An introduction to Elliott wave theory


Welcome to the second of my spread betting video tutorials.

Many thanks to everyone who left their comments on my first tutorial, the essentials of tramline trading – very helpful and encouraging. If you missed it you can watch it here.

This week I explain the basics of Elliott wave theory and how to use it to your advantage in your trades.

Elliott wave theory is a complex and, to the uninitiated, seemingly arbitrary tool. But once you have a grasp of the basics, and used in conjunction with other technical analysis methods, it can prove very useful in forecasting market trends.

In this video, you will learn:

• The key principles of Elliott wave theory;
• What corrective waves are;
• The significance of the ABC wave pattern;
• How to apply it in practice to real-time trades.

And if you haven’t seen them yet, or you would like a refresher, do take a look at my other video tutorials.

• See all my spread betting video tutorials here.

  • Simon

    Excellant videos and emails John, thankyou. Could you or someone please just clarify that I am correct in thinking that after the fifth wave their will always be a reversing five wave trend in the opposite. direction, within the same timescale, in this case , daily. Many thanks

  • jomar

    very helpful and interesting. Because the presentation has to be so short, it would be helpful to recommend further reading or any useful software. I know there are many books available. Your recommendation would sort the wheat from the chaff.

  • Brian

    Cheers John. As always keeping it simple and that is imperative!

    @Simon – That is correct!

    EW is very much subjective, but as John stated, it is just another tool in the toolbox.

  • Frances

    Thank you for making a complex topic so easy to follow.
    Will use your guidelines and start looking for Elliott waves from now on. I had always avoided it because the explanations givens in books are so complicated. You are a great teacher, John.

  • Frances

    Thank you for making a complex topic so easy to follow.
    Will use your guidelines and start looking for Elliott waves from now on. I had always avoided it because the explanations givens in books are so complicated. You are a great teacher, John.

  • Paul

    Thank you for a second great video John, I especially like your use of positive divergence on the momentum indicator.
    I shall have a play with that.

    Thanks again for sharing.

  • Jack

    The textbook on Elliott Waves is
    “Elliott Wave Principle” by AJ Frost and Robert Prechter.

    There are a load of paid and free courses and material available from Robert Prechter’s website

  • Jack

    Elliott Wave Theory by AJ Frost and RR Prechter.

    Further resources (free and for sale) are available at Mr. Prechter’s website:

  • Elaine

    Thanks John, it clarified in a simple way concepts I was struggling to get.
    Another tool to use in my trading.
    Looking forward to your next video.

  • Dan

    Good video, but the section you used for illustrating 5 Elliottewaves from the low of 2009 whilst look like 5 waves do not seem to agree with the fact that the 3rd wave should be not just the longer but also with higher momentum ie steeper.

    Therefore if you join the start of wave 1 and low of ABC correction (wave 2) and project that line from top of wave 1 then the 3rd wave should at list touch the line or even overshoot.

    So what you were illustrating as waves 1 – 5 could be just corrective waves ABC of higher time frame tracing out double or triple zigzg. This would point to recent high of July could be the top rather than another wave up to form your 5th wave. Any comments?

  • LT

    Thanks John, great videos, and emails… looking forward to the rest.

    @Brian re @Simon, it doesn’t seem to be the case in this video that after 5 waves the trend reverses for a 5 wave in teh opposite direction, as after a large correction, the trend resumes and goes on up… so is the point to just catch the fall after the 5th wave ends (in a bull run)…??

  • KenN

    Nice video, clear and simple. Thank you once again for taking the time to put this together!

  • Jugs

    Dan @ 10 is probably right here. The wave structure up from the March 2009 low looks corrective (i.e.corrective within a bear market) and is of a degree higher in the EW count. Corrective ABC waves can sub-divide into either a 3-3-5 or 5-3-5 wave pattern of one degree less and I think this is what we are seeing in John’s video example.

  • Lee

    A nice clear approach, thank you. I wouldn’t try to call a top or bottom on wave 5 or ‘C’ of a correction.
    Instead, attempt to trade waves 3 and 5 with the stronger trending move as they push back through the previous top or bottom of the impulse waves 1 and 3 respectively.

    There’s a lot of free Eliott wave stuff at if you want the nitty gritty.

  • Dudley Bartlett

    Thanks for your great tutorials made simple. Is there any particular time period you would suggest using the tutorials on?

  • Bob

    Thanks John. You’re a great teacher with a down to earth common sense approach. I shall be trying to put into practice your techniques.

  • dave j

    gday John e/w is easy after the event but trying to figure it out on a live chart before the event is a complete waste of time. I tried studying Prechter the more I studied the more confusing it became..Also read Fibonacci for traders with the same result …gday John and thanks for the videos dave j