The Hindu Business Line : Strategy

Elliott Wave analysis is more of an art rather than a science. The subject, as such, is quite simple, with a handful of rules and guidelines. It, however, would take loads of patience and experience to trade successfully using Elliott Wave theory.

For sake of maintaining mental sanity and protecting personal networth, do not become an Elliott Wave maniac. Always keep things simple and never strain for a wave count. There are bound to be instances where the price would not move on expected lines.

An Elliott Wave analyst should always have a preferred view and at least one or more alternate views. As price action unfolds, it would either validate or negate the preferred view. Always look for symmetry within waves of a similar degree while analysing and labelling Elliott Wave patterns.

Remember that price patterns develop much quicker in the human mind while it may take quite some time for such patterns to evolve. Those with loads of patience would be more adept at using Elliott Wave successfully.

There would always be occasions where price patterns may not fit into a convincing Elliott Wave pattern. In such occasions, never try to fit a wave count. This would invariably turn out to be a costly and futile exercise.

Always look for obvious five-wave or three-wave patterns and try to take a trading decision in alignment with the long-term trend. As always, do not forget to have a stop loss for your holdings.

When Elliott Wave patterns appear convincing, try to capitalise on it by entering aggressively, as prices start moving in the anticipated direction.

Never exit out of a position at one stroke. Always sell a portion of the holding at the first logical target. Sell another portion at the second target and hold the balance with a safe trailing stop-loss.

B. Krishnakumar

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