Market Price Movement $BTC Education: What Is the Elliott Wave Theory?

The Elliott Wave Theory in technical analysis describes price movements in the financial market. Developed by Ralph Nelson Elliott, it observes recurring fractal wave patterns identified in asset price movements and consumer behavior. Investors who profit from a market trend are described as riding a wave.

Key Takeaways:

- The Elliott Wave theory is a technical analysis of price patterns related to changes in investor sentiment and psychology.

- The theory identifies impulse waves that establish a pattern and corrective waves that oppose the larger trend.

- Each set of waves is within another set of waves that adhere to the same impulse or corrective pattern, described as a fractal approach to investing.

How Do You Trade Using Elliott Wave Theory?

If a trader sees an asset moving upward on an impulse wave, they may go long until it completes its fifth wave. Anticipating a reversal, the trader may then go short on the asset. Underlying this trading theory is the idea that fractal patterns recur in financial markets. In mathematics, fractal patterns repeat themselves on an infinite scale.

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