Candlestick Patterns and Elliott Wave: A Powerful Combination for Advanced Traders

While Elliott Wave is a very powerful analysis tool when it is done right, it does have some short falls. One major short fall is Elliott Wave has a tendency to call trend changes early. This is due to the wrong degree of labelling for some or most usually the last part of a movement.

One of the most powerful technical analysis tools are candlestick patterns.

When a larger degree Elliott Wave structure may be complete, then identification of candlestick reversal patterns in that context can help an analyst determine if the structure is indeed complete, or if the last portion should be labelled one degree lower and as such may be incomplete.

A thorough knowledge of candlestick patterns along with Elliott Wave is required for this approach. It is important to know which candlestick patterns are reliable reversal patterns, and which are of lesser significance. It is also important to know which candlestick patterns require confirmation in the following candlestick, and which do not. Finally, it is important to know how volume should behave for a reliable reversal signal.

Putting this knowledge together with Elliott Wave improves the accuracy of an Elliott Wave prediction.