Elliott wave theory

According to Elliott wave theory, market movements conform to patterns - a series of waves reflecting the fact that people tend to think and behave in a herd-like way.

The Elliott wave theory is a method of analysing charts devised in the 1940s by an American accountant called Ralph N Elliott. According to Elliott, stock market movements conform to specific patterns, consisting of a series of waves reflecting the fact that people tend to think and behave in a herd-like way.

People's response to price changes isn't reasoned or random, but is determined by "shared mood trends". A complete Elliot wave consists of eight waves in all, five on the upswing (three up, two down) and three on the downswing (two down, one up). Every wave consists of a number of smaller Waves conforming to the same pattern, so it's possible to discern Elliott waves in price movements during time periods ranging from a single hour to an entire century.

See John C Burford's spread betting video tutorial: An introduction to Elliott wave theory.

Recommended

Margin call
Glossary

Margin call

When an investor borrows to bet on markets, they put down a deposit known as “margin”.
2 Apr 2021
Resource curse
Glossary

Resource curse

The term “resource curse” refers to the observation that countries with abundant natural resources also tend to be less economically developed than th…
14 Jan 2021
Balance of payments
Glossary

Balance of payments

The balance of payments refers to the accounts that sum up a country's financial position relative to other countries.
8 Jan 2021
Yield-curve control
Glossary

Yield-curve control

Yield-curve control is when a central bank aims to control long-term interest rates by pledging to buy (or sell) as many long-term bonds as needed to …
25 Dec 2020

Most Popular

China owns a lot more gold than it’s letting on – and here’s why
Gold

China owns a lot more gold than it’s letting on – and here’s why

In a world awash with money-printing, a currency backed by gold would have great credibility. And China – with designs on the yuan becoming the world’…
21 Apr 2021
“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
House prices in the UK are still surging – here’s why it’ll probably continue
Property

House prices in the UK are still surging – here’s why it’ll probably continue

The latest UK house price data shows no letup in the country’s booming property market, with the biggest yearly rise since 2014. And there’s no end in…
22 Apr 2021