The Elliott wave theory refers to a theory in the technical analysis used to describe price movements in the financial market. This theory identified by Ralph Nelson Elliott. The theory identifies impulse waves that set up a pattern and corrective waves that oppose the larger trend.

Each set of waves is nested within a large set of waves that adhere to the same impulse or corrective pattern, which is described as a fractal approach to investing.

Now, let's know the tricks that we are mentioned in the title--

Impulsive and Corrective Waves

Prices move in impulsive and corrective waves. Knowing which wave is likely underway, and what recent waves were, helps forecast what the price is likely to do next.

An impulse wave is a large price move and has associated trends. An uptrend keeps reaching higher prices because the moves up are larger than the moves down which occur in between those large up waves.

Corrective waves are the smaller waves that occur within a trend.

Trade in the direction of the impulse waves, because the price is making the largest moves in that direction. Impulse waves provide a better chance of making a large profit than corrective waves do.

Corrective waves are used to enter into a trend trade, in an attempt to capture the next bigger impulse wave.

Trend and Pullback Price Structures

Nelson found that when an uptrend is underway it typically has three large upward price moves, interspersed with two corrections. This creates a five-wave pattern: impulse, correction, impulse, correction, and another impulse. These five waves are labeled wave one through wave five, respectively.

The uptrend is then followed by three waves lower: an impulse down, a correction to the upside, and then another impulse down. These waves are labeled A, B, and C.

Nelson also found that these movements are fractal, meaning the pattern occurs on small and large time frames. For example, the first impulse wave higher within an uptrend on a daily chart is composed of five waves on an hourly chart. Corrective waves are composed of three smaller waves if viewed on a smaller chart time frame.

Typical Correction Size

When buying on corrections during an uptrend or selling on corrections in a downtrend, it is helpful to know how large the typical correction is.

Based on the five-wave pattern, wave one is the first impulse wave of a trend and wave two is the first correction. Wave three is the next impulse, followed by corrective wave four and impulse wave five.

Based on the research of Nelson, wave two is typically 60 percent the length of wave one. If wave one advances $1, then wave two will likely see the price drop by about $0.60. If it is the start of a downtrend, and wave one was $2, the correction to the upside is often about $1.20.

Combine The Three Concepts

Utilize these three concepts by only taking trades in the direction of the impulse waves. Take trades during the corrective waves. Look for trade entry signals once the price has corrected the average amount. The correction isn't likely to stop exactly at the percentage levels discussed above, so taking trades slightly above or below the described percentage levels is fine.

Consider keeping track of each wave in the overall price structure. For example, after a five-wave pattern to the upside, a bigger three-wave decline usually follows. Watching the direction of the impulse waves will signal potential trend changes, and that signal is stronger if combined by a five-wave impulse pattern or three-wave correction pattern ending.

I hope that these tricks can be a turning point in your trading and it must go on with the trend.

Source: https://www.thebalance.com/elliott-w...rading-4153295