Chapter 5

Price Waves You Can Surf to Profits

In This Chapter

arrow Seeing how the markets move in waves

arrow Realizing the downsides to subjective wave counting

arrow Following an objective approach to wave theory

Trend trading is a beneficial way to make money in the markets because it allows you to make big profits while risking a small amount of money.

As I mention throughout this book, trend trading is trading the long-term moves of the market. However, the market doesn’t trend straight up or down during those long-term moves. On its way up or down in the direction of the trend, it wiggles or oscillates.

Chart analysts call these oscillations waves because they form short-term crests (highs) and troughs (lows) as the market moves in its long-term direction. This is similar to how the ocean makes a series of waves as the water moves toward the shore.

An uptrend typically forms a pattern of higher highs (wave highs) and higher lows (wave lows) in its long-term ascent. A downtrend typically forms a pattern of lower highs (wave highs) and lower lows (wave lows) in its long-term descent.

In this chapter, I explore the basics of wave theory, from Elliot waves to Fibonacci levels, and all the related ...

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