Another powerful approach to understanding market structure is the Elliott Wave Theory. Instead of looking at indicators, this method tracks the natural rhythm of crowd psychology.

In a bullish market, the primary trend unfolds in a 5-wave impulse pattern:

• Wave 1: Initial rally as smart money enters.
• Wave 2: First pullback, which must not break the start of Wave 1.
• Wave 3: The longest and strongest move, driven by mass momentum.
• Wave 4: Profit-taking phase, often moving sideways as a consolidation.
• Wave 5: Final push higher, typically fuelled by retail FOMO.

Timeframe Tip: While waves occur on all scales, they are cleanest and most reliable on high timeframes. For macro trend identification, these structures are best visible on the 1-week (1W) and 1-month (1M) charts, where market noise is filtered out.

Traders Insight: Never chase the market during a vertical Wave 3 or Wave 5 expansion. The safest strategy is to wait for confirmation on high timeframes and look for entries during the corrective Wave 2 or Wave 4 pullbacks. Always define your invalidation level and set a strict stop-loss before executing the trade.

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