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Third Waves in the Forex Market.

If there is one wave in the basic Elliott wave sequence that you as a forex trader don't want to miss, it's a third wave. Like the Energizer bunny, third waves "just keep going and going." Riding them is a pure pleasure – and pity you if you happen to get caught on the wrong side of one.

Third waves, says Bob Prechter in his Elliott Wave Principle – Key To Market Behavior, are, "wonders to behold. They are strong and broad, [they] generate the greatest volume and price movement and are most often the extended wave in a series. [They] invariably produce breakouts, 'continuation' gaps, volume expansions, exceptional breadth," etc.

Sounds good, but how do you trade them? Well, first, you have to identify a third wave developing. Let's say that you've counted waves 1 and 2 on a chart, and you're willing to bet your money that wave 3 is about to start. Of course, you don't know for sure if it will, so to protect yourself, you recall the First Rule or Elliott: "Wave 2 cannot retrace past the origin of wave one":



In other words, if the ostensible wave 2 does go past the origin of wave 1, you'll know that what you were looking at was not a 1-2 sequence with a 3rd wave in the making. So you could place your stop-loss just beneath the starting point of wave 1.

Here's a real life example from this morning (Nov. 3). At 8:28 AM Eastern, our Currency Specialty Service published this chart of the AUDUSD:



If you chose to trade the recent rally in this pair from near the end of wave (ii), your risk would be in the area just below the starting point of wave (i).

Third waves occur in all timeframes, in all currency pairs. There is probably one developing somewhere right now. And our Currency Specialty Service is here to help you find them.

Get Forecasts of the Forex Markets YOU Follow. The Elliott Wave Currency Specialty Service is a professional-grade advisory tool previously reserved mostly for global forex pros. With it, you can build your own, flexible and affordable, currency package to suit your trading needs. Each package is a bargain and the more you choose, the less each one costs.

Click the Third Waves & How To Trade Them header link above to learn more about trading these highly profitable Third Waves.

Good day and good trading.

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