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The 3rd Wave How To Trade It


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#1
Nouf

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As Elliotticians this should be our favorite wave to trade, as its where you make the most $$$ as it generally is the biggest wave in a 5 wave sequence, not all the time as one of the 3 rules of Elliot Wave is that "Wave 3 can NEVER be the shortest wave in a 5 wave sequence"

So if wave 3 is shorter than wave 1 then by that rule wave 5 MUST be shorter than wave 3 so that wave 3 not the shortest wave in a 5 wave sequence

How to trade it

Virtually all Elliotticians or Elliott traders will like trading this move as simply put it has the most potential of substantial gains

When you suspect you have a wave 2 low in place, you then have risk defined to that point, so thats the point at which risk is contained, then as a 3rd wave is likely to sub-divide into 5 smaller waves, we are looking for a big move higher to confirm a 3rd wave, a lot of times we see gaps in the direction of the trend this is generally where we have the middle part of a 3rd wave and the strongest part of the move

So once we have a suspected wave 2 low in place and looking for a suspected 3rd wave, we can start to look for at least a 1x1 measurement, but more common fibbo relationships are where wave 3 = 1 x 1.618 ext or where wave 3 = 1 x 2.618 ext

A good trick is to watch the RSI as it really should hit overbought or oversold status, well past the 80 mark, only it will stay that way for longer than you think, as a strong 3rd wave is VERY obvious to those that have seen and traded enough of them, it a very common wave and virtually un-mistakable in a 5 wave sequence as most times its the longest and strongest part of a 5 wave sequence

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To be there for the good times, you got to be there all the time - Ben Lichtenstein





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