The Elliott Wave Principle is based on the idea that markets move in repetitive cycles, which are divided into waves. These waves are further subdivided into smaller waves, creating a hierarchical structure. The principle identifies two main types of waves:
The final push, often driven by retail FOMO (Fear Of Missing Out), accompanied by momentum divergence. 2. The Corrective Phase (Counter-Trend)
: Calculating precise entry ranges, stop-losses, and profit targets. Part 2: Practical Application Trading Techniques : Includes setups with risk-reward ratios greater than 1:3. Specialized Content
The practical twist: Kumar provides specific candlestick patterns and volume conditions that confirm each wave. For example, he teaches that Wave 3 is often accompanied by the highest volume and strongest momentum indicators (RSI above 70 in a bullish trend). The Elliott Wave Principle is based on the
: Price will make a new high in Wave 5, but the EWO will print a lower peak, creating a clear bearish divergence. This divergence acts as a warning to exit long positions. 3. High-Probability Trade Setups
One of the hardest aspects of Elliott Wave is distinguishing between a pullback and a trend reversal. Kumar simplifies corrective structures into:
: A complex, profit-taking consolidation phase that never enters the price territory of Wave 1. your wave count is incorrect
: It provides proven techniques for a 1:3 risk-reward ratio , helping traders avoid common pitfalls like "over-counting" random price swings.
Wave 5 should show a visible bearish/bullish divergence against Wave 3, signaling that price is making a new high while underlying buying power fades. Step 3: Define Clear Invalidation Points
: Look for Wave 2 to retrace exactly 50%, 61.8%, or 78.6% of Wave 1. This provides a tight stop-loss just below the start of Wave 1. creating a clear bearish divergence.
If any of these rules are broken, your wave count is incorrect, and you must re-label your chart: Wave 2 can never retrace more than 100% of Wave 1.
The main idea is that the market moves in a followed by a three-wave correction . Core Components of Practical Application
Whether you find the PDF or build your own system based on its principles, remember Deepak Kumar’s closing line from his seminar: "The market is a fractal of human emotion. You don't need to predict the future. You just need to recognize the present."
At its core, the Elliott Wave Principle asserts that market prices move in recognizable, repetitive patterns driven by investor psychology. These patterns, or "waves," alternate between impulsive phases that drive the trend and corrective phases that challenge it.
Wave 2 can never retrace more than 100% of Wave 1. The starting point of Wave 1 serves as an absolute line in the sand for stop-loss placement.