Elliot Wave Theory

Elliot Waves are based on a theory developed in the 1930s by the American financier Ralph Elliot and were initially applied to stock markets before being successfully implemented on the Forex market. It is believed that the Elliot wave theory allows to define the direction of future market movements with a high level of accuracy, in addition to the reason for the movements. The theory is built on analysis of patterns in mass psychology and behaviour reflected by trends on the financial markets. According to this theory, any upwards or downwards trend contains five waves. Uneven waves are considered impulsive and even ones are considered correctional. The Elliot wave theory has many nuances which need to be taken into account when trying to identify trends.