(Free) Complete Elliott Wave Trading Strategy for New Trader & Investor [ Entry - Exit ]


Origin of Elliott Wave 1930:


The idea behind the Elliott Wave is to assume that participants in the stock market will not learn from historical mistakes and are always blinded by greed (Motive Waves). Eventually when they realize that the market is not in line with reality, panic will surface. This is when the Corrective Waves (ABC) are formed.


Many traders and analysts use Elliott Wave extensively to predict future price movements. However, the Elliott Wave Principle was not developed as a forecasting tool, but rather to inform users of Elliott Wave's current market behaviour. This has the same purpose as many theories or indicators that the general public is learning now. But most of us use these indicators or theories as a form of price prediction.


If you prefer to learn this content in video format, please go to the following link:



The formation of the Elliott wave concept:


The basic Elliott wave concept is based on the "5 wave pattern".

  • Use 1-3-5 waves as the motive waves for directional/same direction movement;
  • Waves 2-4 are contrarian/adjusting waves of waves 1-3-5, as shown in the figure below:


Basic Characteristic of 5 Wave Pattern: 

  • WAVE 2 will never be lower than the starting point of WAVE 1,
  • WAVE 3 is always the longest stretch than other waves,
  • WAVE 4 will trade above the highest point of WAVE 1.



*Note: Ralph N. Elliott mentioned that the 5 WAVE mode may contain more than 5 waves. Since the 5th wave shows us the overall market trend, another 5 waves may be formed in the 5th wave. The time range can be as small as the minute chart.


Complete wave:

We mentioned earlier that the Elliott Wave Principle is based on the market's realization of reality (macro or micro fundamentals), and market value cannot justify its rationality.


A complete Elliott wave can help us understand the current market conditions, whether the market is still greedy (uptrend) or they finally realize that the balloon value of reality and underlying assets is unreasonable, and fear is created (trend reversal) ).


A complete wave consists of 8 waves:

  • 5-wave motivation model (1,2,3,4,5)
  • 3-wave correction pattern (A, B, C)


Once a complete cycle is formed, the price may enter a new complete cycle, with a total of 8 waves. Please note that the following chart is an example for a better understanding of the complete cycle of Elliott Waves. A complete cycle may be larger than several smaller complete cycles, or it may be a smaller cycle of a larger complete cycle. Investors and traders should pay attention to this when viewing, maybe you can use the weekly/monthly chart to draw a complete Elliott wave chart, and then look at the daily chart and so on.



Why 5 Motive Patterns - 3 Corrective Patterns?


Unfortunately, Ralph N. Elliott didn’t specifically explain why a complete cycle is 5-3 waves patterns at that time. He simply said that was how it was formed at that time. 


This doesn’t mean that it is not effective in the current market. Instead, based on our point of view, we understand why Ralph Elliott didn’t fix a 5-3 waves pattern to be used in different eras of the financial market. Because the idea behind Elliott Wave is to tell us how the price reacts when the market’s realisation of reality is not justifiable to the value of the underlying asset. 


Human nature doesn’t change, Greed & Fear is the fuel to keep the financial market moving. But the regulation, market size, & financial products change over time. Which will affect the market price volatility and price behaviour. 


As long as we understand the principle of analysis, we can apply the principle to the market and react to the market greed & fear for our benefit. Like how we trained our Operator Analysis students, we focus on the principle of “how does the big fish behaves” to track these big fish intentions and we will know when to react to their next movement. So that you can fish in different oceans, rivers, or lakes. 


Elliott Wave’s Entry & Exit Application



This strategy consists of Leading indicators that have some degree of lagging by its nature. Shall you want to achieve better entry & exit, you should rely on price & volume transaction data and movements to measure the big boys/ the market intention. 


This is a concept trading plan we have used in the past. We no longer use this method as we found better ways to find the entry & exit by analyzing price & volume data to measure Big Boys intention. However, it should be sufficient for beginners to analyze potential stocks and minimize the risk at the same time. If you understand the tools that will be used in this strategy and discipline in your trading. 


Analysis tools:

Elliott Wave: To identify the current trend

Price & Volume Action: To time the Entry

Stochastic / MACD: To time the Exit

Risk Management: Cut Loss level adjustment and position sizing.


Identifying the Current Trend


  • Wait for the WAVE 4 to form (make sure it meets all the WAVES criteria).
  • Make sure WAVE 4 meets the criteria of trading above WAVE 1 territory. 


Entry Timing

  • First Entry when price retrace after a rebound at Wave 4 bottom. 
  • Entry when price moves up with high volume


  • Set Cut Loss #1 at previous Low


[To identify price rebound go to this link: https://roundnsurge.com/news/identify-market-bottom-with-price-volume-analysis-wyckoff-method]


Riding the Profits

  • Second Entry when price trades above WAVE 3 high.

          [1st Entry position sizing should be the same as 2nd entry position sizing to lower the risk exposure.]

  • Set Cut Loss #2 below WAVE 1 high & adjust Cut Loss #1 to the same level.


Prepare for the Worst


  • Adjusting Cut Loss #1 to a higher level is to protect our profits and minimize the risk of 2nd Entry if 2nd Entry fails to move higher.


Time To Harvest Your Profits

  • The easiest way to time the exit at Wave 5 is by applying Stochastic or MACD to identify any divergence.

Above Image: Stochastic Oscillator


Above Image: MACD Histogram





All strategies look good when presented. The difficult part in executing a trading strategy is how much you understand the strategy and the reasons for all the price movement that triggers the exit or entry. When you understand your own “tools” in trading, it will be much easier for you to stick to your trading plan and reduce the chances of making an emotional decision. 



Lastly, indicators tend to be lagging, partly because their nature is more towards telling us the current trend instead of forecasting future price movements. Because it is telling us the current market conditions, you can react to it and don’t look back if the price continues to move higher. You feel much better and won’t bend your trading strategy in the next trade. If you want to achieve better precision in entry & exit, you will need to understand and react to the big boys' intentions. 



For more understanding about big boys' intentions, you may join our upcoming live stream preview in the link below. 



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Malaysia stock market is a unique market, hence it requires a customized trading approach to tackle & swerve. Many existing traders in Malaysia apply a plug-and-play strategy from the overseas stock market, but it is not necessarily the best strategy to trade in KLSE. This is due to the difference in local and overseas stock market regulation and the size of market participants of institutional funds & retail investors.


“True traders react to the market.” is the backbone of our trading method. Our findings and strategies are developed through years of trading experience and observance of the operating style in Malaysia’s stock market.


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This blog is for sharing our point of view about the market movement and stocks only. The opinions and information herein are based on available data believed to be reliable and shall not be construed as an offer, invitation or solicitation to buy or sell any securities. Round & Surge and/or its associated persons do not warrant, represent, and/or guarantee the accuracy of any opinions and information herein in any manner whatsoever. No reliance upon any parts thereof by anyone shall give rise to any claim whatsoever against Round & Surge. It is not advice or recommendation to buy or sell any financial instrument. Viewers and readers are responsible for your own trading decision. The author of this blog is not liable for any losses incurred from any investment or trading.