Moving averages are already too popular for us, but using it in conjunction with Elliot waves is something that few people do. In this article, traders a very unique way of trading that combines Elliot wave analysis with EMA indicator to have a profitable strategy.

Talking a little about Elliot wave structure, you can see the picture below:


Elliot's wave cycle consists of two distinct phases: a push wave and a correction. Elliott's complete wave cycle is made up of 8 waves, including 5 push waves and 3 corrective waves. ABC correction phase represents the correction of the big push wave.

The hardest thing to determine is when the Elliot wave starts. In this article, the author shared how to determine the simple starting point of an Elliot wave to help a trader improve the probability of a trading strategy is to combine with the EMA 10 and 20. Elliot and the EMA will complement each other.

The cycle of the Elliot wave

The fact is that defining wave 1 of an Elliot wave cycle is quite subjective since you can almost consider any point as the starting point of an Elliot wave cycle. If the identification of wave 1 is difficult then we can simply do not try to identify wave 1 of Elliot wave cycle anymore the best part to enter a trade is wave 3 or wave 5. So, In this strategy, we are not trying to identify wave 1.

The Elliott Wave Theory states that corrective wave 2 should not retrace any more than wave 1, which makes our identification of wave 3 much easier. You will see how this is defined in the examples below.

USDJPY pair trading: Wave 3

You see the chart of USDJPY H4 frame below:


We will stay out until wave 1 and wave 2 are completed. As said before, if wave 1 is uncertain because USDJPY is in a downtrend before wave 1. So it could also be a correction. To ensure that the trend has changed, we should wait for wave 3 to begin. Below is the next chart of the USDJPY H1 frame:


For confirmation, we use a crossover of 10 EMA and 20 EMA on the lower timeframe H1. As the price moves through a bullish phase and maintains its momentum for a considerable time, a clearer picture emerges and it can be seen that wave 3 has started and USD / JPY is likely to move up. Once the conditions are in place, we initiate a buy trade.

EURGBP trading: Wave 5

You see the H4 frame chart below:


It can be seen that wave 3 has risen sharply, but since wave 1 is difficult to identify, and wave 3 is going so fast, we may miss out on the chance. In such a case, you better be able to trade at wave 5.

Note: Elliot wave principles should not be too rigid, but rather flexible. In this strategy, the propulsive waves in the 5-wave series are likely to be of not very different sizes. If the correction for wave 2 is clear, then the correction for wave 4 is likely to be a sideways pattern. Similarly, if wave 2's correction is sideways, then the correction for wave 4 is likely to be more pronounced. Now let's apply these to the EURGBP pair chart above:


Here, the correction of wave 2 is clear and it reverses from the nearby bottom. If you trade here i.e. trade at the start of wave 3, the stop loss will be placed below the nearest low. However, if there is no chance to participate in wave 3 then we move on to wave 5.

You see the chart below:


As mentioned, wave 2 is clear, wave 4 will either move sideways or correct shall be shallower, and in this chart, it has functioned properly as noted above.

Now move down the H1 frame chart to find the bullish crossover of the 10 and 20 EMA. Look at the chart below:


The crossover happened now we could buy but note, wave 5 is usually the same size as wave 1. We rely on this to make a better take profit.