
The Elliott wave theory is an approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave patterns shows a five wave advance followed by a three wave decline.
Ellioticians classify price movements in patterned waves that can indicate future targets and reversals. Waves moving with the trend are called impulse waves, whereas waves moving against the trend are called corrective waves. Elliott Wave Theory breaks down impulse waves and corrective waves into five primary and three secondary movement respectively. The eight movements comprise a complete wave cycle. Time frames can range from 15 minutes to decades.
The challenging part of Elliott Wave Theory is figuring out the relativity of the wave structure. A corrective wave, for instance, could be composed of sub impulsive and corrective waves. It is therefore crucial to determine the role of a wave in relation to the greater wave structure. Thus, the key to Elliot Waves is to be able to identify the wave context in question. Ellioticians also use Fibonacci retracements to predict the tops and bottoms of future waves.









