Elliott Wave Theory is a theory of cyclic fractal price movement behavior, introduced by accountant Ralph Nelson Elliott in his book “The Wave Principle” (1938) and widely used by traders around the world to predict future prices of selected instruments. The theory is based on the idea that all price movements on the market are cyclical.
Elliott noticed in his work that all price movements on the market can be conditionally divided into eight subwaves that behave similarly in each structure. Based on this statement, the entire theory was built, which traders use. They independently determine the current Elliott wave phase, based on the results obtained, they build corresponding trading plans.
The theory can be used for speculation with any freely traded asset, obligation, or commodity (stocks, bonds, oil, gold, etc.), on various timeframes.
The characteristics of Elliott waves are their complexity and subjectivity in predicting prices, so beginners rarely use it in analysis.
FAQ
What is Elliott Wave Theory?
Elliott Wave Theory is a method of analyzing financial markets by identifying repeating patterns of price movements.
How is Elliott Wave Theory used?
Traders use Elliott Wave Theory to predict future price movements by identifying the current phase of the wave cycle.
Why is Elliott Wave Theory complex?
The theory is complex and subjective because it requires interpreting price patterns, which can vary depending on market conditions.
