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Elliott's theory relies on analyzing price charts to identify wave patterns, which are fractal in nature, meaning they repeat across different timeframes, and discern what prices may do next; thus the application of the Wave Principle is a form of pattern recognition.
A chart pattern or price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which naturally occurs and repeats over a period. Chart patterns are used as either reversal or ...
Ralph Nelson Elliott (28 July 1871 – 15 January 1948) was an American accountant and author whose study of stock market data led him to develop the Wave Principle, a description of the cyclical nature of trader psychology and a form of technical analysis.
The main idea behind the tool is the support and resistance values for a currency pair trend at which the most important breaks or bounces can appear. The retracement concept is used in many indicators such as Tirone levels, Gartley patterns, Elliott wave principle, and more. After a significant movement in price (be it up or down) the new ...
In 1979 Prechter left Merrill Lynch and published the first subscription issue of the Elliott Wave Theorist.The 1970s had been very bullish years in the gold market but mostly bearish for stocks, yet his Elliott wave analysis called for a long-term reversal lower in gold (February 1980) [5] [14] and a long-term "super bull market underway" in stocks (October 1982).
Modern application of Elliott wave theory posits that a Grand Supercycle wave five is completing in the 21st century and should be followed by a corrective price pattern of decline that will represent the largest economic recession since the 1700s.
On a technical analysis chart, a gap represents an area where no trading takes place. On the Japanese candlestick chart, a window is interpreted as a gap. Gaps are spaces on a chart that emerge when the price of the financial instrument significantly changes with little or no trading in between.
The aspects of a candlestick pattern. A candlestick chart (also called Japanese candlestick chart or K-line [7]) is a style of financial chart used to describe price movements of a security, derivative, or currency. Stock price prediction based on K-line patterns is the essence of candlestick technical analysis.