Elliott Wave Forex Swing Trading Strategy
If you have been trading for a long time, you know how unpredictable the market can be. The forex market is even more notorious for being too volatile. Prices can sometimes go up and down more than a hundred pips in a few hours. Of course, as the largest market with an average of over $5.1 trillion traded daily, the forex market can be the most volatile trading market. At the same time, it also has the greatest potential for traders to make a profit. With volatility comes not only risk but also opportunity.
The question now is how do we make good use of the volatility of the forex market. How can we anticipate and read where the market is going?
There is no quick and sure answer to the above question. Trading is a speculative game. Traders are never sure where the price is going. All they can do is speculate based on the historical movement patterns of the market.
The general pattern or characteristic of movement is the Elliott Wave. Elliott Wave Theory is a form of technical analysis in which traders will forecast price movements based on repeated cycles or patterns of movement.
Experienced Elliott Wave traders can spot these waves effectively. However, it can be difficult for new traders to spot the cyclical patterns of the forex market due to its volatility. The Elliott Wave Forex Swing Trading Strategy simplifies the process of using indicators based on Elliott Wave Theory.
Elliott Wave Oscillator
The Elliott Wave Oscillator (EWO) is a trend-following technical indicator that is part of the Oscillator family of indicators.
It is basically an oscillator that is calculated based on the difference between the 5-period Simple Moving Average (SMA) and the 35-period Simple Moving Average (SMA). It also uses the standard closing of each period as the basis for the calculation. The results are then displayed as histogram bars in a separate indicator window.
This version of EWO calculates histogram bars based on the average price. It also applies a smoothing method based on a simple moving average. It also plots the histogram's bar moving average, which has been set to plot a 5-period simple moving average (SMA). However, these settings can be changed according to the merchant's preferences.
In some ways, this version of the EWO is similar to the Moving Average Convergence and Divergence (MACD) and can be used in the same way.
The crossing of the bars and lines will give the first signal of a possible trend reversal. The cross of the bar and the middle line, which is located at zero, will confirm the trend reversal. Traders can use this signal as a reversal signal. The position of the bar in relation to the center line can also serve as a trend direction filter.
Relative Strength Index
The Relative Strength Index (RSI) is a classic technical indicator that is also an oscillator.
The RSI compares bullish price momentum, which is equivalent to an average gain, with bearish price momentum, which is equivalent to an average loss. It also includes the previous average profit and loss with the current profit or loss. The resulting numbers are presented as lines that oscillate in the range from 0 to 100, with 50 being the middle line. These lines will usually mimic price action movements on the price chart.
The classic RSI indicator window usually has markings at 30, 50, and 70. When the line breaks below 30, the price is considered oversold and could be due to a bullish reversal. If the line is above 70, the price is considered overbought and may be due to a bearish reversal. However, momentum traders see it differently. They will view a drop below 30 as possible bearish momentum and a break above 70 as possible bullish momentum. The 50 level, which is the midpoint, is usually used as a basis for trend distortion or trend direction.
Many trend and momentum traders will also add 45 and 55 levels to identify the trend. A break above 55 will indicate confirmation of the uptrend, while the level 45 will serve as support. On the other hand, a decline below the 45 level will indicate a bearish trend, while the 55 level will serve as resistance.
EMA 5 10 34 Crossover is a trend reversal signal indicator based on the crossing of three moving average lines.
This indicator has been set to generate a signal whenever the 5-period, 10-period and 34-period exponential moving average (EMA) lines cross. However, these parameters can be changed depending on the preferences or needs of the trader.
The indicator draws a red arrow pointing down when it detects a bearish trend reversal signal and a blue arrow pointing up when it detects a bullish trend reversal signal.