Wave theoryIt's based onCycleA pattern of fluctuations that analyzes and predicts future trends in prices is one of a kindPrice trendsAnalytical tools. Its founder was the american master of analysis, r. N.ElliotHe created wave theory after a long study of the dow jones industrial average index。
The most important feature of the wave theory is universality, and other areas of human society follow the rules of the wave theory, repeating themselves in similar situations. Stock and bond markets are particularly well suited to validate wave theory, as they are free markets with broad public participation, with complete trading records, and with more comprehensive and rich information about the market. Wave theory is the most widely used in technical analysis, but at the same time it is truly difficult to understand and master it。
Indeed, every theory is right, and the key is in-depth study and adherence to it. For wave theory, the key challenge is to identify the driving and adjusting waves. The driving and adjusting waves always alternate. Each wave-driven trend has the same direction as the main movement, and can be further broken down into five smaller waves, known as the five waves in motion. The movement trend for each adjustment wave is the opposite of the main trend, consisting of three smaller waves, known as the three negative waves. If a complete cycle is completed, the wave may be merged to form a higher wave. Wave theory argues that the market fundamentals will never change, regardless of how long the market operates and how large it is。
The driving wave is the wave that sustains the large trend of the cycle, with the driving wave divided into extended waves, tilt triangles and failure patterns. The adjustment wave is the adjustment of the driving wave of the preceding period, which consists mainly of fonts, flats, triangles, composites, etc。
