Corrective Waves

AAA

DEFINITION of 'Corrective Waves'

A set of stock price movements that occur against the main trend according to the Elliot Wave method of technical analysis. According to the Elliott Wave theory, stock price movements occur in predictable cycles. These movements are broken up into motive waves and corrective waves. Motive waves are stock price movements in the direction of the trend, and corrective waves are movements against the trend. Together, motive waves and corrective waves form certain patterns which are the basis of the Elliott Wave theory.

INVESTOPEDIA EXPLAINS 'Corrective Waves'

Elliott Wave theory was developed by Ralph Elliot, and introduced in his 1938 book, the Wave Principle. The theory was expanded by A.J Frost and Robert Prechter in the Elliott Wave Principle: The Key to Stock Market Profits. The theory is controversial, and is difficult to verify, due to the subjective aspects involved in its implementation. Also, as a technical analysis technique, the Elliot Wave theory runs against the efficient market hypothesis, a dominant theory in modern finance.

RELATED TERMS
  1. Elliott Wave Theory

    Theory named after Ralph Nelson Elliott, who concluded that the ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Wave

    A pattern of behavior marked by noticeable increases and decreases. ...
  5. Market Cycles

    1. Trends or patterns that may exist in a given market environment, ...
  6. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
Related Articles
  1. Advanced Channeling Patterns: Wolfe ...
    Active Trading Fundamentals

    Advanced Channeling Patterns: Wolfe ...

  2. Triple Screen Trading System - Part ...
    Trading Strategies

    Triple Screen Trading System - Part ...

  3. Profit Without Predicting The Market
    Trading Strategies

    Profit Without Predicting The Market

  4. Elliott Wave Theory
    Forex Education

    Elliott Wave Theory

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center