The three rules for impulse wave formation are: If any of these rules are violated, then the impulse wave is not formed and we have to re-label the suspected impulse wave. However, the formation of the wave is based on a set of rules. Like all motive waves, the impulse wave has five sub-waves: three motive waves and two corrective waves which are labelled as a 5-3-5-3-5 structure. Impulse is the most common motive wave and also easiest to spot in a market. The Elliott Wave can be categorized into Motives and Corrective Waves: Investors can get an insight into ongoing trend dynamics when observing these waves and also helps in deeply analyzing the price movements.īut traders should take note that interpretation of the Elliot wave is subjective as investors interpret it in different ways.īefore discussing the patterns, let us discuss Motives and Corrective Waves: What are Motives and Corrective Waves? The theory holds as these are recurring patterns, the movements of the stock prices can be easily predicted. The Elliott Wave Theory suggests that the stock prices move continuously up and down in the same pattern known as waves that are formed by the traders’ psychology.
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