The Elliott Wave Principle is a detailed description of how groups of people behave. It reveals that mass psychology swings from pessimism to optimism, are creating specific and always measurable patterns. The idea is that if you can identify repeating patterns in prices, and figure out where in those repeating patterns you are today, then you can predict where you will be going in the future. This principle interprets market actions in terms of recurrent price structures. The wave is a movement in the market, either up or down. The size of the wave depends upon the period of time that is being analyzed. Basically, market cycles are composed of two major types of Waves:
1. The Impulse Wave:
It is a wave that moves in the direction of the main trend of the market. Every impulse wave can be sub-divided into a 5 - wave structure (1 - 2 - 3 - 4 - 5).
2. The Corrective Wave:
It is a wave that moves counter to the direction of the main trend of the market. Every corrective wave can be sub-divided into a 3 - wave structure (a - b - c).
An important feature of the principle is that it is that the market structure is built from similar patterns on a larger or smaller scales. Therefore, we can count the wave on a long-term yearly market chart as well as short-term hourly market chart. The stock market has three attributes of the principle that make it quite applicable: One, It is a true free market. Two, It provides consistent and regular metrics that can be measured, and Three, It is manipulated by a statistically significantly large group of people.
To learn More
http://goarticles.com/article/Elliott-Wave-Principle/4798357/
The Equity Scholar Team
http://www.equityscholar.com/
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