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1. Learn the fundamental pattern described by the Elliott wave theory. Specifically, Elliott believed that markets move in a series of five waves trending upward, followed by three waves trending downward as a corrective move. As an example, draw a chart using graph paper for an imaginary stock that, over a period of several months, moved from 33 to 40, then down to 35, up to 42, down to 39, up to 46, down to 42, up to 44, and finally back down to 40. You will see that these eight price points form the five waves on the upward side, followed by the three corrective waves. A key feature is that on the upward side, the price never drops below the previous low until the fifth wave (the third upward movement.) The correction is marked by the final downward movement ending lower than the previous low price. This is the classic pattern described by Elliott wave theory.
2. Begin studying actual stock price charts to see if you can detect the Elliott wave pattern. When you see a stock performing the five-wave upward pattern, Elliott wave theory predicts that it will next go through the three-wave downward correction. Watch the stock to see if this prediction comes true. Continue watching the stock to see if the five-wave upward pattern repeats itself. Do this with a number of different stocks to familiarize yourself with the pattern.
3. Select the proper buy and sell points for stocks you have become familiar with. It's a good idea to practice with paper trades before risking your investment capital. You may identify a 'buy' signal when a stock has performed a complete Elliott wave cycle and is beginning a new upward wave, or you may recognize the peak of the final upward wave as a place to sell or short a stock. When you are comfortable with your ability to recognize the patterns and select the appropriate buy and sell points, you are ready to start trading for real.