Market cycle theory that explains price movements in cycles of 8 waves. In an uptrend, this can be broken up into a pattern of 5 waves moving up, labeled 1 to 5, and a pattern of 3 waves moving down, labeled A, B, and C.
The 5 waves moving up is called the impulse wave, and the 3 waves moving down is called the corrective wave.
Elliot also theorise that the waves follow patterns that are ratios of the numbers in the Fibonacci sequence. The important ratios are 0.5, 0.667, 0.6. 0.625 and 0.615.« Back to Index