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Reading a Wave Count

If you haven’t already completed the steps in the Quick Start, you should do that now to produce your first automatic wave count. Then come back here and read on…

Now that you’ve calculated an automatic wave count, it’s time to assess the count and to evaluate any potential trading opportunities. Here are some tips to help you get started:

 

Wave Count Basics

 

  • At the high and low turning points in the chart, you’ll see both the wave label, which identifies what kind of wave has been detected, as well as…
  • The number of bars it took for each wave to complete – the number next to the wave label (if “Show # bars on waves” is enabled, see Smart Tools)
  • The waves are stacked to indicate each wave’s degree (timeframe). Wave labels further away from the price are at higher degrees (larger timeframes).
  • Hovering (or touching) a wave label will show the line connecting to the other sub-waves in the pattern. This group of sub-waves defines exactly one valid Elliott Wave pattern.
  • Hovering (or touching) a wave label also displays key details about the wave (if “Show wave info” is enabled, see Smart Tools).
  • In most cases, some waves in a count will have a question mark “?” next to them. This indicates that the wave pattern has not yet completed. This is the essence of Elliott Wave Analysis. The incomplete wave patterns give you a clear indication of what the market is likely to do next – in order to complete the pattern. And, they also give you a guideline for what reasonable risk parameters might be for a potential trade.

 

One of many possible counts

It’s important to remember that the AutoCount that WaveBasis displays is one of potentially several (or many) possible valid counts that the pattern recognition engine has looked at and evaluated. WaveBasis has selected the count that is statistically most likely to accurately describe the current market context. In many cases, to better understand the risk associated with a trade you may be considering, and to tip the probabilities further in your favor, it is advisable to also consider alternate wave counts.

 

The Wave Count Forecast gadget is a great way to learn how to read and interpret Elliott Wave counts. The gadget automatically interprets wave counts for you and provides forecasts at multiple timeframes in easy to understand written commentary.

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