Elliott Wave Theory

Ralph Nelson Elliott, a mad genius and professional accountant from the 1920s and 1930s, was a legend in his time.

Elliott discovered that stock markets, which were thought to behave in a somewhat chaotic manner, didn't. He did this by analyzing 75 years' worth of stock data.

He finally accumulated enough proof (and confidence) to disclose his discoveries with the world when he was 66 years old.

His theory was described in the book The Wave Principle.

According to him, the market moved in predictable cycles, which he attributed to investor emotions influenced by outside factors (ahem, CNBC, Bloomberg, WSB) or the general public's psyche at the time.

The upward and downward price swings generated by collective psychology, according to Elliott, usually followed the same repeated patterns.

These upward and downward movements were dubbed “waves” by him.

He argues that if you can accurately detect price trends, you can forecast where prices will go (or not go) next.

Elliott waves are appealing to traders because of this.

It allows them to pinpoint the exact point at which the price is most likely to reverse.

In other words, Elliott devised a strategy that allows traders to profit from market peaks and bottoms.

So, in the midst of the price pandemonium, Elliott discovered order. Isn't it fantastic？

Of course, like many insane geniuses, he needed a catchy name for his discovery, so he came up with The Elliott Wave Theory.

But before we go into Elliott waves, it's important to know what fractals are.

Fractals

Fractals are structures that can be broken down into parts, each of which is a near-identical replica of the whole. This trait is referred to as “self-similarity” by mathematicians.

Fractals are everywhere, and you don't have to look hard to find them. They can be found all over the place in nature!

A fractal is a seashell. A fractal is something like a snowflake. A fractal is a cloud. A lightning bolt, for example, is a fractal.

So, what is the significance of fractals？

Elliott waves are fractals, which is an essential feature. Elliott waves, like seashells and snowflakes, can be fragmented into smaller Elliot waves.

Are you ready to become an Elliottician right now？