“Elliot Waves Made Simple” by Steve Sinclair walks us through the complex mindset of a day trader. Elliot waves are part of an overall technical analysis program for day traders.
I am not a day trader, but understanding technical analysis, even at a basic level, can assist you in any kind of investing. You can apply Elliot wave analysis to the stock market, cryptocurrency, foreign exchange, commodities, etc.
Above, you can see a simple Elliot wave. You can use Elliot wave analysis to see the momentum of a larger primary trend in the market. There are two parts to an Elliot wave: five motive points and three corrective points.
1) Ralph Nelson Elliot (1871-1948) discovered the patterns we use today within Elliot wave analysis. He believes it represents the ongoing swings between optimism and pessimism.
2) The Motive phase moves in the direction of the larger trend, up or down. This phase has five major points annotated with numbers.
3) The corrective phase moves against the larger trend, up or down. This phase has three major points annotated with letters.
4) Each Elliot wave can become much more complex, so you must learn how to find the larger motive and corrective points.
5) To increase your overall market awareness, combine additional technical analysis resources, such as Fibonacci numbers and Relative Strength Index (RSI).
The charts can become messy, but you can make assumptions as long as you identify your Elliot points. Your goal is to find suitable entry and exit points.
Even if you are a buy-and-hold investor (like me), understanding technical analysis can help you find good entry points. Also, you’ll be able to comprehend articles from traders who use technical analysis.
This book goes deep into the many advanced Elliot wave techniques. I learned as much as possible and will slowly integrate some of these readings into my daily analysis.
Eventually, I will reread this book to absorb more complex ideas. This is a fantastic book to start with technical analysis, particularly Elliot waves.
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