Learn_Forex_Using_the_Elliot_Wave_Oscillator_to_Predict_Forex_Moves_body_Picture_11.png, Learn Forex: Using the Elliot Wave Oscillator to Predict Forex Moves

Reading the Elliott Wave Oscillator

Using the Elliott Wave Oscillator to help pick out the new waves is a sound strategy once traders understand how this oscillator works in practice. The newly forming waves typically start out from a divergence in the price and indicator. Trend reversals are the place where traders commonly discover Wave 1.

Since markets commonly ebb and flow rather than run in a single direction for long, Wave 1 experiences a normal correction. In such a correction of price, the Forex market or currency pair will never hit an extreme point lower or higher than the previous low or high made, but it will retrace a good percentage of that first Wave 1. As the correction occurs alongside the EWO, traders will see emerging a Wave 2 and later a Wave 4, the corrections. Opportunities on these two waves are quite limited and not really worth trading. It is the big Wave 3 that traders are after.

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The strongest movement in price, or Wave 3, occurs after retracement Wave 2 has subsided. Both the indicator and the market will attain newer highs or lows, depending on which direction Wave 1 went. EWO gives the signal to trade this impressive Wave 3, but unfortunately it will not deliver any exit points data. Because of this limitation in the oscillator, it is wise to set up a profit exit order in the 100% to 161% profit price range.

As far as Wave 5 goes, the forex markets will many times achieve a newer high, yet the oscillator itself will not exceed the top of Wave 3 at this point. This creates a divergence in the chart between the price and the EWO. It happens just before a reversal occurs, and this is helpful to know for trading purposes as well.

Learn Forex –Elliot Wave Oscillator Showing Divergence

Learn_Forex_Using_the_Elliot_Wave_Oscillator_to_Predict_Forex_Moves_body_Picture_12.png, Learn Forex: Using the Elliot Wave Oscillator to Predict Forex Moves