In this article, I will introduce the Elliot Wave Theory, named after Ralph Elliot. This theory is used by many forex traders today and it states that the market price moves in cycles. I will explain how this theory works and why it is still relevant in today’s markets.
The Elliot Wave Theory is based on the observation that market prices move in cycles. The basic idea is that there are two types of waves: impulsive waves and corrective waves. Impulsive waves move in the direction of the trend, while corrective waves move against the trend.
The theory states that there are three types of impulsive waves:
1) Motive Waves: These waves move in the direction of the trend and consist of 5 sub-waves.
2) Extension Waves: These waves extend the previous impulsive wave and consist of 3 sub-waves.
3) Diagonal Waves: These waves diagonalize the previous impulsive wave and consist of 5 sub-waves.
Why Elliot Wave Theory Is Still Relevant Today
There are several reasons why this theory is still relevant today. First, it can be applied to any time frame, from long-term to short-term charts. Second, it can be applied to any market, including forex, stocks, commodities, etc. Third, it is relatively easy to identify Elliott Wave patterns once you know what to look for. Lastly, many traders swear by this theory and have made a lot of money using it.
In conclusion, the Elliot Wave Theory is a very popular market analysis technique that is still relevant today. It is based on the observation that market prices move in cycles and consists of three types of impulsive waves: motive waves, extension waves, and diagonal waves. If you want to learn more about this theory, stay tuned for part 2 where I will go into greater detail about each type of wave.