Elliot Wave Theory

Fundamental Concept

The most popular pattern of Elliot Wave are :

Picture 1

1.    Main movement in Forex market surely will form pattern in five wave, then after formed a whole series wave there will be “correction” which is formed by three wave that move reversal. (See picture above)

2.    Amount from this phases called “cardinal waves” by Elliot, also knowing as “impulse wave”, this condition popularized again by Pretcher and Frost. The Phases that marked by alphabet known as “corrective waves” or in general called as “threes”.

3.    Wave 2 is the correction from wave 1 then wave 4 is the correction from wave 3. A whole series wave from 1 to 5 have correction a-b-c series.

4.    In macro illustration, series wave from wave 1 to wave 5 completed if peak from the wave that formed is more higher than before or alson known as “simply put”. This, series wave from wave to wave 5 is accomplished if wave 1, 3, 5 is formed, meanwhile a-b-c series completed if wave 2 and wave 4 is formed. (see picture 2)

Picture 2

5.    In micro illustration, each wave can elaborated in small Elliot wave series which is note the concept that described before (no. 3), i.e. : wave 2 is the correction for wave 1; wave 4 is the correction for wave 3; then a-b-c series is the correction for a whole series wave from wave 1 to wave 5. (See picture 3)

Picture 3

6.    Basic movement from “5 (wave)” and have “three (wave)” correction, is same with a few rule and instruction from the principal about:”everything will always move constantly not depend with time as reference. The Pattern from hourly chart calculated same with the way we calculate weekly, daily and even yearly chart pattern.

7.    Time as reference is not important in wave, but give more attention to the shape of wave. Wave can be widen or decline however the shape (pattern) will always fixed.

8.    There are 3 rules that can not be denied in determining wave. Namely:

·    Wave 2 won’t corrects more than starting point wave 1, if the direction of impulse wave is up, then wave 2 is imposible under original (start point) wave 1. (see picture 4). If impulse wave is down, then wave 2 is not more than the wave 1 start point.

·   Length of wave 3 is not less short than length of wave 1 impulse. (See picture 5)

·   If wave is up, then wave 4 is never pass through wave 1.  If the wave is down, then wave 4 never move more than the bottom of wave 1. So if series wave have combination of this rule, then its not a true wave.