Forex is an alternative way to earn online and is certainly one of the alternatives to consider when looking for ways to round off your salary. Be careful though, because the risk of leakage is around the corner. That's why you need to have the right knowledge so that you don't get lost in the dark meanders of this market.
There are many tools to trade in the Forex and binary options market: scalping, price volatility, trend trading, price action. Each one needs to be known and deepened to be able to use it at the right time. What we are going to deepen today will be the Elliot's waves.
Dow was the first to identify the analogy between the trends followed by the financial markets and the movement of the waves of the sea, but the first to develop a real theory based on this observation was Ralph Nelson Elliott. The wave principle was immediately regarded as the necessary complement to Dow's theory and is still used successfully in the various financial markets today.
To explain how the dynamics of the trends work, Dow compared the action of an upward market during its rising tide phase, during which the waters, while falling back between one previous wave and the next, still managing to gain ground and are moving forward more and more.
This analogy was inserted by Elliott himself within a much broader methodology, the merit of which is to provide predictive indications on the future behavior of the markets. The technique that Elliott has developed could be applied to any financial asset with the same identical characteristics: efficiency, liquidity and fluidity in the movement of prices; thanks to this is the natural application in the most liquid market in the world, which is that of currencies.
Based on the theoriyes, three main phases can be identified (accumulation, acceleration/trend, distribution) within which five intermediate waves develop. According to Elliott, markets follow a repetitive cyclical rhythm which can be divided into waves, defined in number and direction.
A complete movement develops according to a configuration of eight waves that can be divided into two distinct phases: the impulsive phase and the corrective phase. With the help of a magnifying glass you can analyze the behavior of prices within each wave, each of which shows a sequence of sub-waves. Each wave is subdivided into lower-grade sub waves and, in turn, is part of a higher-grade wave.
In his theory he identified eight different types of waves, each of which depends on the direction of the higher grade one to which it belongs. A wave moving in the direction of the higher trend will be divided into five waves, while one moving in the opposite direction to the higher trend can only be divided into three waves.
Characteristics that waves must respect in Elliott's theory to help detect individual price movements are as follows:
The minimum of the fourth wave must not fall below the maximum reached during the first wave (this is the overlap rule).
Elliott's Wave Theory is one of the "advanced" tools that you should always approach when you have a clear idea of the market and how it works. The theory that we are presenting is not one of those basic steps, but it is a very valid help to understand the trends.
Ralph Nelson Elliott developed this theory in the 1930s, after a long and careful observation of the market. Price movements are not random within the financial market but follow cyclical and precise patterns. The engine, so to speak, of these cycles (at least at the time) was mass psychology: people raised and lowered prices, under certain conditions that were repeated over time.
The market, Elliott observed, develops 5 waves in the trend direction and 3 correction waves in the opposite direction. To put it simply: a price goes up 5 steps (not continuous), and then three more go down. The movement can also go in the opposite direction: go down five to then go up three. Each wave, in turn, is composed in a certain way: the waves that are part of the group of 5, have, within them, 5 small mini waves, while those that are part of the group of three, within them will have three. They are small market fluctuations therefore, which can be expected.
Let's see step by step how a bullish trend works and how the theory is formed.
Some market operators buy good A, so its price rises (first wave, upwards); at that point operators collect profits because they believe that the price has risen enough, so the price falls (second wave, downwards).
The price is considered "low" again, which pushes the employees to buy the good A, and here the price rises again (Third wave, upwards); considered to have made a good deal, the profits are collected because the good is sold (fourth wave, downwards).
At this point the market has drawn attention to itself, and more operators are beginning to take an interest in good A, whose price is therefore rising (fifth wave, rising). So far, the five waves.
Strong in the noise caused, the first operators who had bought, sell, and the price falls a little (first correction, downward). However, the hype attracts small retailers who try to insinuate the market, buying: result, the price rises a bit (second correction, upward). But the trend has now run its course, so the price drops definitively (third correction, in decline).
Elliott's waves are difficult to spot for a poorly trained eye. However, the importance gold can be fundamental. Imagine that you can predict the end of a trend, and therefore understand that entering the market of that currency is not useful. Or being able to enter the moment before the rise, and thus be able to sell earn a lot. In short, understanding the market is undoubtedly a long process that requires a lot of practice, but it is certainly worth it.
Most of the time we Italians need to try a service before we can fully use it: just open a demo account to trade.
Apps for online trading are many, and it is difficult to find the ideal solution without wasting time with non-functional applications. So, we try to make it clear by recommending a range of trader applications to download and test directly with your strategies.
It is much easier to analyze some data through the reading of graphs than the discussion that can arise around simple numerical inputs. Through the graphs it will be possible to monitor information related to volumes and other technical indicators (they are displayed at the base of the graph characterizing the time axis). To give a concrete example, the bands of Bollinger are directly represented on the price graph.
If it is true that more and more people are using online trading to round off their salaries, the market itself owes a lot to the internet and the traders themselves. The reasons why this market attracts more and more attention are that the costs for commissions are very low, not to mention the ease and speed in being able to meet certain economic dynamics (especially for a class of non-specialist people).