Does Elliott Wave Theory Analysis Works for Intraday Trading

| November 28, 2015

Let me explain in details if “Elliott wave theory analysis works for Intraday Trading or not” with practical example and real facts. I don’t believe in just theoretical and philosophical statements but always try to explain every topic with evidences and practical examples let it be my analysis reports, book or articles.

So, I am going to explain if Elliott Wave Theory analysis can be used for Intraday Trading or not. Just have patience and read this complete article till last. This article will cover most of the useful concepts and will also cover some other frequently asked questions like,

  1. Which is the best time frame to use for Elliott wave theory analysis?
  2. How to use Elliott Wave Theory for intraday swing trading?

When we are discussing Elliott Wave Theory analysis then it is all about waves. As we see, chart of every financial script let it be Stocks, Indexes, Commodities or currencies doesn’t move straight but always moves in Up-Down-Up-Down motion or zigzag motion and this Up-Down-Up structure on chart called as waves.

And these waves are manifested, means these wave’s structure is understandable. This up-down-up structure on chart always moves in a definite pattern or definite path, means if you are able to understand the pattern of previous waves then you can always conclude the structure or nature of next move.

And the phenomena or law or method or pattern to understand these waves is Elliott Wave Theory discovered by RN Elliott in 1930-40. And it is a natural law which every chart 100% follows. If you develop the skills to identify these patterns then you can always identify the next moves.

Using Elliott Wave Theory Analysis for Intraday and Short Term Trading

Most of the analysts believe that Elliott Wave Theory can be used for Positional Trades only and it cannot be used for short term or Intraday Trading.  So, let me explain how this Elliott Wave Theory can be used for Short Term or Swing or intraday Trades. Those who don’t know about Elliott Wave Theory can get basic Idea by reading these two articles,

Just look at the daily chart of Nifty given below.

Wave on daily chart of Nifty

Wave on daily chart of Nifty

This is daily time bar chart of Nifty. Daily chart means every single bar on chart represents the move of 1 day. And whatever up-down-up-down structure you see called wave pattern.

Here, if we look at the move of last 3 days then it is represented by just 3 bar (look the move marked within red circle at the end). Obviously we can never identify intraday movement on this daily chart as it is impossible to identify waves. Intraday move is just a single line on this chart.

So, let’s see the same move on 30 minutes chart:

Wave on 30 minutes chart of Nifty

Wave on 30 minutes chart of Nifty

This is 30 minutes time bar chart of Nifty showing same move of last 3 days as I marked within circle on first daily chart. This move is from 7714-7860-7725. In this 30 minutes chart, every bar represents the move of 30 minutes.

Just see, the move which represented by just 3 bars on daily chart is represented by about 36 bars on 30 minutes chart.  And we can identify some waves within this move on 30 minutes chart whereas it was just 3 bars on daily chart.

Though, we can identify more waves on this 30 minutes chart but still it is not comfortable for Intraday Trade.

So, let’s see this same market move on 5 minutes chart:

Elliott Wave counts on 5 minutes chart of Nifty

Elliott Wave counts on 5 minutes chart of Nifty

This is 5 minutes time bar chart of Nifty showing same move (7714-7860-7725) as shown on Daily and 30 minutes charts above. Every single bar on this chart represents the move of 5 minutes and move which is represented by 3 bars on daily chart and by 36 bars on 30 minutes chart is represented by 225 bars on this 5 minutes chart.

Just look at the chart and see how many waves we can identify on this 5 minutes chart of last 3 days. Also look at the time bar below, we can identify inner waves even in intraday move and all the waves are following same rules, patterns and calculations.

Now, I have marked a small “3-3-5 Flat Correction pattern” on this chart within red circle which is really small to identify on this 5 minute chart but let us see it on lowest time frame chart, i.e. on 1 minute chart:

Elliott Wave counts on 1 minute chart of Nifty

Elliott Wave counts on 1 minute chart of Nifty

This is 1 minute’s time bar chart of Nifty showing “3-3-5 Flat Correction” pattern which I marked on 5 minutes chart with circle. The pattern which is very small and looks really hard to identify on 5 minutes chart is very clear on 1 minute chart with easy identification of all inner wave following all rules perfectly.

