Elliott Wave Theory

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DEFINITION of 'Elliott Wave Theory'

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.

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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.

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RELATED FAQS
  1. How are corrective waves created?

    Corrective waves are one of the two major types of waves described in Elliot Wave Theory, the other being impulsive waves. ... Read Full Answer >>
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    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
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    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>
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