Wave Principle

The Wave Principle, popularized by Ralph Nelson Elliott, suggests that financial markets move in predictable patterns or "waves" due to the collective emotions of investors. Specifically, it identifies a cycle of five upward waves and three corrective downward waves in trending markets. This principle reflects how psychology drives market movements, leading to trends and reversals over time. By recognizing these patterns, traders and investors aim to anticipate future price movements and make informed decisions. It is an analytical tool used to understand market behavior rather than a guarantee of future results.