| > | | | | But understanding of price waves cannot be achieved |
| What is a Price Wave? In simplest terms, a Price | | | | by simply reading a single article like this alone. More |
| Wave is a simple symmetrical oscillation or fluctuation | | | | research and extensive study is required, and how far |
| that moves from peak to trough and back again | | | | you go in your ability to forecast market price action |
| indefinitely. Just one interval of this wave (from top to | | | | will be directly tied to the amount of time and effort |
| bottom back to top again) is called a 'cycle'. | | | | you are willing to put forth. |
| All freely traded markets are made up of these Price | | | | I present you with this article in order to help you get |
| Waves. That is the common element of all markets. It | | | | started. If you are impressed with the fact that cyclic |
| is theorized that all price movements of all stocks and | | | | concepts can provide you with a lot of information as |
| commodities consist of the same type and number of | | | | to the probable direction of market prices, then |
| these price waves providing a degree of predictability | | | | perhaps you'll be strongly motivated to go to the next |
| of when the market is going to reverse. Once you | | | | level. |
| have come to understand these price waves you will | | | | Suppose you are looking at a chart of the SP500 and |
| gain a better understanding of how they produce the | | | | by way of cyclic analysis you note that price has been |
| resultant peaks and troughs (tops and bottoms). | | | | in a downward swing. Noting that the ebb and flow of |
| Because these price waves repeat indefinitely, cycle | | | | all the price waves that make up this market pattern |
| after cycle, once you have identified the wave pattern | | | | show strong evidence that it is ready to start on its up |
| itself you can determine its value at any point in the | | | | swing. Without even knowing precise details there are |
| past or future. This characteristic of price waves is | | | | things you can determine from this information. |
| what gives it a degree of predictability. | | | | 1. Now would not be the best time to short. |
| Take any price chart, such as Cotton, Soybeans or | | | | 2. Prices are likely to stop dropping any time now. |
| the SP500, and it is possible to look at it and note a | | | | From this you can decide to tighten your trailing-stops, |
| wave-like motion. You can apply a moving average, a | | | | not initiate any more sells, and prehaps prepare for |
| Stochastic or some other oscillation indicator and these | | | | possible trend change. This is just the basics. With a |
| wave-like moves become even more evident. But | | | | proper cyclic analysis, you can determine the best |
| more is needed than just noting these waves in order | | | | place to enter your trades, where to put your risk |
| to arrive at an estimate of what the market will do | | | | stops, and where to anticipate your profit objective |
| next. | | | | price points. From this you can determine your |
| There are questions that every trader asks when | | | | risk-to-reward ratios and determine whether conditions |
| looking at a price chart. Should I buy or sell? Should I | | | | are favorable for a trade. |
| wait? How high up will the market go? How much | | | | If this appeals to you, then all you need now is to know |
| should I risk? If I exited now would I be leaving too | | | | what direction to go to learn. For this I would suggest |
| much on the table? | | | | that you do a search on the Internet on Cycle Analysis |
| The purpose of the above discussion on price waves | | | | and use the names Edward Dewey and J.M. Hurst. I |
| is to set the stage toward your understanding of what | | | | would provide you with the exact publications if it were |
| makes up what you see on a price chart and that by | | | | not for the fluid nature of the Internet and pages |
| knowing the price waves involved that you can obtain | | | | changing all the time. By doing a search on the above |
| answers to the questions asked in the previous | | | | terms and names, you'll find what you need to get |
| paragraph. | | | | started in making a cycle analysis. |