# How to Trade Flats and Expanded Flats

### Video Transcription:

Hello, traders. Welcome to the Elliott Wave Theory course and the second module, Elliot Wave Patterns. In this lesson, I’m going to teach you how to trade flats and expanded flats with the Elliot Wave Theory. Now lets jump right into the MT4 platform, and lets look for a trending market for us to be able to find a flat corrective move.

Now, we’re going to start with this EURO/US dollar. Yes, this daily, this EURO/US dollar daily chart. As you can see, we have been on a very strong up move, for about 690 pips from the bottom of the move to the high of the move. Now, the actual high of the move comes around here and we are going to diagnose this area of price action. The action move comes around here, when we make the first corrective move.

Now, how do you define or how do you find the first corrective move on a trending market? Well that’s easy. The first corrective will completely break with the up-structure that we were on just before it. As you can, see we were making higher highs and higher lows. And then we had a gap, then a feel of the gap and a continuation to the low that breaks with the last low of the up-structure. So thus, this is wave A.

And right here, we are going to name it because in Elliot Wave you always name the waves when you start counting them because if you don’t name them, it’s going to be very difficult for you to find them later. This is wave A or the first wave of the corrective move. We don’t know if it’s a flat corrective move, or if it’s a zigzag, or if it’s actually an expanded flat, but we are just going to wait.

Now we see that we made this high and then price started to correct to the downside. Again, we make another high, and then we break with the structure, but we are still inside of a very square, a very flat pattern. So we are going to grab a Fibonacci tool and we are going to measure where this, let me just get rid of this middle Fibonacci, and we have 127.2% and 161.8%, which is the one we use for the expanded flats. Now you can see that we came right on to the 127.2, which means that we have made a second wave of an expanded flat. Now we are just going to name it again. Here’s the end of wave B. Right here, at the 127, and of course we don’t know where we are going.

Let’s assume that we don’t know anything about what price action is about to do. We just know that we have made the first corrective wave, which is wave A. Then we have made a second corrective wave inside of an expanded flat and we know it’s an expanded flat because corrected 127.2 of wave A. So this means that we are going to be looking for this zone first to make a long trade. This is the zone that we are looking at, between the 127 and the 161.8. Now, this is the power buy zone. You don’t know if price is going to touch the 127 and go up, or just go down to the 161 and go up, but this is your buy zone.

You’re going to also help yourself with previous areas of support and resistance and we have one around this level. You can see that we have a resistance here, we have resistance here, and we have support here. So this is actually a very good zone for us to take into consideration because it actually comes in the middle of our power buy zone. So this is our point C, and this is where we are going to try to look for it. Now, how are we going to trade? The way to trade it is to position yourself before price comes to these levels.

Now, you can see that the price moved about 655 pips from this low. Let me just point it out for you, to this high. This is the low of the move and this is the high of the move. Then we have the…let me just thicken these lines for you and make them a nice black. And then we have the ABC expanded flat, which you can see right here. This is the A, B, and then we are looking for point C, and we assume that point C will be around this level. This is our power buy zone and here we have a strong area of resistance, where we are definitely going to find some buyers.

So we are going to position ourselves at this level, and we are going to put a buy order just above this area of resistance, which now is going to be tested as support, right around these levels, right around the 1.31, 115, and as you can see we get field and of course our stop-loss is going to be below the 161.8. If price goes below the 161.8, we are no longer in an expanded flat, and the price actually didn’t complete the structure, so we are not looking for loans anymore. We are going to be risking around 90 pips, and we are going to take profits around a higher point before our first half of our position. This means that your are going to be making for the first half of your position around 340 pips, then you can let your trade ride for an extra 390 pips, but that is up to you. I like to take profit at the next level of big support in this case, which would be the end of wave B.