The Elliott Wave Principle
The Elliott wave principle is a form of technical analysis that attempts to forecast trends in the financial markets and other collective activities. It is named after Ralph Nelson Elliott (1871–1948), an accountant who developed the concept in the 1930s: he proposed that market prices unfold in specific patterns, which practitioners today call Elliott waves. Elliott published his views of market behavior in the book The Wave Principle (1938), in a series of articles in Financial World magazine in 1939, and most fully in his final major work, Nature’s Laws – The Secret of the Universe (1946).[1] Elliott argued that because humans are themselves rhythmical, their activities and decisions could be predicted in rhythms, too. Critics argue that the Elliott wave principle is pseudoscientific and contradicts the efficient market hypothesis.
Contents
[hide]
• 1 Overall design
• 2 Degree
• 3 Behavioral characteristics and wave "signature"
• 4 Pattern recognition and fractals
• 5 Fibonacci relationships
• 6 After Elliott
• 7 Rediscovery and current use
• 8 Criticism
• 9 See also
• 10 Notes
• 11 References
• 12 External links
[edit] Overall design
The wave principle posits that collective investor psychology (or crowd psychology) moves from optimism to pessimism and back again. These swings create patterns, as evidenced in the price movements of a market at every degree of trend.
From R.N. Elliott's essay, "The Basis of the Wave Principle," October 1940.
Practically all developments which result from (human) socialeconomic processes follow a law that causes them to repeat themselves in similar and constantly recurring series of waves of definite number and pattern. R. N. Elliott's model, in Nature’s Law: The Secret of the Universe says that market prices alternate between five waves and three waves at all degrees within a trend, as the illustration shows. As these waves develop, the larger price patterns unfold in a self-similar fractal
Contents
[hide]
• 1 Overall design
• 2 Degree
• 3 Behavioral characteristics and wave "signature"
• 4 Pattern recognition and fractals
• 5 Fibonacci relationships
• 6 After Elliott
• 7 Rediscovery and current use
• 8 Criticism
• 9 See also
• 10 Notes
• 11 References
• 12 External links
[edit] Overall design
The wave principle posits that collective investor psychology (or crowd psychology) moves from optimism to pessimism and back again. These swings create patterns, as evidenced in the price movements of a market at every degree of trend.
From R.N. Elliott's essay, "The Basis of the Wave Principle," October 1940.
Practically all developments which result from (human) socialeconomic processes follow a law that causes them to repeat themselves in similar and constantly recurring series of waves of definite number and pattern. R. N. Elliott's model, in Nature’s Law: The Secret of the Universe says that market prices alternate between five waves and three waves at all degrees within a trend, as the illustration shows. As these waves develop, the larger price patterns unfold in a self-similar fractal