The Ultimate Guide to Mastering the Elliott Wave Principle

Every new trader is looking hard to find the best strategy to beat the market.

The Elliott Wave Principle, sometimes abbreviated to just “EWP” , is considered one of the most accurate tools to predict the future of any asset, based on technical analysis.

In this guide, we will explain how to use advanced trading techniques in order to master the use of the Elliott Wave Theory.

What is the Elliott Wave Theory?

Ralph Nelson Elliott was an accountant responsible for developing the Elliott Wave Principle in the 1930s.

Prior to Elliott’s theorem, most analysts believed that the market moved in a random, unpredictable way. Elliott, however, was able to discern that the market often moved in specific, repetitive and – most importantly – identifiable patterns.

In this article, you will learn about Elliott’s theory in-depth, and how you can apply it to your trading setups.

Fundamental Rules to Master

1. Essentials

It’s important that we start with the basics first and move on to more advanced techniques once you have a grasp of the fundamentals.

The idea is that after studying this guide your trading skills will be enhanced even if you decide the Elliott Wave is not the perfect theory for you or your trading setups.

At its most basic level, Elliott’s theory is that the market always moves in a series of waves. An overarching impulsive wave moves the price in the direction of the main trend-line, while a corrective wave moves against it.

In the case of an uptrend, the impulsive wave is made up of five waves that pushes the price higher.

In a period of a downtrend the opposite occurs; the impulsive wave is made up of five waves that push the price lower.

After every impulsive wave, the Elliott Theory posits that there should also be a rebound that corrects the impulsive phase, which is known as a corrective wave. The corrective wave is made up of three individual waves.

Elliott’s hypothesis is that every price move in any given market can be labelled with an impulse phase, formed by five impulsive waves and a corrective phase, characterised by three corrective waves.