What is an Elliot Wave?
The Elliot Wave is a principle or tool used by investors trying to predict or time the market. Elliot Wave theory was developed in the 1930s by Ralph Nelson Elliot. Elliot Wave theory is based on the premise that the stock market is made up of a large group of traders and that this group, as a collective, tends to behave as any large social group, with their behavior following certain patterns that tend to repeat themselves. These patterns can be discerned by looking at charts of the stock price over time. Elliot Wave theory gets it name from the fact that these patterns resemble waves. The price of the stock surges forward, falls back, and then surges forward again. If the stock price is trending down, then the stock price will surge downward, then recover a bit before continuing its downward decline. There are a large number of Elliot Wave patterns and an almost as large number of variations on these patterns. There are also Elliot Wave patterns within these Elliot Wave patterns. Cro
Your Trading Edge, 1/11/2002 Ralph Nelson Elliott developed the Elliott Wave principle in the early 1930s. He found that stock markets move in repetitive cycles, reflecting human actions that are caused by exterior influences or mass psychology. As a market analysis procedure, the Elliott Wave principle is nothing more than a pattern-recognition system. As such it is part of the common concept of market analysis that assumes that what has happened in the past will repeat itself in the future. The notion of repetition is the foundation of many analytical techniques that include Gann, patternrecognition (such as Head and Shoulders), or cycle analysis. Many mathematical indicators are not much more than extrapolated pattern recognition of price structure. Where Elliott differs from these is that his pattern recognition is related across many periods. The Elliott Wave principle asserts that what happened twenty years ago has a bearing on what is happening today.The chart in this article su
