According to the Elliott Wave Principle, each trend is made up of certain basic elements (waves) that tend to repeat themselves. By the way they move, waves are divided into two types:
1. Impulse (motivational) waves move the main trend
2. Corrective waves are moving against the trend.
According to the Ralph Nelson Elliott Wave Principle, there are five waves in each trend. After the end of the fifth wave, the trend reverses or corrects using three elements. Thus, the rising and falling wave pattern contains only eight waves. When the trend changes, there are several large impulse waves with a total of ten elements. In addition, waves can contract or expand over time in certain parts of the chart, but their basic shape will not change.
According to Elliott, market movements follow a basic pattern of five bullish waves and three bearish waves, forming a complete cycle of eight waves.
Downtrend waves are also a correction of the previous five impulse waves, that is, the main trend.
According to Elliott, market movements are divided into nine degrees depending on their size and duration. The lowest steps are the minute, hour and day wave. Mediums are minor, minor, and major waves spanning weeks, months, and years. The three upper stages are the waves of the cycle, supercycle and large supercycle, they refer to years, decades and centuries, respectively.
The Eliot wave indicator principles, described by Elliott, and then refined and expanded by the proponents of the theory, are very detailed, the interpretation and description of individual wave structures causes controversy among the proponents of the theory itself. Depending on the approach, they can mark the same market movement in completely different ways, considering it a wave of a higher or lower order.
A definite practical problem is also post facto verification of wave counting. Existing markings can be changed as a result of an unexpected "model" of the mechanism.
It is worth remembering that the wave theory is just a patented concept with no scientific basis.
