Elliott Wave Theory

Let us move to 20e, 20 century when he was this mad genius named Ralph Nelson Elliott. Elliot shown that stock markets behave in a certain pattern, whereas at that time was believed that they were absolutely chaotic.

Processes in the stock market to repeat the circles, which he identified as the emotions of investors and traders, due to external factors or dominant mass psychology.

Elliot shown that abrupt changes in mass psychology always occur in the same order, so-called waves. Elliott called his discovery of the wave theory.

By Eliot market moves on 5.3 wave patterns. The first 5-wave pattern is called impulsive waves, and the last 3-wave pattern - corrective waves.

Although Eliot developed the wave theory of stock markets, this theory can be applied in the online currency market trading Forex. In place of the securities in this theory can be currencies, bonds, gold, oil, etc.

The principle of wave posits that collective investor psychology moves from optimism to pessimism and back again. These vibrations create patterns that indicate the price fluctuations in the market at every level of the trend.