MT4 Elliott wave count indicator
The Elliott wave count MT4 indicator is a wave counting indicator built for the MT4 trading platform. Unlike regular Elliott wave indicators, this indicator does not draw the lines but only gives a count for the waves.
To be able to use this indicator effectively, traders need to understand how to count Elliott waves and also understand the different market cycles and the nomenclature that is used. If you think that this indicator is the Holy grail, then you will be disappointed.
The Elliott wave count indicator gives a visual representation and a simplistic view of trading with Elliott waves by just counting and labeling the waves.
It is simple as that!
The indicator also gives trading signals indicating potential turning points in the price, just the way a trader will make use of the waves to predict the future price action.
Given the fact that the MT4 Elliott wave count indicator is an automated indicator, traders should apply some discretion.
Elliott wave concept of trading is not that commonly used and requires a bit of an advanced method of analysis and knowledge about the markets. In this aspect, the Elliott wave MT4 indicator is an easy indicator to get started with the concept of trading with Elliott waves.
The indicator is supposed to improve the quality of trading based on Elliott waves concept of trading. The indicator works across all time frames including short term and long term charts. Therefore, the indicator is best suited for all types of traders whether you are a short term scalper or a long term swing trader.
Elliott waves after all measure the market cycle and therefore you will find wave counts of all levels regardless of whether you are looking at the long term charts or the short term intraday charts.
The Elliott wave indicator is therefore a handy tool to get started with the Elliott wave concept of trading, if you are really keen to learn about this concept of technical analysis. Traders can use the Elliott wave indicator alongside their existing trading systems and can therefore validate the signals given from this indicator alone. This is a good practice if you are just starting out with Elliott wave based trading or completely new to forex trading. But before we get into the details of how to use the Elliott wave count indicator for MT4, let’s briefly cover the concept of Elliott wave theory and the wave count principles.
What is the Elliott wave theory?
The Elliott wave theory is a concept applied in technical analysis. It was developed by Ralph Nelson Elliott, in his famous book The Wave Principle, published in 1938. The Elliott wave principle or the Elliott wave theory takes a completely different approach to regular concepts of technical analysis.
For example, you do not use any technical indicators in the Elliott wave approach. This concept is based on market cycles and was primarily aimed to understand the investor psychology.
There are many different concepts in Elliott wave theory, which can get very advanced rather quickly. Therefore, one of the things to bear in mind is that you cannot expect an indicator, especially one that is free of cost to be capable of being accurate.
The Elliott wave theory is initially based on the following rules of counting the waves and measuring them one against the other based on the retracement or the extension levels.
- There are five waves in the Elliott wave concept, and this is how price moves within the direction of the main trend
- Then there are three waves that move in the opposite direction to the trend
- Thus, the Elliot wave is comprised of a total of 5 and 3 waves. This never changes regardless of the levels that you check. In a way, Elliott waves are fractal in nature
- Depending on the cycle and the duration, the waves are categorized into the following types:
- Grand supercycle
- Each of the waves in the Elliott wave must adhere to a strict set of Fibonacci levels
- The third wave, is the often the longest wave and this is where traders tend to take advantage of the trend
- The turning points, after the third wave also allows traders to potentially predict the retracement levels
The Elliott wave based trading draws upon the Dow Theory. Both these concepts which were discovered early on focused on the fact that price tends to move in waves of varying levels.
While Dow simply named it as the primary, intermediate and the short term cycles, Elliott wave theory takes it a bit further into naming each of the waves and also giving them accurate Fibonacci levels of extension and retracement.
While the wave counting patterns comes with different names, there are three basic rules that the Elliott wave must always adhere to.
- Wave 3 can never be the shortest wave and must move always in the direction of the main trend
- Wave 2 should never extend beyond the low or the high of wave 1
- Wave 4 should never cross or touch the same price area as wave 1
Quite often, beginners use these simple but core concepts to get started with Elliott wave trading. Some traders also assign Fibonacci levels to validate their analysis every further.
One of the things to bear in mind is that Elliott waves comes in different degrees. Therefore, having an understanding of which degree wave you are in (ex: Minor, or Sub-Minuette) can give you an estimate of the potential turning points in price.
Installing and using the Elliott wave MT4 indicator
The Elliott wave indicator for the MT4 platform is easy to install and use. After pasting the indicator into your MT4 indicators folder, you can drag and drop the indicator onto your chart.
The configuration window is very simple to use with not much of settings to configure the indicator.
