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Elliott Wave Theory

Elliott Wave Theory is a technical analysis method that predicts market trends through repeating price wave patterns, developed by Ralph Nelson Elliott in the 1920s. It consists of the Five-Wave Impulse Pattern and the Three-Wave Corrective Pattern, which traders use to identify trends, align with Fibonacci levels, and manage risks. Common mistakes include misidentifying wave structures and overcomplicating the analysis.

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94 views1 page

Elliott Wave Theory

Elliott Wave Theory is a technical analysis method that predicts market trends through repeating price wave patterns, developed by Ralph Nelson Elliott in the 1920s. It consists of the Five-Wave Impulse Pattern and the Three-Wave Corrective Pattern, which traders use to identify trends, align with Fibonacci levels, and manage risks. Common mistakes include misidentifying wave structures and overcomplicating the analysis.

Uploaded by

addajouwalid1
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Elliott Wave Theory

Elliott Wave Theory is a form of technical analysis used to predict market trends by identifying
repeating price wave patterns. It was developed by Ralph Nelson Elliott in the late 1920s and is
based on the idea that financial markets move in cycles driven by investor psychology.

Key Principles

1. The Five-Wave Impulse Pattern:


- Wave 1: The market starts moving up.
- Wave 2: A small pullback occurs.
- Wave 3: The strongest upward movement, usually the longest wave.
- Wave 4: Another correction, but not going below the start of Wave 3.
- Wave 5: The final push up before a trend reversal.

2. The Three-Wave Corrective Pattern:


- Wave A: Market declines.
- Wave B: Temporary rebound.
- Wave C: A final drop before a new cycle begins.

3. Fractals in Elliott Wave:


- These patterns repeat on different timeframes (e.g., daily and monthly charts).

How Traders Use Elliott Waves

- Identifying Trends: Helps predict the next move in the market.


- Fibonacci Levels: Elliott waves often align with Fibonacci retracement and extension levels.
- Risk Management: Helps traders place stop-losses effectively.

Common Mistakes Traders Make

- Misidentifying wave structures.


- Ignoring corrective waves and only focusing on impulse waves.
- Overcomplicating the analysis with unnecessary indicators.

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