Stock marketWave theory(elliot wave theory) by ralph nelson elliott, an american analyst, in the 1930sTechnical analysisTheories, used to predict price fluctuations in financial markets (especially stock markets). According to the theory, market price trends are not entirely random, but follow specific natural patterns and cyclical patterns, with core thinking based on group psychological volatility。
Here are some of the central points of the wave theory:
1. Basic structure: eight-wave cycle
The wave theory suggests that market dynamics consist of a full cycle of “five waves up” and “three waves down”, with eight waves:
Corrective waves: three waves in the downward trend (a, b, c), of which: 2. Fractal nature 3
The wave theory must be applied in practice according to the following rules:
Wave 2 cannot break the beginning of wave 1. Wave 3 cannot be the shortest driving wave (usually the main wave). Wave 4 cannot overlap with the price zone of wave 1 (which applies in stock markets but may be liberalized in futures or foreign exchange markets). 4. Complexity of adjustment waves
Adapting wave patterns (e. G. Wave 2, wave 4, wave a-b-c) with common types of:
Market psychology and wave 6. Application and limitations: 7. Learning recommendations
Wave theory, as one of the tools for technical analysis, requires long-term practice and validation. Investors should avoid mechanical use and make integrated decisions in the context of the market environment, financial management and risk control。
