The forex Wolfe wave system, brings to mind, some important forex related terms that one must be familiar with in order to really understand what it is all about. Some of those terms are
- Trading patterns; which is the price movement of a security over a specific time period.
- Charting techniques; the graphical representation of price movements, volume, open interest, settlement prices, and other indicators.
- Elliot waves; a method of technical analysis used to analyze financial market cycles, and forecast market trends.
With an idea of the terms above, anyone can easily understand what the forex Wolfe wave is all about.
WHAT IS FOREX WOLFE WAVE?
A forex Wolfe wave is a naturally occurring pattern in the financial market, just like other wave patterns, but with a different charting technique. It is a reversal pattern that can be said to be similar to the Elliot wave patterns in many ways; present in the financial market, reliable reversal pattern, and occurs naturally given to the makeup of the forex market.
One thing about the forex Wolfe wave (which has been mentioned earlier) is that it is seen practically in all time frames in every trade; it is like a natural thing in the market. Most importantly, it can be used to predict the direction of the price of a security, and how long it can take for that prediction to be actualized. Forex trading is all about the appreciation and depreciation of commodities. The price of a currency pair may be on the high today, but that is not to say that it will stay that way, because definitely, it will change. Now, knowing when it will change can prepare a trader to take advantage of this change and not lose money. That is the function of the forex Wolfe wave.
IDENTIFYING THE FOREX WOLFE WAVE
There is need to do a bit of research to really understand what the forex Wolfe wave is all about. However, the important factors that make up the identity of this wave are
1. It is a five wave pattern; meaning that the charts show five different waves, all of which have different functions
2. All of the five wave generated in the Wolfe wave chart have regular timing
3. It occurs naturally in every time frame
4. It is a reliable reversal pattern used in break out trading
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