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Basics of Elliott Wave

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Elliott Wave Theory

In the last unit, we have learned the origin of Elliott Wave Theory. Now, we will discuss in further detail and understand the concept of Elliott Wave Theory. 

What is Elliott Wave Theory?

Elliott Wave theory measures investor psychology. Changing investor psychology is recorded in the form of price movements. If we can identify repeating patterns in prices and figure out where we are in those repeating patterns today, we can predict where we are going.

Elliott Wave Theory enables one to identify the market’s structure and anticipate the most likely next move based on our positions within those structures. By using the Elliott Wave Theory, we can identify the highest probable moves with the least risk.

The Elliott Wave Theory works by identifying patterns in market prices. So, we start by analyzing waves on the chart. All price actions occur in the form of waves. That is because: 

  • Human nature and expressions are repetitive and have predictive value. 
  • Path of prices is not a product of news 
  • Market's progression unfold in waves

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