The Elliott Wave Theory is a tool for technical analysis of financial markets that has several functions, all to be used just before the time prior to making a transaction. It is not recommended to use this tool to run an operation as its main use is to provide the information needed to create a context of time before making a decision, it does not provide market inputs or outputs.

In trading there are three pillars or 3 steps to reach a trade:

• First step: The operator must understand the current market, this should make the Elliott Wave technical analysis.
• Second step: The operator must have a strategy for a market entry to indicate the precise moment where the cycle is over, in terms of Elliott Wave it would be to the end of the wave, the strategy is crucial as Elliott Wave itself not only confirms the end of a wave and the trading can become subjective and low in probability.
• Step Three: The operator must have a proper business management by having a low risk profile, which includes: Risk Management, Volatility Administration and Portfolio Management.

To be clear let’s compare these 3 steps to identify high probability operation and come out as winners with a simple home project: you will fix a healthy fruit juice with mango and mint, for this you should get a blender or an electric mixer, and also other ingredients. The first step is to read the instructions in order to understand how a blender works and what you can do with it (Elliott Wave), the second step is to decide what purpose you want to achieve and mix the ingredients according to the objective (strategy), and the third step is to manage the portions and the number of people you want to serve (business administration). Remember that Elliott Wave is the instruction manual.

Chaos Theory and Fractal Geometry: In our universe there is something called fractal geometry, a simple concept that can be defined as follows: semi-geometric shapes that repeat infinitely, figures that are similar to the main structure in their internal structure. For example, each branch of a tree seems to appear in the form but not in size to the entire tree, a wave of the sea seems to have smaller waves within it, a broccoli that contains series of triangles are repeated within the resemble of the fuller figure.

Theory Golden Ratio or Divine Proportion: The 61.8% is known as the Golden Ratio, is a mysterious number that appears in all aspects of our universe, it comes from the Fibonacci number, making a division between the current Fibonacci number and the number just before it: for example 55/34 = 1.618 this applies to all of the Fibonacci number sequence. The Golden Ratio is present in the distribution of human bones, space studies, biology, medicine, architecture, neurons in the human brain, art and more.

The Exciting Elliott Wave: Ralph Nelson Elliott discovered that financial markets obeyed to fractal logic and reacting to the Fibonacci numbers thus produced studies to discover how to quantify this logic using a tool with clear rules known as the theory Elliott Wave. This technique works because the movement of any financial market (FOREX, equities, derivatives etc.) is created by thousands of human brains making decisions or automatic systems created by human, due to the nature of fractal human brain and which obeys mathematical logic Golden Ratio 61.8% in measurable fractal graphics movements making it possible to project future movements are recorded with high precision. Elliott Wave is a filter that is added to the graphics market and allows you to tag movements as a series of rules responding to the following questions:

1. Why is the price at this level?
2. What will be the next move?
3. Where is my idea invalidated?
4. Where do I close my operation?
5. What is the context of the market in all time frames?
7. When to operate and when to expect?

Besides solving these questions the Elliott Wave theory indicates what the best tools to operate, the best time frame and helps the operator to have a clear perspective before, during and after the operation. Suitable for any time frame and trading style. Elliott Wave analysis adds any trading strategy from 10% to 20% greater chance of success. When you open an operation without applying any tool it has 50% chance of success and 50% chance of loss, with Elliott Wave you move from 50-50 to 70-30, adding a winning trading strategy can reach 85 % chance of success and a 15% chance of loss, add to that a proper business management and you will be operating as a professional, when you achieved this level of trading it gets more difficult to lose.

## How to use the Elliott Wave?:

Learning the Elliott Wave theory is a process that requires dedication and discipline, in our experience as educators we need to devote on average a month to learn the theory, however, is not enough to memorize, the most important thing is to apply it to your graphics correctly. It is said that this tool is subjective but when the trader learns to use it properly you will discover that it is an objective tool that enhances trading analysis like no other could. Elliott Wave analysis should not be used to make decisions based only on this information, remember that you need to have a strategy, this strategy basically identify the end of each wave to enter the start of the next wave and closing the position at the best possible price before a deep setback or a change in the trend. The strategy can be simple with a trendline break or advanced trading techniques such as those we teach.

Differences in what Elliott Wave Theory is compare to Other Tools of Technical Analysis: For applications on technical analysis figures (channels, trend lines, triangles, rectangles, pennants, flags, double and triple ceilings or floors, etc.), oscillators, moving averages, among hundreds of techniques and tools, is difficult to understand market context and filter situations of high and low probability. Elliott Wave uses basic tools of technical analysis and provides context to choose the best settings, so the Elliott Wave theory will not replace the traditional tools, it will turn them into high probability setups, which we call convergence between different techniques that enhance the likelihood of success.

The Elliott Wave Basic Structure: In the world of Elliott Wave we talk about pulses and corrections, each pulse consists of five waves and every 3 wave a correction. This ensures that the market performs movements that overcome levels. The microscope of a technical analyst is the time frame, remember that the market is fractal, waves within waves, if at the monthly chart you’re able to see a wave “1” and a wave “2”, at the weekly chart you’ll see five internal waves for wave “1” along with three wave corrective waves to “2” and so on down to graphics like a minute, all the time frames are bound and will make sense.

Basic Rules of Momentum

Now we invite you to share this report and to continue our market reports, we recommend taking our professional training called Ultimate Elliott Wave.