What is Elliott Wave?
According to the Elliott wave theory, a total of eight waves represents an entire movement of a price cycle. Out of eight waves, five refers to as Impulsive waves and three and remaining three referred to as Corrective waves.
At the point when the essential market pattern is bullish, impulsive waves are in the direction of the trend (upwards) whereas corrective waves are opposite to the trend (downwards).
Similarly, once the first market trend is pessimistic, impulsive waves are in the direction of the trend (downwards) whereas corrective waves are opposite to the trend (upwards).
The above pattern formation doesn’t rely on a time frame. You’ll be able to observe Elliott wave patterns in Intraday charts still as monthly charts. However, the likelihood of false waves decreases in higher time frame charts.
There are three general wave theory rules in Elliott wave theory:
- Rule 1: Wave 2 cannot retrace more than 100% of Wave 1, means wave 2 cannot go below the start point of wave 1.
- Rule 2: Wave three will never be the shortest of the 3 impulse waves. (Generally, it is the biggest wave and most furious).
- Rule 3: Wave four can never overlap Wave one.
To get insights about this wonderful theory, I recommend you read a classic book on Elliott waves.Which is shown below.
Elliott Wave Principle: Key to Market Behavior
You can Buy this Book from below link: