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Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology by Peter Tryde, Robert Lee

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CONCLUSION

The basic tenet of Elliott Wave Theory is that market movements are based on crowd behavior. Market movements occur as a series of impulse and corrective waves, and these movements can occur in predictable cycles. A bullish swing will be corrected by a bearish swing. The bullish swing will consist of five waves, three waves up and two waves down, and the bearish swing will consist of three waves, two waves down and one wave up. The sum of the waves in the entire cycle will be eight waves. Impulse waves refer to the waves in the bullish swing, and are numbered as 1, 2, 3, 4, and 5. And corrective waves refer to the waves in the bearish swing, and are numbered as A, B, and C. Impulse waves are waves that move in the direction of the main trend, and corrective waves are waves that move in the opposite direction of the main trend. Impulse waves can be further broken down into another set of minor impulse waves, and likewise, corrective waves can be further broken down into another set of minor corrective waves. The cycle can be repeated as it expands or contracts in accordance with different time frames. All such impulse and corrective waves adhere to the rules of the theory.

Elliott Wave Theory can be used effectively when applied, as described in this chapter, to a suitable trading strategy in which risk can be minimized. One difficulty is in identifying the count, and recognizing whether waves are impulse waves or corrective waves. Another problem is in determining which ...

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