When the uptrend ends, the same crowd that has just raised the price, forcing another reduction. Bulls calm down in the mistaken belief, even though upward momentum is weakening, and formed the model top. When the "smart money" will go away quietly, trend breaks the critical point. Bulls suddenly realize that they are trapped. In an effort to protect the profits they start to get rid of the shares. Price drops and sales are growing wave after wave.
In most figures the price reduction observed common characteristics. Formed and punched a few false minima. Volume worries on as losers unload their positions in the waiting crowd. Price confidently held last goal down one after another. Then, in the collapse of all hopes, the action makes a final multiple bottom.
Analysis of the figures provides short-term traders excellent opportunity to understand the repetitive behavior of the market and benefit from profits. Check out the work of RN Elliott in the 1930's and you'll find Pyativolnovoe decline. This structure is as valid today for a price correction, as it was 60 years ago. How to model crowd behavior, traders can use it even without understanding the general theory of Elliott Waves.
5 waves consist of three downward impulses and two corrections. The first pulse (peak) corrects the uptrend that has led to a new maximum asset. From this peak begins to decrease prices, which ends the second momentum: a technical breakthrough campaign. As was the case with growing markets, this impulse can be very dynamic. But in most falls, the worst usually is reserved for last. When this second pulse ends, the false bottom of the picture brightens calming, sales slowed and appear timid bulls. Then suddenly renewed selling and moving into the final third pulse, which is so emotional that the price break through all conceivable targets and levels of support.
The emotions of this latest wave of selling pressure quench, the action jumps. This rapid upward movement ignites the first impulse significant counter-trend. But the strong rise suddenly fails. After all, the bulls are constrained by the recent painful experiences, but at least the preceding unexpectedly withheld. But there comes a new crowd, and the price is considered as a form of double bottom lines of trend. The balance of power changed again and the stock breaks through the line, moving into a new uptrend.
An experienced eye can see pyativolnovoe reduction at all time scales, from 5-minutes and the monthly charts. These variables are quite consistent with the general movement of the concept of greed, which turns the cyclical trends in the orderly and predictable process. And who do not understand the behavior of the crowd, represented by this model, left out of financial markets.
