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Background
Ralph Nelson Elliott) (1871 - 1948) studied
the wave phenomena of the US stock
market in 1934
Published the Wave Principle in 1938
Published the Nature Law in 1942
In 1970s, Robert Prechter, Jr. made Elliott
Wave Theory popular in the investing
communities
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Theory Outline
Market fluctuations due to:
Impulse Wave
Corrective Wave
Impulse wave
follows the trend
composes of 5 sub-waves
Corrective wave
moves against the trend
Composes of 3 sub-waves
Waves within waves
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3
4
(3) 5
a
b
(4) c
1
2
3
4
(5) 5
1
2
3
4
(a) 5
a
b
(b) c
1
2
3
(c) 5
4
Waves within
Waves
By counting waves in the long
term to short term charts,
forecasting can be made
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Time / Price Structure of
Financial Markets
Fluctuations according to:
the Fibonacci Number Series
Fractal Structure
Non-linearity
Asymmetry
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Wave Counting Principle
2
nd
wave should not exceed the beginning
of 1
st
wave
3
rd
wave should not be the shortest
among 1
st
, 3
rd
and 5
th
wave
No overlapping between 4
th
and 2
nd
wave
(with exception in diagonal triangle)
Rule of alteration 2
nd
and 4
th
waves take
different wave forms
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1
2
3
4
5
1
2
Correct Wrong
End of 2
nd
wave should not exceed
the beginning of 1
st
wave
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1
2
3
4
5
Correct
Wrong
1
2
(i)
(ii)
(iii)
3
rd
wave
should not be
the shortest
among 1
st
, 3
rd
and 5
th
wave
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1
2
3
4
5
Correct
Wrong
(i)
(ii)
(iii)
1
2
4
th
wave
should not
overlap with
the 2
nd
wave
(except for
diagonal
triangle)
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1
2
3
4
5
Correct
Correct
1
2
3
4
5
Rule of
Alteration
2
nd
and 4
th
wave take
different
forms
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3 Wave Forms in Impulse Wave (1)
Extension
One of the 1
st
, 3
rd
and 5
th
wave will extend
conspicuously
3rd wave would not be the shortest among
1
st
, 3
rd
and 5
th
wave
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1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
st
wave
extension
3
rd
wave
extension
5
th
wave
extension
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3 Wave Forms in Impulse Wave (2)
Diagonal triangle
Wave structure in upward or downward diagonal
triangle
In a form of contracting or expanding triangle
The sub-waves in the diagonal triangle take the
structure of 3-3-3-3-3
If diagonal triangle appears at the 1
st
wave, it
will take the structure of 5-3-5-3-5
The 2
nd
and the 4
th
sub-wave will overlap
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1
2
3
4
5
Contracting
diagonal
Triangular
5
th
wave
1
2
3
4
5
Expanding
diagonal
triangular
5
th
wave
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1
2
3
4
5
Contracting
diagonal
triangular
1st wave
Expanding
diagonal
triangular
1st wave
1
2
3
4
5
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3 Wave Forms in Impulse Wave (3)
5
th
wave extension
5
th
wave failed to exceed the 3
rd
wave end
5
th
wave takes a structure of 5-3-5-3-5
failure to have the momentum to breath into
new high / low before reversal
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1
2
3
4
5
Upward 5
th
wave
failure
Downward 5
th
wave
failure
1
2
3
4
5
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Corrective Wave Structure
4 simple structures in corrective wave
Zig-Zag
Flat
Irregular
Horizontal Triangle
2 complex structures in corrective wave
Double Three
Triple Three
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Zig Zag (5-3-5)
a
b
c
a (i)
(i)
(ii)
(iii)
(iv) a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
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Flat (3-3-5)
a
b
c
a c
a
b a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
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Irregular (3-3-5)
a
b
c
a c
a
b a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
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Horizontal Triangle (3-3-3-3-3)
a
b
c
a
b
c
d
e
d
e
a
b
c
a
b
c
d
e
d
e
Contracting
horizontal
triangle
Expanding
horizontal
triangle
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Double-three
a
b
x c
a (i)
(i)
(ii)
(iii)
(iv) a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
a c
a
b a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
a
b
c
x
a
b
c
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Triple-three
a
b
x c
a (i)
(i)
(ii)
(iii)
(iv)
a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
a c
a
b
a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
a
b
c
x
a
b
c
b
x
a
c
a c
a
b
a
b
b c
(i)
(ii)
(iii)
(iv)
c (v)
a
b
x c
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1
2
Elliott Channel (1)
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1
2
Elliott Channel (2)
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1
2
3
4
Elliott Channel (3)
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1
2
3
4
5
Elliott Channel (4)
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3?
Elliott Channel (5)
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3
4
(3) 5
Elliott Channel (6)
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3
4
(3) 5
a
b
(4) c
(5) 5?
Elliott Channel (7)
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3
4
(3) 5
a
b
(4) c
1
2
3
4
(5) 5
Elliott Channel (8)
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3
4
(3) 5
a
b
(4) c
1
2
3
4
(5) 5
1
2
3
4
(a) 5
Elliott Channel (9)
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3
4
(3) 5
a
b
(4) c
1
2
3
4
(5) 5
1
2
3
4
(a) 5
a
b
(b) c
Elliott Channel (10)
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1
2
3
4
(1) 5
(2) c
a
b
1
2
3
4
(3) 5
a
b
(4) c
1
2
3
4
(5) 5
1
2
3
4
(a) 5
a
b
(b) c
1
2
3
(c) 5
4
Elliott Channel (11)
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Item Details
Book Name Elliott Wave Principle: Key to Market
Behavior
Author
Robert Prechter and A.J. Frost
Contents The basic tenets of wave theory
The rules and guidelines of wave analysis
The scientific background of the Wave
Principle and Long term waves
Item Details
Book Name R. N. Elliott's Masterworks: The Definitive
Collection
Editor
Robert Prechter, Jr.
Contents "The Wave Principle" (1938)
The Financial World articles (1939)
Nature's Law -- The Secret of the Universe
(1946)
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