Elliott Wave Theory: Mind Blowing Or Total Nonsense?

It was developed by Ralph Nelson Elliott in the 1930s, and is based on the idea that financial markets move in predictable patterns or waves.

According to Elliott, financial markets move in a series of five waves in the direction of the main trend, followed by three corrective waves against the trend. These waves are named using numbers and letters: the five waves in the direction of the trend are labeled 1, 2, 3, 4, and 5, while the three waves against the trend are labeled A, B, and C.

Elliott wave theory is based on the assumption that the market reflects the collective psychology of investors, which can be analyzed through wave patterns. The theory holds that these waves occur on different timeframes and can be used to identify potential turning points in the market, as well as the overall trend.

While Elliott wave theory is a popular tool among technical analysts, it is also controversial, with some critics arguing that it is subjective and not supported by empirical evidence. As with any technical analysis tool, it should be used in conjunction with other methods of analysis and should not be relied upon as the sole basis for investment decisions.