The Benefits of Using Elliott Wave Theory
For any business to be successful, it is important for the owner to gain a complete understanding of market trends and conditions. The world of economics and finance has many different theories and techniques, which can allow a person to interpret and determine market conditions. Elliott Wave Theory is a common technique used to interpret price structures and market trends.
By making use of this theoretical framework, there are some key features of the market that a person can learn. The most important point is the behavior and actions of the market. This theory provides a comprehensive account of the trends within a given market; Based on which, a person can anticipate future market states to a favorable extent. This theoretical framework may not allow for a complete forecast, but it can provide a fairly concrete picture of market conditions.
The main focus of this theoretical framework is on the recurrence of price and cost segments. This means highlighting and mapping different costs and prices, in a way that demonstrates repetition and consistency. This is a very useful aspect as it allows a person to determine future costs and expenses.
The framework also highlights market cycles and offers two distinctive waves that are known to occur within a given market. The first of these are called impulse waves, which can be divided into sub-patterns comprising five structures. These structures set out in three distinctive patterns, namely the extended waves, the diagonal triangle at wave five, and lastly, the fifth wave glitch.
The second category of waves after impulse waves is known as corrective waves. These can be divided into six subcategories of waves. The categories are based on the direction and patterns of the waves ranging from zigzag to flat, irregular, horizontal, triangle, double three and triple three patterns. Each pattern provides valuable information regarding market cycles and consistency.
When it comes to interpreting such patterns, ideally the primary focus is on erratic behavior. This can be done by comparing the wave pattern at different time intervals. When working in particularly active markets, it would be wise to calculate waves on a weekly or daily basis to ensure timely interpretation and forecasting.
Erratic behavior can be seen in such patterns where waves frequently break or change direction. Consistency can be judged through such wave patterns, which are uniform and recurring throughout a given category. Crossing waves can determine the level of instability within a given time period, while some intersections can also show complete market crashes.
The correct execution of the principles of this framework provides the person with a set of six wave patterns and three wave subgroups. These together can allow people to effectively interpret the future condition as well as future actions within a given market. Elliott Wave Theory offers a valuable foundation for a wide range of industries and businesses. The correct implication and interpretation of patterns within this framework would allow safe and calculated steps within a market industry.