Elliott Wave Theory

Understanding the foundation of our analysis methodology

Elliott Wave Theory is a form of technical analysis that traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective activities.

The Basic Pattern

Ralph Nelson Elliott developed the Elliott Wave Theory in the 1930s. He discovered that stock markets, thought to behave in a somewhat chaotic manner, actually traded in repetitive cycles.

The theory identifies two main phases in market cycles:

  • 1 Impulse Waves: A five-wave pattern that moves in the direction of the main trend.
  • 2 Corrective Waves: A three-wave pattern that moves against the main trend.

Wave Degrees

Elliott identified nine degrees of waves, from the smallest subminuette to the largest Grand Supercycle. Understanding these degrees helps traders identify where they are in the larger market structure.

Fibonacci Relationships

Waves often relate to each other through Fibonacci ratios (0.618, 1.618, 2.618, etc.). These mathematical relationships help predict potential price targets and retracement levels.

How We Use It

At EWPlans, our analysts apply Elliott Wave Theory across multiple timeframes (H4, D1, W1) to provide comprehensive market analysis. We combine wave analysis with other technical tools to deliver actionable trading insights.

Risk Notice

Disclaimer

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