An Introduction to Theory and its wave application rules Financial Tips Tips Bar

Category: Money tips Release Date: 2006-08-13

Wave theory is in the field of technical analysis is an important component. The theory was invented by the technical master of Eliot as a price trend analysis tool that, according to cyclical fluctuations in the law to analyze and predict the trend of stock index and stock price.

Described his theory as follows: stock price continuously experienced five times the rise in volatility, when the completed rose by 5 times fluctuations (commonly known as push waves), the fluctuations will appear three times (known as adjustment of waves) were observed. 8 constitute such a volatile stock price movements of a cycle. Then began a second five waves up and down three waves adjustments. The end, an increase of 5 waves up to declare the entire end of the process. In the final phase, will not appear like the two previous adjustments as small as three times the waves will occur right up on behalf of all five times during the adjustment of the large increase in wave 3 times volatility. The cycle is based on the theory "eight wave cycle" as the basis. In each rise / fall in both the integrity of the process includes an eight-wave cycle, and there are small cycles in a cycle, small cycles have a smaller cycle.

In the wave theory, an increase of 5 waves are waves are known as 1,2,3,4,5, down 3 waves were referred to as A, B, C wave, in which 1,3,5, B wave trend upward, 2 , 4, A, C wave down trend.

The theory application rules are as follows:

1 to promote the composition of wave after wave of 5 There are four laws, namely, a loop in the same:

1, wave 2 must not be less than the starting point of wave 1;

2, 1,3,5 in the waves, the waves can not be 3 the length of the shortest of the three 1;

3, if any of a wave waves 1,3,5 extend waves into the remaining two wave duration and amplitude will tend to the same;

4, wave 4 can not be less than the waves at the end of one of the top.

2, wave 3 is usually to extend the waves, is the most explosive and the biggest primary waves.

3, according to Golden Section, wave 3 = wave 1 amplitude range of X1.618 or 2.618.

4, wave 5 of wave 1 amplitude = 3 end point of origin to the total wave amplitude X (0.382 ~ 0.618).

5, wave 5 wave rally is typically less than 3, when the waves below the 5 end of the end of wave 3, when, in order to defeat waves.

6, in the adjustment of the three waves of wolves, there will be "in character", "irregular", "triangle" and other forms.

Investors mastered the basic principles of wave theory, the proper use of wave theory, the key lies in accurately grasp the characteristics of the various waves in each wave with the appearance of the market is expected to its "magnitude" and "width."

Increase in wave 5 of wave theory, we can consider the stock market bull market, but fell three waves for the bear market, the corresponding stock market the following features:

1, wave 1 is the eight-wave cycle beginning as well as bull markets start, usually the shortest rise in five waves, and its rise in the extended wave amplitude waves the size of wave a decision. So, retail investors will be the size of waves as an important basis for the market.

Second, a rising wave, due to short sell-off was also greater than the long, therefore, adjust the wave 2 down, its back to the range block is often deep, sometimes falling close to the starting point of wave 1 at this time should be seen as bargain-hunting again, the opportunity.

3, wave 3 is often the most explosive extension of waves, and for the increase in the main wave, is the stability of the bull market up period, this stock market rising often the longest duration and magnitude, in particular, in the breaking waves, when a vertex , is the most strong buy signal.

4, in wave 5, is a bull market trading activity boiling stage, second, or third-line stocks are often greater than the blue chips rise, investing in speculative stocks, ¸ stocks tend to benefit a lot, but it is worth noting that the stock market will soon into the bear market.

5, wave A appears, is still relatively optimistic about the mentality of most investors holding a wait and see attitude, in fact bear market has begun arrived.

6, wave B the rising market, investors, banker at this time be careful not to fall into the "bull trap", but was stuck high. This wave is usually referred to as escape waves, the ship is the last chance.

7, wave C is a strong decline, or large, a comprehensive long decline waves is the most lethal of a wave, this time to be careful out of the stock market.

Elliott wave theory is a set of strong subjective analysis tools, different analysts on the wave number method is different from the division of the waves is also difficult to pinpoint that depends on the discretion of investors demanding. At the same time the theory is mainly used for the overall trend of the market trend analysis and forecasting, analysis and forecast of the relative roles of individual stocks weakened.

In venture capital, the wave theory, the trend for the financial involvement of the small intermediate area of great help to the role of the troops referred calls with different risk management areas have a significant reference to the role, if combined with other along with the use of the theory will be is a good use of tools, but the role of the wave theory, can not be excessive superstition, hope you share friends attracted enough attention.