Appendix A: Introduction to the Wave Principle
In the 1930s, R. N. Elliott discovered that market price movements adhere to a certain pattern composed of what he called waves. He called the pattern’s characteristics the Wave Principle. Every wave has a starting point and ending point in price and time. The pattern is continuous in that the end of one wave marks the beginning of the next wave. The basic pattern consists of five individual waves that are linked together and achieve progress as market prices move up or down (see Figure A.1).
This five-wave sequence, labeled with numbers 1 through 5, is called a motive wave, because it propels ...
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