# EWT or Elliot Wave Theory

We base Elliot Wave Theory on the technical analysis of lengthy-time period patterns which can presume to copy periodically, with long-run periods composed of shorter term intervals.

The basic guiding principle of Elliot Wave Theory is that the movement of inventory market indexes and prices can describe as a series of waves, and that there are 9 degrees of waves that cowl one-of-a-kind lengths of time, which Elliot named from the longest time span to the shortest:

Grand Supercycle
Supercycle
Cycle
Primary
Intermediate
Minor
Minute
Minuette
Subminuette

Each wave of a specific degree comprises waves of lesser ranges, so the Grand Supercycle wave comprises Supercycle waves, which comprises Cycle waves, which composed of Primary waves, and so on.

Each wave includes a purpose wave wherein its most important path is that of the Elliot Wave of the degree immediately above it and observed with a corrective wave that moves counter to the motive wave.

## Impulse In The Elliot Wave Theory

The impulse wave can be further componented into five sub-waves, typically numbered from 1 to 5. Subwave 1, three, and five circulate within the path of the purpose wave itself, while sub-waves 2 and four are corrective waves that pass counter to the motive waves.

It can also break the corrective wave down into three sub-waves, commonly precise through the letters A–C. Subwave A and C flow counter to the preceding reason wave, at the same time as sub-wave B is within the course of the previous purpose wave. The entire reason wave plus the whole corrective wave makes up a cycle.

Subwave have a fractal nice-every Elliot Wave is a part of another Elliot Wave of the next better degree, and is, itself, composed of Elliot Waves of the next lower diploma.

Specifically, every 2 adjacent sub-waves of an Elliot Wave composed of the eight waves of the subsequent decrease diploma, and it also composes people waves of waves of the next lower diploma, and so on.

When a wave moves in the equal course because the Elliot Wave in the subsequent better degree, it’s miles called an actionary wave (AKA fashion wave); if it movements inside the contrary route, I refer it to as a reactionary wave (AKA countertrend wave).

### Guidelines Using Elliot Wave Theory

Then there are suggestions, which may also or might not be present or might also range. A critical high-quality of Elliot Waves is that whilst their form is precise, the amplitude and period of the waves will vary, which significantly lessens their cost as a forecasting device.

It takes the important, sensible utility of Elliot Wave Theory into consideration that it restricts the range of viable future paths of the market and that it permits an Elliottician to test the relative possibilities of every route.

The greater recommendations glad via a specific course, the much more likely it will occur.

#### Fibonacci Sequence and the Golden Ratio

Both Collins and Elliot had a fascination with the Fibonacci series and the golden ratio. A Fibonacci collection formed by taking 2 numbers—any 2 numbers—and adding them together to shape a 3rd variety; then the 2nd and third numbers delivered again to shape a 4th wide variety, and that continued to any desired period.

The ratio of the last range over the penultimate variety procedures 1.618, and this ratio can observe in many natural items, and because of this, we know this ratio as the golden ratio.

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