Elliot Wave discovered by Ralph Nelson Elliot in the late 1920s. He found that the stock market has certain characteristics, and not moving irregularly, but the stock price is always repeating itself, which reflects human actions and emotions that caused exterior influences and mass psychology.
Basically, the Elliott Wave principle based on the Dow Theory, which also defines price movement in waves, but Elliott discovered the fractal nature of market action. So Elliott to analyze market depth, identify the specific characteristics of wave patterns and making detailed market predictions based on patterns that have been identified.
Fractals are mathematical structures, which occur on a smaller scale infinitely repeat. The pattern found in Elliott was built in the same way. Impulsive wave, which runs with the main trend, always shows five waves in the pattern. On a smaller scale, in each of the impulsive wave as isebut before, will be found again five waves.
Basic Principles
According to the laws of physics: "Every action creates an equal and opposite reaction." The same applies to financial markets. A price movement up or down must be followed by a reverse movement, as the saying goes: "What goes up must come down" (and vice versa).
Price movements can be divided into trends on the one hand and corrections or sideways movements on the other. Trends show the main direction of prices while corrections move against the trend. In Elliott wave terms is called impulsive and corrective waves. Impulse wave formation has five distinct price movements, three in the direction of the trend (I, III, and V) and two against the trend (II and IV).
Complete Cycle Elliot Wave
In his book The Wafe Principle, and in articles published by the magazine Financial Worid, RN Elliot mentioned that the stock market moves in five-wave pattern (wave) rose and three-wave down to complete a cycle of eight waves.
A complete cycle consists of eight waves, then built with two waves of two distinct phases, motive phase (five waves) in which each subwave depicted in each figure (Wave 1, 2, 3, 4, and 5), and the corrective phase is described by letter (wave a, b, and c)
In his book The Wafe Principle, and in articles published by the magazine Financial Worid, RN Elliot mentioned that the stock market moves in five-wave pattern (wave) rose and three-wave down to complete a cycle of eight waves.
A complete cycle consists of eight waves, then built with two waves of two distinct phases, motive phase (five waves) in which each subwave depicted in each figure (Wave 1, 2, 3, 4, and 5), and the corrective phase is described by letter (wave a, b, and c)
to be continued..
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