This article is taken from the Forex Journal (December 2008 issue)
The author, Jim Martens, is the senior currency analyst at Elliott Wave International (EWI). He worked as an analyst with floor brokers before joining EWI in 1993, where he covered commodities and oversaw currency analysis. After a stint with Nexus Capital Ltd., a Soros-affiliated hedge fund, he is back with EWI, covering dollar rates and major cross rates in EWI’s International Currency Outlook.
- Currency trader Jim Martens explains that knowing the patterns of the Elliott Wave Principle can provide a comfortable sense of déjà vu when trading the currency markets. Using the known market patterns, it is possible to get the sense that you have been here before or have seen this price action before and, therefore, what price action will follow.
A feeling of déjà vu can give you the “creeps,” making you wonder whether your brain is on the fritz or whether you have actually already lived this moment before. But when you notice a pattern repeating on a foreign exchange price chart, that same sense of déjà vu can be comforting rather than chilling.
Technical analysts depend on seeing different patterns, such as head-and-shoulders patterns, on price charts. Elliott wave analysis, which is a form of technical analysis, limits the number of repeating patterns, and those patterns link together to form five-wave and three-wave moves that repeat on multiple time frames. Recognize where the market is located within the repeating pattern, and you can get the sense that you have been here before or have seen this price action before. This feeling of déjà vu might even be pleasing if you have noticed that the market usually reacts in a certain manner after the pattern ends.
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