"Elliott Wave Theory" is a technical analysis method used to study and predict market cycles in financial markets. This method was discovered in the 1930s by an American accountant, Ralph Nelson Elliott (1871–1948). The Elliot Wave Theory is also known as the five wave principle.
The Elliott Wave Principle accepts that investor behavior is motivated by herd psychology to create common behavioral patterns, and as a result of this motivation, it fluctuates in accordance with a natural rhythm between optimism and pessimism. These fluctuations create smooth and regular market trends in every term. In the Elliot waves model, the periods in which prices have moved forward are called impulses, and the periods of temporary pause in the opposite direction of the distance traveled are called corrections.
Repulsions always consist of five waves, while corrections (with a few exceptions) consist of three waves. The impulse wave consisting of five waves and the three-wave structure that develops in the opposite direction to this wave and recovers only a certain percentage of the distance traveled in the five waves is called the 5+3 cycle. Sub-waves that make up impulse waves are labeled with numbers (1,2,3,4,5) and sub-waves that make up corrective waves are labeled with letters (A,B,C). (A-B-C Correction)
The movement algorithm in Elliott waves is also present in major, that is, upper time frames, as well as in minor, that is, lower time frames. For example, in the 1st Elliott wave on the 1-day chart, the price movement will complete its movement by making 5 waves in this 1st wave. Here, as a term, names such as 3 of 1 are made. This means; It means the 3rd wave within the 1st wave. Of course, this lower wave, the 3rd wave, also has 5 wave movements that can be seen in smaller time frames.
Elliott waves from major time frames to minor time frames; It consists of wave movements inside the waves and the movement algorithm is the same. (5 waves and A-B-C correction) The best example of this is the matryoshka baby toys. By similar logic, they are intertwined waves in the same motion algorithm.
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