Like many things Elliott Wave theory can be simple or
complex, it's up to you. The basic premise is that high volume, free markets (no
Government intervention over the long haul) are subject to the individual
investors hopes (greed) and fears en masse. These emotional capitulations are
reflected graphically at any point of any day by price. Portraying these swings
in chart form provides a picture of the current market psychology. In the
earlier part of this century Ralph Nelson Elliott promulgated tools with which
to interpret the chart patterns and hence, the name of the theory.
Technical analysis is a method of evaluating securities by
analyzing the statistics generated by market activity, such as past prices and
volume. Technical analysts do not attempt to measure a security's intrinsic
value, but instead use charts and other tools to identify patterns that can
suggest future activity.
This handy summary will serve as a cheat sheet in the
future:
- Market orders guarantee
execution but not price.
- Limit
orders guarantee price but not execution.
- All-or-none orders are only executed if the
broker has enough shares, as a block, to fill your order in a single
transaction.
- A stop order
automatically converts to a market order when a predetermined price (the stop
price) is reached. A stop loss order, on the other hand, automatically converts
to a limit order when the stop price is reached.
- When you sell short, your potential losses are
theoretically unlimited.
- Day
orders expire at the end of a trading day.
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