Elliott Wave Theory

Loading the player...

What is the 'Elliott Wave Theory'

The Elliott Wave Theory is the theory named after Ralph Nelson Elliott, who concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves.

BREAKING DOWN 'Elliott Wave Theory'

Based on rhythms found in nature, the theory suggests that the market moves up in a series of five waves and down in a series of three waves.

The key difference between the Elliott Wave Principle and other cyclical theories is that this theory suggests no absolute time requirements for a cycle to complete.

RELATED TERMS
  1. Corrective Waves

    A set of stock price movements that occur against the main trend ...
  2. Impulse Wave Pattern

    A term used in the Elliott wave theory to describe the strong ...
  3. Wave

    A pattern of behavior marked by noticeable increases and decreases. ...
  4. Wolfe Wave

    In technical analysis, it is a naturally occurring trading pattern ...
  5. Biased Expectations Theory

    A theory that the future value of interest rates is equal to ...
  6. Accelerator Theory

    An economic theory that suggests that as demand or income increases ...
Related Articles
  1. Trading

    Elliott Wave Theory

    Acquaint yourself with the principle built on the discovery that stock markets did not behave in a chaotic manner.
  2. Trading

    Elliott Wave Theory Basics

    Elliott believed that the movement of the stock market could be accurately predicted by charting patterns. Learn the basics of this theory.
  3. Trading

    Using Elliott Wave To Trade Forex Markets

    Learn how to set up a trading plan using this method, to profit as a forex trader.
  4. Trading

    Dow Theory: Current Relevance

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.comThere is little doubt that Dow theory is of major importance in the history of technical analysis. Many of its tenets and ...
  5. Trading

    7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  6. Trading

    Spotting First Rise Patterns And What To Do With Them

    The first rise pattern marks the first 100% retracement of a downtrend within the time frame of interest.
  7. Markets

    Elliott Management: An Activist Investor Analysis (HES, CTXS)

    Learn about the activist investor strategies used by Elliott Management. Read about the fund's positions in Hess Corp., Citrix and CDK Global.
  8. Trading

    Using Elliot Wave

    Todd Gordon, senior technical strategist at FOREX.com, shares a different way to look at Elliott Wave analysis and how he uses it daily while trading the currency markets.
  9. Trading

    Advanced Channeling Patterns: Wolfe Waves and Gartleys

    Discover how these provide the trader with insight into both the timing and scope of breakouts.
  10. Markets

    Activist Investor Discloses Big Stake in LifeLock

    Elliott Associates, an entity under the wing of big hedge fund Elliott Management, has revealed it is now a major shareholder in identity protection specialist LifeLock (NYSE: LOCK). In a regulatory ...
RELATED FAQS
  1. Why are corrective waves useful for technical analysis?

    Discover what role a corrective wave plays in the Elliot wave theory of stock market trading and how technical analysts spot ... Read Answer >>
  2. How are corrective waves created?

    Learn how traders and analysts identify corrective waves in the Elliot Wave Theory, a controversial and complicated market ... Read Answer >>
  3. How was the Fibonacci retracement developed for use in finance?

    Learn about the history of the use of Fibonacci retracement levels in stock trading, including the influence of technical ... Read Answer >>
  4. How are Wolfe Wave patterns interpreted by analysts and traders?

    Read about how technical analysts and traders interpret the Wolfe Wave, a 5-point wave pattern used to predict a new equilibrium ... Read Answer >>
  5. How effective is creating trade entries after spotting a Wolfe Wave pattern?

    Learn how to identify the Wolfe wave pattern and how traders use this to create long trade entries by analyzing bullish Wolfe ... Read Answer >>
  6. What is the chaos theory?

    The chaos theory is a complicated and disputed mathematical theory that seeks to explain the effect of seemingly insignificant ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center