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In this section, we will look at some setups and apply our knowledge of Elliott Wave to determine entry, stop loss, and exit points. Surfs up!

Learn how to use Elliott Waves in your forex trading.


Let’s say you wanted to begin your wave count. You see that price seems to have bottomed out and has begun a new move upwards.

Using your knowledge of Elliott Wave, you label this move up as Wave 1 and the retracement as Wave 2.

Elliott Wave Counts

In order to find a good entry point, you head back to the School of Pipsology to find out which of the three cardinal rules and guidelines you could apply. Here’s what you found out:

  • Rule Number #2: Wave 2 can NEVER go beyond the start of Wave 1
  • Waves 2 and 4 frequently bounce off Fibonacci retracement levels

So, using your superior Elliott Wave trading skillz, you decide to pop the Fibonacci tool to see if the price is at a Fib level. Holy mama!

Price is just chillin’ like ice cream fillin’ around the 50% level. Hmm, this could be the start of Wave 3, which is a very strong buy signal.

Elliott Wave Potential Entry



If price retraces more than 100% of Wave 1, then your wave count is wrong.

Let’s see what happens next…

Elliott Wave 3

Your Elliott Wave analysis paid off and you caught a huge upward move!

You go to Las Vegas (or Macau), overconfident that everything you touch is a winner, blow all your forex profits on roulette, and end right back where you started.

There are no Elliot Waves in a casino.

Lucky for you…we have another hypothetical scenario where you can earn imaginary money again…

Scenario 2:

This time, let’s use your knowledge on corrective wave patterns to grab those pips.

Elliott Wave Flat Formation

You begin counting the waves on a downtrend and you notice that the ABC corrective waves are moving sideways.

Hmm, is this a flat formation in the works? This means that price may just begin a new impulse wave once Wave C ends.

Elliott Wave Flat Entry

Trusting your Elliott Wave skills, you go ahead and sell at the market price in hopes of catching a new impulse wave.

You place your stop just a couple of pips above the start of Wave 4 just in case your wave count is wrong.

Elliott Wave Flat Exit

Because we like happy endings, your trade idea based on the Elliott Wave Theory works out and nets you a couple of thousand pips on this day, which is not always the case.

You have also learned your lesson this time around so you skip Vegas and decide to use your profits to grow your forex trading capital instead.