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Technical Analysis

Introduction to Elliot Wave Principle

The financial market is consistently inconsistent by nature and in predictions. Since people can never be away from the financial arena of stock market and trends, forecasting the financial trend and nature turned out to be a necessity. Elliot wave principle essentially concentrates in forecasting or predicting the most common fluctuations in the financial sector. Elliot wave principle should be seen and treated as a technical sort of analysis about the upcoming trend and nature of the financial market.

Ralph Nelson Elliot, who was an accountant, developed this technical process of analyzing market behavior in 1930. His conclusions essentially pointed out certain facts about the market pulse in the form of a mathematical wave, or market behaviors can be predicted in the form of a mathematical wave, suggested Mr. Elliot. Elliot argued that the rhythmic nature of human mind is not an exemption, even when proceeding with market business. This sort of a prediction of financial market with its root entrenched on the mental settings of humans had followers as well as critics.

Elliot theory suggests that the movement of human mind from an extreme of optimism to an extreme of pessimism happens quite often and it brings back normalcy whether the starting point is optimism or the starting point is pessimism. This happens within a fixed interval of time for a number of times. That essentially points out that human mind swings between optimism and pessimism and retains both states from time to time. Similar is the case when human mind deals with financial market as well, says Mr. Elliot.

It could mathematically represented in the form of a wave, but critics argue that Elliot wave principle cannot be considered as purely and absolutely scientific since this principle lacks a sound scientific platform to justify its credibility. Instead, they argue that Elliot wave principle can only be considered as pseudo scientific.

After Elliot, Elliot wave principle was popularized and published by many and was certainly a helping hand to fresh investors as well as experienced campaigners.  Then came the age of rediscovery of the Elliot wave principle by experts, but the core principle stood the same as before.

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