DEFINITION of 'Wave'

A pattern of behavior marked by noticeable increases and decreases. Waves can be identified in stock price movements and in consumer behavior. Investors trying to profit from a market trend could be described as "riding a wave".


A large, strong movement by homeowners to replace their existing mortgages with new ones that have better terms is called a refinancing wave.

BREAKING DOWN 'Wave'

Some technical analysts try to profit from wave patterns in the stock market using the Elliott Wave Theory. This hypothesis says that stock price movements can be predicted because they move in repeating up-and-down patterns called waves that are created by investor psychology. The theory identifies several different types of waves, including motive waves, impulse waves and corrective waves. It is subjective, and not all traders interpret the theory the same way, or agree that it is a successful trading strategy.

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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 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 >>
  4. 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 >>
  5. How was the Fibonacci retracement developed for use in finance?

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