Basic Tenets of Elliott Wave Theory

Elliott’s separation of larger corrective movements into Minor, Minute and Sub-Minute categories – all forming part of the overall symmetry of share price movements – detectable since the 19th century in the US market, and traceable down to the 17th century in the UK – is one of the most fascinating aspects of the Wave Principle. The basic pattern which forms this cumulative upward progression is easily comprehensible, and its key features can be reduced to five basic tenets:

1. For every action there is a reaction. Market movements in the direction of the main trend are impulse waves. Market movements counter to the main trend are corrective waves. An impulse wave is always followed by a corrective wave.
   
   
2. Generally, all impulse waves have 5 subordinate waves whilst all corrective waves comprise 3 subordinate waves.
   
   
3. When the main trend is upwards, waves 1, 3 and 5 are impulse waves, and waves 2 and 4 are corrective waves.
   
   
4. The action of the main trend can take place over a time frame of anything from a few hours to many years. When the main trend has completed a five-wave cycle, it reverses and a counter move of three waves usually occurs.
   
   
5. A move comprising five waves followed by a counter-move of three waves, once completed is considered to represent the first and second waves of a cycle in the time frame of the next higher degree.

Recommended Reading
	Elliott Wave Principle Robert Prechter and A.J. Frost's groundbreaking investment classic hailed by reviewers as "the definitive textbook on the Wave Principle." It's the most useful and comprehensive guide to understanding and applying the Elliott Wave Principle. More info ...
	Leonard of Pisa by Joseph and Frances Gies A wonderful book about Leonardo Fibonacci's rediscovery of the Golden Ratio in the 13th century. Includes Fibonacci's own math problems, and quaint woodcut illustrations. (Softback, 128 pp). More info ...
	Spiral Calendar by Christopher Carolan A once in a generation analytical breakthrough, and an instant investment best seller. The Spiral Calendar reveals one of the most exciting market forecasting discoveries of our time. (Large Format Hardback, 158 pp). More Info ...
	RN Elliott's Masterworks edited by Robert R. Prechter, Jr. Presents three ground-breaking works in which Elliott first described his discoveries to the world, plus a detailed biography, rare photos and more. (Hardback, 308 pp). More Info ...
	RN Elliott's Market Letters (1938-1946) edited by Robert R. Prechter, Jr. Real-time analysis and market forecasts from the master, with many essays on the applications of the Wave Principle. The letters and essays are extensively footnoted and cross-referenced by Robert Prechter. (Hardback, 234 pp). More Info ...

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