Elliott Wave Theory is a powerful tool for predicting market movements by analyzing repetitive price patterns driven by investor psychology. The theory divides market trends into five impulsive waves (1-5) and three corrective waves (A-B-C). Let's break it down:
🔹 Impulse Waves (1-5)
Wave 1: The start of the trend, usually fueled by early investors.
Wave 2: A corrective pullback as traders take profit.
Wave 3: The strongest wave, fueled by momentum and broad market participation.
Wave 4: Another pullback, but shallower than Wave 2.
Wave 5: The final move up, often driven by FOMO before a correction begins.
🔻 Corrective Waves (A-B-C)
Wave A: The first decline as early traders exit positions.
Wave B: A short-lived recovery as some traders think the trend will continue.
Wave C: The final bearish wave, often deeper than Wave A, marking the end of the correction.
Three Key Principles of Elliott Wave Theory
✔️ Wave 3 is never the shortest impulse wave.
✔️ Wave 2 never retraces past the start of Wave 1.
✔️ Wave 4 never overlaps with Wave 1.
How to Use It?
Traders use Elliott Waves to identify entry and exit points, confirming trends with indicators like Fibonacci retracements and RSI.
🔹 Impulse Waves (1-5)
Wave 1: The start of the trend, usually fueled by early investors.
Wave 2: A corrective pullback as traders take profit.
Wave 3: The strongest wave, fueled by momentum and broad market participation.
Wave 4: Another pullback, but shallower than Wave 2.
Wave 5: The final move up, often driven by FOMO before a correction begins.
🔻 Corrective Waves (A-B-C)
Wave A: The first decline as early traders exit positions.
Wave B: A short-lived recovery as some traders think the trend will continue.
Wave C: The final bearish wave, often deeper than Wave A, marking the end of the correction.
Three Key Principles of Elliott Wave Theory
✔️ Wave 3 is never the shortest impulse wave.
✔️ Wave 2 never retraces past the start of Wave 1.
✔️ Wave 4 never overlaps with Wave 1.
How to Use It?
Traders use Elliott Waves to identify entry and exit points, confirming trends with indicators like Fibonacci retracements and RSI.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.