Elliott Wave theory is considered as among the finest theory to forecast trends in motion of price. It was introduced in 1920’s by Ralph Nelson Elliott. This individual studied the repetitive routine pattern and came to the conclusion that this pattern resulted due to mindset of those. Based on these wave patterns this individual made stock market forecasts. elliott wave theory
According to this theory, there is an energetic wave that goes along with the key trend. They are five in numbers. When there is an increase in price, it is corrected by what we call corrective or a static correction wave. This theory claims that the five energetic waves are followed by three corrective waves in order to improve the price rise; this is referred to as a 5-3 move. Thus, it is concluded that a whole Elliott wave consists of 8 waves spanning over two phases.
In short, Elliott waves are three or five wave series of decline or advances that define a trend. Seeing that these are based on psychology of the people thus, they may have more reliability as in contrast to another methods and that is why they are being used in some important indices like Nasdaq Blend Index and S&P Index etc.
Even though many future traders, forex investors and stock brokers are aware of this approach of analysis and its stability, still they do not go for it because they often times find it difficult to understand and incorporate it into their specialized analysis. Nevertheless , it is not as difficult as a lot of people perceive. It will requires some time and effort on your part, but the results you will get after learning Elliott trend analysis will be gratifying. You just have to learn few guidelines and rules and you will be spots to use this powerful statistical tool.
Please check my tale – Elliott Wave Evaluation for detail the way you can incorporate quantitative and qualitative analysis for trading.