Elliott Wave
Elliott Wave is inextricably linked with the Fibonacci number sequence. The theory is that securities prices move in waves. These waves are coincidentally sequenced in the basic Fibonacci ratios. Let’s go through each wave in turn:
The Basic Pattern
The basic premise is that there is an initial 5-wave impulse. This impulse itself has three impulses of its own (wave 1, 3, and 5) and two retracement waves (2 and 4).
Diagram 4.5.5. Basic Elliott Wave structure.
Following a 5-wave impulse, there will be a 3-wave correction (A, B, C). Each wave 1, 3, 5 is an impulse wave that will divide into five smaller waves, and each wave 2 and ...
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