Wave analysis of the Forex market, otherwise known as the Elliott Wave Principle, is a kind of technical analysis that shows the movement of prices in analogy with tides in the seas. In this case, every action has its opposition. In other words, the FOREX wave analysis assumes that the entire price movement can be identified within the two main wave groups:
Impulses – drive the price of the wave either downward or upward (have a numerical designation);
Corrections – waves that adequately “respond” to the pulse (have the letter designation).
Pulses always alternate with corrections. Let’s look at an example of an impulse. The impulse is invariably represented by five waves, with 1, 3, and 5 waves necessarily driving, that is, they themselves act as impulses, but waves 2 and 4 are corrective.
Wave Analysis as a tool for forecasting with a professional approach has enormous potential. As an example, the above wedge can be considered. Wedge is always the first wave of momentum. After its formation, a pronounced price movement begins in the direction of the formed wedge
This method of analysis is very interesting, but at the same time it can not be referred to simple methods of forecasting, since it abounds with subjective decisions, which sometimes prevents the trader from correctly assessing the situation and taking the only correct decision.