyzing these patterns on a silver chart and applying the Elliott Theory, silver traders are able to decide where to get in and where to get out by identifying points at which the xagusd trading market is likely to turn.
One of the easiest places to see this technical analysis theory at work is in the xagusd trading market, where changing investor trading psychology is recorded in the form of xagusd trading price movements. If a trader can identify repeating patterns in xagusd trading prices, and figure out where these repeating silver trading pattern is relative to the Elliot pattern counts then the trader can predict where xagusd prices are likely to head to.
Rules for Elliott Count
Based on the xagusd trading market patterns formations formed by this trading theory, there are several guidelines & rules for valid Counts:
- Wave 2 should not go below the beginning of Part 1.
- Wave 3 should be the biggest among Part 1, 3 & 5.
- Wave 4 should not overlap with Part 1.
Five pattern (dominant trend)
1: This one is rarely obvious at its inception. When the first wave of a new bull market begins, the fundamental news is almost universally negative. The previous silver trend is considered still strongly in force. Fundamental analysts continue to revise their estimates lower; the beginning of a new trend probably does not look strong. Sentiment surveys are still bearish and the implied volatility in the xagusd trading market is high. Volume might increase a bit as xagusd prices rise, but not by enough to alert many technical trading analysts.
2: This one two corrects 1, but can never extend beyond the starting point of wave one. Typically, the news is still bad. As xagusd trading prices retest the prior low, bearish sentiment quickly builds, and "the crowd" mentality reminds all that the bear market is still in force. Still, some positive signs appear for those who are looking: volume should be lower during 2 than during 1, xagusd trading prices usually do not retrace more than 61.8% of 1 part one gains. Silver Price will reach a low that is higher than the previous low resulting into a higher low.
3: This is usually the largest & most powerful move upward, larger than 1 & 5. News is now positive and fundamental analysts start to raise estimates. Silver Prices rise quickly, corrections are short-lived & shallow. Anyone looking to get in on a pullback will likely miss the boat. As 3 starts, the news is probably still somewhat bearish, & most traders remain negative: but by part three midpoint, the crowd will often join in and agree the new market sentiment is bullish. Wave three will extends beyond the highest level reached by 1.
4: This is typically & clearly corrective. Silver Prices may move sideways for an extended period, & 4 typically retraces less than 38.20% of 3. Volume is well below that of wave three. This is a good place to buy a pull back if you understand the potential ahead for a Part 5. Still this 4 is often frustrating because of their lack of progress in the larger upward trend.
5: This is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the xagusd trading price hits the top. Volume is often lower in 5 than in wave three, and many momentum indicators start to show divergences (xagusd prices reach a new high but the indicators don't reach new highs). At the end of a major bullish trend, bears may very well be ridiculed, for trying to pick a market top.
Three Pattern (Corrective Trend)
A: Corrections are typically harder to identify than impulse moves. In A of a bearish market, the fundamental news is usually still positive. Most analysts see the drop as a correction in a still active bullish market. Some xagusd trading technical indicators that accompany A include increased trading volume, rising & implied volatility & possibly a higher open interest in short selling.
B: Silver Prices reverse and move slightly higher, which many see as a resumption of the now long gone bullish trend. Those familiar with classical technical analysis might see the peak as the right shoulder of a head & shoulders reversal silver trading pattern. Volume during B should be lower than in A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative.
C: Silver Prices move impulsively lower. Volume picks up, & by the third leg of C, almost everyone realizes that a bearish silver trend is firmly entrenched. C is typically at least as large as A & often extends to 1.618 Fibo expansion level beyond A lowest point.
