Questions About Trading Using Elliott Wave

Should a person EVER consider shorting within a 3rd wave?

 * Absolutely not. A 3rd wave is the strongest and fastest moving part of the 5 wave trend, and often has significant extensions within its subdivision waves. Therefore, attempting to short within this wave will only result in pain.

When should I maintain my position overnight, in other words, swing trade?

 * From my experience, the only times that are really rewarding to swing trade is when you are trading a 3rd wave. Since it is the largest part of the trend, it often provides you with the most profitability in the shortest amount of time.

Should I trade a corrective wave, such as a wave 2 or 4?

 * Since corrective wave patterns are often quite variable, trading those waves is often very difficult. Therefore, if you ever choose to trade one, it is advisable to not swing trade them, and simply day trade them. The main reason is that they can display 3 waves within the corrective moves, or they can display 5 waves. So if you are following a wave structure and you expect a 5 wave structure, the market can simply reverse after only 3 waves. Furthermore, since they are so unpredictable, often they only cause you to churn your account. So, I do not suggest trading within corrective waves.

You continually espouse "low-risk" set-ups and trades. What do you mean by this?

 * I refer to trading wave 2 pullbacks most often. Once we identify an initial 5 wave move in a change of direction, we will then look for a wave 2 pullback. We have several methods to identify a confluence level at which we intend to short or go long on this wave 2 pullback. Furthermore, since a basic Elliott Wave rule provides that Wave 2 cannot retrace further than the start of Wave 1, we have a natural stop which tells us that we have incorrectly identified the pattern, and are then stopped out. Therefore, we truly trade in a low risk manner for high potential profits of a 3rd wave move.