What is Elliott Wave Theory
What is Elliott
Wave Theory? For anyone with even a passing interest in
stock markets and trading the name Ralph Nelson Elliott is usually a
very familiar one. An accountant working at the turn of the last
century Elliott's theory, known as the Elliott Wave Theory, proposed
that stock market trends and patterns were, to a certain degree, all
very much the same.
If you take one stock market chart for something like oil, and you
remove all information relating to any time frame or values, and you
place this next to a trading chart for something completely different,
what you will notice is that they share significant similarities.
The reason for this, so Elliott Wave Theory suggests, is that stock
markets are heavily controlled by human psychology, and human
psychology is fairly predictable. For example, if you tell someone not
to think of a pink elephant they'll be unable to do anything but
picture such a thing, and if you offer to show someone your holiday
photos they'll suddenly recall an urgent appointment. We are a pretty
predictable bunch at heart. So What is Elliott
Theory - The Basics
Knowing this fact, and combining it with the mathematical principles of
the Elliott Wave Theory, it is possible to observe trends in the stock
markets, and foresee changes in advance of them occurring.
Elliott Wave Theory Cycle
basic principle of the Elliott Wave Theory is simple. Over a period of
minutes, hours, days, weeks, months or even many years, stock markets
and similar trends will follow a cyclical wave pattern.
its most basic, the Elliott wave pattern is considered to consist of
three progressive waves,
broken by two correctional waves.
These are then followed by a further three
correctional waves to
complete the cycle.
The wave cycles then themselves evolve to become part of an even larger
Elliottwave cycle pattern.
Wave Principle - Now
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Elliott Wave Theory: The Basics
the first wave will be a
progressive increase in stock value, followed by a slight correctional
decrease. The third wave is usually the most significant and longest
period of growth, followed by another corrective decrease before the
fifth, usually positive growth period. This five point wave can often
be seen whether you examine market trends over the very short term,
intermediary term or even long term. In this way it has often be
considered to be a fractal based theory.
There are a number
of ways in which knowledge and application of Elliott's Wave Theory can
be used to both predict stock
market trends as well as to provide a
certain degree of reassurance during times when values may be
decreasing. Understanding that these decreases may well be
correctional, and be preceding a subsequent growth period can provide a
distinct advantage when trading both over the short and longer term.
Elliott Wave Theory: Learn More!
One of the problems with the Elliott Wave Theory is that it can be
difficult to identify the patterns accurately enough to make
significant decisions. However, by following a few simple rules and
guidelines, Elliott wave theory can become an extremely powerful tool
that can probably tell us more about what is actually happening in the
market than any other technical
learning the 13 wave patterns identified by Elliott.
download, the Traders
Day Trading free Elliott
Wave Theory PDF quick start guide. Download it free now
for a quick
overview of the basics.
It is a handy reference guide to the
basics of the wave patterns and wave formation.
Related Elliott Wave Theory Pages
Waves - Part 1 of the Elliott Wave theory basics guide. Learn
the basics of wave structure and how impulse waves are formed....
Waves - Part 2 of the Elliott Wave Theory basics guide. Learn
the basics of wave structure and how corrective waves are formed....
Wave Theory - The practical application of
trading wave theory, find out how to put the theory into
practice in reality. Which wave do I buy? What are the Elliott wave
- Learn the basics of Fibonacci trading. Find out how the fibonacci
sequence works hand in glove with Elliott Wave theory to form a
combination of technical indicators that provides us with a
extremely powerful trading tool.
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