Elliott Wave indicator MT4 configuration
As you can see from the above chart, the only setting available is to show or hide the signals on the chart. Besides this and the option to select the color of the alerts, there isn’t any more configuration details available.
The indicator, once applied to your charts, looks as the follows.
Elliott Wave Count Indicator MT4
The blue alerts on the chart are nothing but the basic Elliott wave counting of the swing points in the price. You will see that the indicator also gives out buy and sell signals as well as the target level.
At the time of writing, the Elliott wave indicator has signaled a sell signal on the EURUSD on March 22nd with a profit level of 1.1190. The signal is yet to be completed.
The indicator automatically shifts and adjusts to the wave counts depending on the time frame that you use. Therefore, you can see signals on some chart time frames, while the signals are not so visible on the rest.
Below is another screenshot of the Elliott wave count indicator on the H4 chart time frame.
Elliott wave count indicator – H4 chart
Free Elliott wave scanner
There is no doubt that the Elliott wave theory is quite popular among traders. Many try but fail to follow this approach of trading the markets. Unlike trading with regular indicators where the signals are taken based on buy and sell patterns, with Elliott wave it is a different story.
It is due to this and the fact that
the Elliott wave concept of counting the waves is subjective that it is often out of reach from many traders.
Ideally, when you are trading with Elliott waves, an experienced trader doesn’t require the need for tools or indicators.
This is why many wannabe Elliott wave traders try to look for Free Elliott wave scanners. The free Elliott wave scanner is basically a scanner that will search the markets for potential signals.
As mentioned earlier, the third wave is the longest and this is where the trends are the strongest. Trading the third wave of the Elliott wave can therefore be very lucrative. The free Elliott wave scanner basically attempts to predict the third wave and signals to the trader.
Of course, there are many other trading signals such as the retracement that follows the third wave completion or the start of the fifth and the final wave. There are many different ways to trade.
A free Elliott wave scanner basically tries to do the hard work for you. In this aspect, the Elliott wave count indicator for the MT4 trading platform attempts to assist you by counting the waves.
There are many Elliott wave scanners but most of them are quite expensive and thus out of reach for new traders who want to learn about trading with Elliott waves.
Drawbacks of the Elliott wave count indicator
Any practitioner of the Elliott wave theory will tell you about the subjectivity that comes with counting of waves. This is similar to how one would trade with price action or chart patterns.
The subjectivity is therefore a bit of a drawback as the Elliott wave count indicator tries to automate this. At times, it is possible that you might not get the right signals. Therefore, blindly trusting this indicator based on the signals that it gives you can be risky.
It is ideal if you spend a lot of time using the Elliott wave count indicator on a demo trading platform in order to get a fair sense of idea of using this automated indicator.
Because Elliott waves work with Fibonacci retracement levels, another major drawback is that the indicator does not show you the Fibonacci levels of extensions and retracements. Therefore, this leaves a lot of legwork to be done if you really want to be thorough.
However, considering the fact that you are using this indicator means it is quite likely that you are not fully confident in trading with Elliott waves. As a result, this indicator needs to be used with caution and not to be blindly trusted.
It is ideal that you initially start off with your existing trading system and look for confluence with the Elliott wave turning points. Another alternative is to make use of the Fibonacci tool and plot the retracement and extension levels to validate the wave counts yourself.
There is often a debate within Elliott wave traders about the starting point of the wave count. This is something that can also be seen in the Elliott wave count indicator. The question is from how far back does the indicator start to count the waves?
A mismatch or a miscalculated wave count from in between could lead to potentially losing traders. Therefore, traders should basically weigh the pros and cons of using the Elliott wave count indicator for the MT4 platform.
The Elliott wave count indicator MT4 - Conclusion
Having cited the risks of using the Elliott wave count indicator you should focus on this indicator more as a handy tool that will help get you started with being familiar about Elliott wave based trading.
Trading based on Elliott waves has always caught the fancy of many traders at some point. However, using this method is not a fool-proof way of trading. Meaning that you will hit losses when trading with Elliott waves.
It is ideal if you combine the Elliott wave count indicator with other concepts such as support and resistance. Combining these two elements can create better chances at taking trading opportunities compared to just trading with the Elliott wave count indicator in isolation.
Trading with just one particular concept or not using the confluence of other methods can lead to an incomplete market structure. This will make your trades prone to wide swings or your stops being abnormally hit. The Elliott wave is not an exception either.
Therefore, traders should not ignore the other basic concepts such as risk management while trying to learn how to trade with the Elliott waves or the Elliott wave count indicator.