This pattern complete with 19 points only, and see the time bar of this chart, it took about 90-120 minutes to complete this pattern. We could take Intraday Sell Position with 14-15 points stoploss only.

Read my analysis report Nifty EW Analysis for 19 Nov 2015 – Perfect Example of 3-3-5 Flat Correction  to understand the importance of “3-3-5 Flat Correction” Pattern and also to know what I concluded after that.

Again, see the decline from 7835-7725 on 5 minutes chart which look like a steep fall as wave (iii). Let’s see the same decline on 1 minute chart again.

Elliott Wave counts on 1 minute chart of Nifty (Chart 5)

Elliott Wave counts on 1 minute chart of Nifty (Chart 5)

This is 1 minute time bar chart of Nifty covering sharp decline from 7835-7725 which I shown as wave (iii) on 5 minute chart.

Again see, the pattern of this wave is same as on 5 minutes chart but we can see inner waves clearly on 1 minutes chart. The move is impulsive on both charts with 5 waves but we can see even inners waves of all 5 waves on 1 minutes chart.

This decline took about 180-230 minutes to complete after that “3-3-5 Flat Correction” pattern shown on previous 1 minute “chart 4”. This entire move is intraday with clear identification of waves. And you can see wave (3) and inner wave (iii) of 3 is longest, steepest and fastest.

Let’s dig deeper and see wave (5) of this “chart 5” (from 7769-7725) closely on separate 1 minutes chart:

Elliott Wave counts on 1 minute chart of Nifty (Chart 6)

Elliott Wave counts on 1 minute chart of Nifty (Chart 6)

This is again 1 minute time bar chart of Nifty showing decline from 7769-7725 marked as inner wave (5) on previous 1 minute “chart 5”.

Here also we can clearly identify all inner wave of this 45 points move. We can clearly identify 5 complete waves, an Irregular Correction as wave 2 and also inner waves of all bigger 5 waves.  And all these waves are following all the rules, calculations and personalities of Elliott Wave Theory. Here also you can see wave (3) and inner wave (iii) of 3 is longest, steepest and fastest.

I have shown lots of lowest time frame charts in this article such as 5 minutes and 1 minutes charts just to make you understand that waves can be identify on every time frame let it be Monthly, Daily, Hourly, 5 minutes or 1 minute where  rule, patterns and calculations of wave are also same on every time frame.

The wave which you can roughly see on 30 minutes chart can be easily identified on 5 minutes chart and wave which can be easily identify on 5 minutes charts can be clearly and deeply identified on 1 minutes chart.

Elliott Wave Theory can be used for Intraday Trading:

Elliott Wave Theory is all about Identifying waves and understanding wave’s pattern to predict next move. And if you can identify waves on 5 minutes and 1 minute’s charts then you can definitely trade Intraday and even hourly for even 10-20 points using Elliott Wave Theory Analysis.

I have shown three 1 minute charts above and these entire three 1 minutes chart covers a single day’s move. And we identify lot’s of pattern on these three 1 minute charts in a single day which is more than enough to trade intraday if you know Elliott Wave Theory.

Even I use Elliott Wave Theory and using it for very short term and intraday trades. Just check my daily analysis of Nifty at  http://sweeglu.com/category/nifty/

But yes, you need to have complete knowledge of Elliott Wave Theory to trade using Elliott Wave Theory including Wave Cycles, Wave Patterns, Wave Calculations and Wave Personalities. Obviously you can’t analyze Elliott Waves without knowing it. And Intraday trades using Elliott Wave Theory can be done only on high volume stocks and indexes, low volumes stocks rarely makes pattern on intraday chart.

To get the same different time frame charts of Nifty which I have shown in this article, read Free Live Charts to Use for Elliott Wave Theory Analysis.

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About the Author ()

Deepak Kumar is an independent Technical Analyst, regular practitioner and Trainer of Elliott wave theory applying Elliott's Wave Principles on Indian Markets successfully since 2011 and made many accurate predictions. He is also the author of book "Practical Application of Elliott's Wave Principles by Deepak Kumar"