The Elliott wave theory was discovered by Ralph Nelson Elliott. According to the Elliott wave principle, market prices follow some recurrent cycles called waves. Waves are patterns of directional movement. Prices change their dynamics based on crowd behaviour. The Elliott wave principle is predictive in nature. It gives some insight about the probable future direction of the market. Elliott suggests that there is a five wave pattern. This five wave pattern consists of impulse waves and corrective waves. There are three impulse waves going alongside the major trend and two corrective waves going against the major trend. Elliott wave guidelines • Wave 1, wave 3 and wave 5 determine the direction of the market • Wave 2 and wave 4 are counter waves to wave 1, wave 3 and wave 5 • Wave two never retraces more than 100% of wave one. • Wave 3 is usually the largest and most powerful • Wave four does not overlap with the price territory of wave one. Elli...
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