Today i would like to share some basic Elliot Wave analysis along with an example. The Elliott Wave Theory was developed by Ralph Nelson Elliott in the 1920s. Elliott found that financial markets have characteristic movements that repeat in perpetuity. He called these movements *waves," due to the troughs and peaks that present themselves in a cyclical up-and-down fashion.
I have put together this example of an Impulsive wave, this pattern is the most common motive wave and the easiest to spot in a market.
The impulse wave consist of five sub waves that make net movement in the same direction as the trend of the next-largest degree. Like all motive waves, it consists of five sub-waves—three of them are also motive waves, and two are corrective waves.
It has three unbreakable rules to be an impulsive wave -
Wave 2 cannot retrace more than the beginning of wave 1
Wave 3 can never be the shortest but does not have to be the longest of waves 1, 2 and 5
Wave 4 cannot overlap the end of wave 1
If one of these rules is violated, the structure is not an impulse wave.
Elliott Wave Theory is a broad and intricate topic and can be a little overwhelming when first learning it but despite its complexity you can use these simple elements to begin with to help you understand which way the market is going. We will dive deeper into
Elliott Waves in the future but for now train your eyes to spot these impulse waves
I have put together this example of an Impulsive wave, this pattern is the most common motive wave and the easiest to spot in a market.
The impulse wave consist of five sub waves that make net movement in the same direction as the trend of the next-largest degree. Like all motive waves, it consists of five sub-waves—three of them are also motive waves, and two are corrective waves.
It has three unbreakable rules to be an impulsive wave -
Wave 2 cannot retrace more than the beginning of wave 1
Wave 3 can never be the shortest but does not have to be the longest of waves 1, 2 and 5
Wave 4 cannot overlap the end of wave 1
If one of these rules is violated, the structure is not an impulse wave.
Elliott Wave Theory is a broad and intricate topic and can be a little overwhelming when first learning it but despite its complexity you can use these simple elements to begin with to help you understand which way the market is going. We will dive deeper into
Elliott Waves in the future but for now train your eyes to spot these impulse waves