A Simple Introduction to Elliott Wave

Elliott Wave Theory is the method for explaining the movement of financial markets including stocks, futures, foreign exchange and cryptocurrencies.

In really simplistic terms, Elliott Wave Theory explains why markets do not simply go up or down in a straight line. It suggests that during any significant movement in the market, regardless of whether it’s up or down, there is a series of phases that occur. These phases take the form of a series of smaller up and down movements that for a patterns that looks like wave.

Furthermore Elliott Wave Theory also says that these patterns repeat. In other words there is a basic cycle of movement that we can observe in market prices. In general you can expect that once these identifiable phases or “wave” movements are complete, then the trend may be over and the market is ready to change direction.

This is where Elliott Wave Theory becomes very useful because if we can learn to identify these waves then we can start to project in advance where and when the market might next be ready to change trend. This is the basis of what analysts and traders who use Elliott Wave are trying to do!

Elliott Wave Theory can be made very complicated if you don’t keep sight of this simple objective… so in this primer, let’s make a commitment to keep it as simple as possible. At Elliott Wave Options we refer to this as a “Traders Approach”, meaning we are focusing on the components of Elliott Wave Theory that will allow us to make money rather than attempting to know everything about Elliott Wave.