# Elliott Wave Trading Made Easy Part 2

By: Nouf | Sat, Jun 2, 2012

Following on from part 1, I want to show readers some easy and simple ideas that even the basic user of Elliott Wave can use.

The examples shown here are real life examples that were shown to members before the moves and gave us the confidence to trade the expected direction; they were trade setups from the week just gone.

## The 3 wave correction (ABC Correction)

I like this setup very much; it's one of my personal favorites, as I have a high degree of confidence when I see a setup like this.

In a trend setting move, the market will from time to time correct and take a breather, it's a normal event and virtually all traders have seen it, only you probably don't know the importance of the actual waves and what they represent.

As the title says it's an easy pattern and involves finding a simple 3 wave move that is correcting against the trend. Elliotticians call this an ABC correction.

Generally wave C is equal to wave A, although it can be a little short or just above, but the idea is a simple 3 wave move that is against the trend, so it can be a 3 wave decline, or a 3 wave dip. I have shown examples of 3 wave bounces as the market spent most of the time in sell mode this week.

Case 1

Earlier this week, me and members were looking lower in the US stock markets, and I was scanning my charts for evidence as I usually do, when I happened to come across this market, it's one of the financial ETS that I track the other being BKX (it too shows the same idea).

You can see that it's a clear 3 wave rally and just pushed above the prior highs. That gave us confidence to look lower.

Why is a 3 wave move important? Well it's against the trend and a 3 wave bounce is a corrective move that once finished will resume the current trend and be completely retraced.

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You can look closely and see a small wedge shape, we call that an ending diagonal (ED). Which is simply a termination pattern and ended this suspected 3 wave move.

The result as expected is a complete retrace of the 3 wave bounce, as the US stock markets broke lower and gapped lower.

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So with the financials showing a clear 3 wave correction it simply gave us a piece of evidence that the US stock markets were heading lower.

Case 2

The same setup I was watching in the ES e-mini contract, I even posted this to followers on my twitter account, so it was made public well before the expected outcome.

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You will note the 3 wave advance to the measured target at 1333ES where wave [c] equals wave [a], further more do you notice the same looking wedge shape, remember the ending diagonal? That's a termination pattern and usually found in the wave C position of an ABC 3 wave correction.

So another piece of evidence to support the next expected move lower in stocks this past week.

The result?

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That's over 50 handles of profit from one simple pattern, but let's says you got half of that, you got 20 handles, just knowing the pattern and the expected outcome puts the odds in your favor, it was the same as the XLF chart above, a simple 3 wave move. Nothing at all complicated and just a simple technique I teach members and clients. (I offer Elliott Wave training)

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Here is that 3 wave bounce shown against the main down trend.

Let's have a look at another one.

Case 3

Another idea I posted to members before the direction. I even posted this to my twitter account as well.

You can see this is on a small time frame a 5 min chart.

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Notice the 3 wave move; do you notice the ending diagonal as well?

The result was?

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Look carefully you can see the previous setup; I have had to increase size in order to show the oil puke, that's over \$7 for the setup and from the 3 wave bounce.

Even if you got half of that, the pattern was suggesting the move was going to break lower.

Other Examples

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FTSE nice 3 wave bounce earlier this year and yielded a substantial decline, over 500 points, we traded that before the decline.

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French CAC, this is still in progress, but it's a daily chart so will it take longer to complete, but I still fully expect the decline to be completely retraced as is it just a "simple 3 wave rally".

It doesn't matter what the time scale, a 3 wave move against the main trade are corrections so a high probability pattern to trade.

These are real life examples posted before the move happened, showing the expected outcome, 3 wave bounces against the trend are setups to trade with a high probability outcome. So take a look at your charts, next time you see a 3 wave bounce, chances are it's just a simple correction and going be completely retraced and join the larger trend.

If you are interested in trading these sorts of setups and trading like a professional, then I invite you to sign up and trade professional setups where you put the odds in your favor and let us find you high quality ideas.

Instead of guessing, try to use a method that gives you the confidence to put your \$\$ to work.

Elliott Wave it makes sense in the right hands.

Until next time,

Have a profitable week ahead.

## Author: Nouf

The information written in this article should not be used for any trade recommendation.

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