Simplifying
the Elliott Wave Principle
Elliott
Wave Theory Articles
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The
wave theory was propagated by Ralph Nelson Elliott. He is known as the
father of the Wave Theory. Today, it is referred to as the Elliott
Wave Principle.
He was born in 1871 in Marysville, Kansas. He enjoyed a really long
working life in accounting as well as business practices of several
companies. At the age of 58, he unfortunately was relegated to the home
thanks to an illness. Needing to keep himself occupied, he turned to
studying the patterns of the stock market.
Elliott
scrutinized annual, monthly, weekly as well as daily, hourly and
half-hourly charts of the numerous indexes and went through around 75
years worth of stock market behavior. By the year 1934, he gained
enough of confidence in his theory that he made a presentation to
Charles J. Collins of Investment Counsel, Inc. in Detroit. And the rest
is history.
The Elliott Wave Principle is quite simply an
in-depth description of how a number of groups of people tend to
behave. It works on the understanding that mass psychology tends to
move between pessimism and optimism and then return forming quite a
natural sequence. This helps form a specific and measurable pattern.
The most popular of places to implement the Elliott
Wave
Principle is at the financial markets. Financial markets are the one
place where investor psychology is constantly changing and therefore
one is able to form a pattern in price movements. Once you are able to
recognize these patterns in prices and understand their forms of
repetition, you will be able to invest in the right manner.
What
the Elliott Wave Principle does is measure investor-based psychology
which forms the actual fuelling engine of the financial markets. Every
time people are optimistic on an issue, the bidding price goes up. When
people are optimistic about the future of a given issue, they bid the
price up.
The Elliott Wave Principle can be understood as an
exercise dealing in probability. A person who practices the principles
of Elliott Wave will be able to recognize the structure of markets and
be able to anticipate when the next move is likely to be based
depending on current positions that are within those structures. Once
you understand the wave patterns you will be able to predict what the
market is going to do next as well as not do. When you use the Elliott
Wave principle, you find the highest probable moves while
assuming the most minimal of risks.
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