Read the crowd.
Rank Alternative Probabilities
Two of the prime components of a successful trading strategy are the trader's psychology & the market's psychology. OK, let us deal with Market Psychology here. Charts are excellent at telling us about the collective psychology of the investment & trading community and the resultant shifting of power between the forces of supply and demand. It is essential to be able to determine exactly when the balance of power shifts between the forces of supply and demand ? that is what trading as opposed to investing is all about!
There are hundreds of thousands of market participants buying and selling securities for a wide variety of reasons: hope of gain, fear of loss, tax consequences, short-covering, hedging, stop-loss triggers, price target triggers, fundamental analysis, technical analysis, broker recommendations and many more. It can be a futile process to figure out why participants are buying and selling.
Chart patterns put all buying and selling into perspective by consolidating the forces of supply and demand into a concise picture. As a complete pictorial record of all trading, chart patterns provide a framework to analyze what is actually going on objectively in the marketplace. A trend is merely an indicator of an imbalance in the supply and demand of a particular issue or commodity.
These changes can usually be seen by market action through changes in price. These price changes often form meaningful chart patterns that can act as signals in trying to determine possible future trend developments. Research has proven that some patterns have high forecasting probabilities. These patterns include: The Cup & Handle, Flat Base, Ascending and Descending Triangles, Parabolic Curves, Symmetrical Triangles, Wedges, Flags and Pennants, Channels and the Head and Shoulders Patterns.
Chart pattern analysis can be used to make short-term or long-term forecasts. The data can be intraday, daily, weekly or monthly and the patterns can be as short as one day or as long as many years. Gaps and outside reversals may form in one trading session, while broadening tops and dormant bottoms may require many months to form if not years. We divide chart patterns between continuation and reversal patterns ? as that is what the market does ? it continues or reverses.
We learnt the importance of patterns, what is essential is to apply the Elliott Wave Principle correctly to these patterns. We work through these patterns in an audio/visual format. It is important to know what the pattern of the market action is and what the alternates are. Like learning Golf we seek to knock out any preconceptions or 'lazy habits' from the start of your wave analysis and trading. We leave you fully prepared for daily intereaction with our KnovaWave Plus* Daily interactive audioactive ElliottWave newsletter (www.KnovaMind.com).
With these pattern recognition skills you will know the price levels the market will gravitate to AND the way (or pattern) it will take place! Whilst we are not saying this is an easy matter, what we are saying when you are able to recognize the patterns you are then enabled to apply these patterns so you can TRADE the Elliott Wave Principle as part of your daily trading or investing regime.
This capsule is an essential component of a constant learning process. Combined with the KnovaWave methodology and the personalized KnovaWave daily services available to you you will fall into an Elliott Wave development process that is not only of endless interest and fascination but one that improves your risk/reward decision making astromonically.
Patterns, Fibonacci and Elliot Wave
We introduce Fibonacci ratios to help control your wave analysis. Remember that Wave Analysis works on a theory of reflexivity - that is all waves in some way are reflecting another wave. In this course we leave you able to utilize these ratios to help you in the correct pattern determination. From that basis you will be able project realistic targets. This pattern of analysis we teach at KnovaWave enables a 'checks and balances' approach. Namely you then 'check' that you have indeed defined the wave count correctly and you have distinguished different scenarios in a 'balanced' analysis.
We approach these ratios and their development in more depth in our Fibonacci capsules, which now are also available. This is a critical component in all your trading - you will learn how we apply 'Nature's Design' in understanding the Market's rhythm.