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Elliott Wave Theory was first discovered in the late 1920s by Ralph Nelson
Elliott. He discovered that the "market" does not behave in a chaotic manner;
instead, it moves in repetitive cycles, which actually reflect human actions,
reactions and emotions caused by exterior influences such as news, whether good
or bad, rumors, economic situations, etc. His theory stated that "the ebb and
flow of mass psychology" always unfolds in the same basic repetitive patterns.
Fractals are mathematical structures where one
object is made up of exactly the same object, only smaller. These smaller
objects are in turn made up of exactly the same object, only smaller still, and
so on, and so forth. The patterns that Elliott discovered are built in the same
way. An impulsive wave, which flows in the direction of the main trend, always
shows five waves in its pattern. In turn, each of these impulsive wave is made
up of five smaller waves. In this smaller pattern, the same pattern repeats
itself ad infinitum. These ever smaller patterns are labeled as different wave
degrees in the Elliott Wave Principle. Aside from these repeating patterns,
Elliott also studied the Fibonacci numbers, and how they apply to these
patterns.
The following tutorial pages are provided and
copyrighted by Elliott Wave International.
To start the tutorial, click here.
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The Elliott Wave Principle