Elliott Wave Theory
A fractal model of market cycles: price moves in five waves with the trend and three corrective waves against it, repeating at every time frame.
Elliott Wave Theory, developed by Ralph Nelson Elliott in the 1930s, proposes that markets move in repeating fractal wave patterns driven by collective investor psychology.
A complete cycle consists of five impulse waves (1–5) in the direction of the trend, followed by three corrective waves (A–B–C) against it. Within each wave, smaller versions of the same structure recur — the pattern is self-similar across all timeframes.
- Odd waves (1, 3, 5, A, C) move with the larger trend; even waves (2, 4, B) are corrections.
- Wave 3 is never the shortest impulse wave.
- Wave 4 cannot overlap Wave 1 in a standard impulse (except in diagonals).
Related Terms
Corrective Wave
A counter-trend three-wave (A-B-C) structure within Elliott Wave Theory that retraces part of the prior impulse before the trend resumes.
AdvancedImpulse Wave
A five-sub-wave structure (1-2-3-4-5) that moves in the direction of the larger Elliott Wave trend — the core engine of directional moves.
AdvancedThree Drives Pattern
Three symmetrical price drives toward a reversal point, each drive an equal Fibonacci extension — signals exhaustion of the dominant trend.
AdvancedWolfe Wave
A five-wave price structure where the fifth wave overshoots a channel, signalling a sharp snap-back to the 1-4 trendline.
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