Channelling Techniques with Elliott Wave
During the development of the Wave Principle, Elliott suggested that channelling technique could be useful devise to anticipate the future wave movement. Elliott developed the three channelling techniques when Wave 2, 3 and 4 is completed respectively. We explain the steps of drawing the channels from the case of wave 2 completion to wave 4 completion.
When wave 2 is completed, trader can draw the first upper channel line and base line to anticipate the location of wave 3 (Figure 5-14). Drawing upper channel line is simple. Firstly, draw the base line by connecting the starting point of wave 1 and the ending point of wave 2. Then draw the parallel line to the first base line passing through the ending point of wave 1. Elliott suggested that wave 3 can be completed near the first upper channel line. Practically speaking, this upper channel line provides only the rough guideline for the location of the wave 3. Wave 3 can be completed below or above this upper channel line.
When wave 3 is completed, we can draw second upper channel line and base line to anticipate wave 4 (Figure 5-15). Firstly, draw second upper channel line by connecting the ending point of wave 1 and the starting point of wave 3. Then draw second base line parallel to the new upper channel line passing through the ending point of wave 2. The second base line can be used to anticipate the rough location of wave 4.
When wave 4 is completed, we can draw the final base line and upper channel line to anticipate the rough location of wave 5 (Figure 5-16). Firstly, draw new base line by connecting the ending point of wave 2 and wave 4. Then draw the final upper channel line parallel to the final base line passing through the starting point of wave 3. With the new upper channel line, trader can anticipate the rough location of wave 5.
Figure 5-14: Drawing base line and upper channel line when wave 2 is completed.
Figure 5-15: Drawing base line and upper channel line when wave 3 is completed.
Figure 5-16: Drawing base line and upper channel line when wave 4 is completed.
About this Article
This article is the part taken from the draft version of the Book: Scientific Guide To Price Action and Pattern Trading (Wisdom of Trend, Cycle, and Fractal Wave). This article is only draft and it will be not updated to the completed version on the release of the book. However, this article will serve you to gather the important knowledge in financial trading. You can get the book to get the most up to date trading strategy for your technical analysis.
Elliott Wave Trend is extremely powerful indicator. Allow you to perform Elliott wave counting as well as Elliott wave pattern detection. On top of them, it provides built in accurate support and resistance system to improve your trading performance.