Wednesday, December 11, 2013

Elliott Wave Theory

This is one of the fascinating things about Elliott Wave Theory: It seems to apply to patterns found not only in markets, but in the rise and fall of nations, and even entire civilizations  as well as the ebb and flow of many other things in the natural world . Traders have studied and applied it for many years, and continue to be in awe of its frequently uncanny ability to anticipate the future. It is important to note that Elliott Wave Theory was derived from back-testing. Back in the 1930s, R.N. Elliott studied decades of charts at various time frames, and discovered that there were certain patterns which repeated across all time frames. These patterns were of a fractal nature; in other words, the patterns on the one-minute chart join together to make up identical larger patterns on the hourly charts, which in turn make up identical larger patterns on the daily charts  and so on. He developed Elliott Wave Theory as an attempt to quantify and explain these patterns.