Thread by @SoulzBTC

In this THREAD I will explain “Elliott Wave”

1. Elliott Wave Theory
2. Basic Wave
3. Corrective Wave
4. Elliott Wave Cycle

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1. Elliot Wave Theory

The Elliott Wave Theory suggests that price movements can be reasonably predicted by studying price history as the markets move in wave patterns

Like ocean waves, the movements are repetitive, rhythmic, and timely.

2. Basic Motive Wave

A wave that always advances in the direction of the trend of one larger degree. It's subdivided into five smaller waves.

Waves 1, 3 and 5 in the Motive Wave are called “actionary” sub-waves.

Waves 2 and 4 are called “corrective” sub-waves.

2.1 Basic Motive Wave

There are 3 rules for Motive Wave formation:

- Wave 2 always retraces (gives back) less than 100% of Wave 1

- Wave 4 always retraces less than 100% of Wave 3

- Wave 3 always travels beyond the end of Wave 1 and is never the shortest wave

3. Corrective Wave

The three-wave structure has its sub-waves labeled as waves A, B and C.

This can be misleading since not all corrective waves are exactly three-wave structures.

3.1 Corrective Wave

Wave A and Wave C are both in the direction of the trend

Wave B is traveling against the direction of the larger correction and will therefore be shown as having three waves

4. Elliott Wave Cycle

The combination of a motive wave and a corrective wave is the structure of the complete Elliott Wave Cycle

This is illustrated with a total of 8 waves.

There is a 5-wave in the direction of the trend, followed by a 3-wave correction against the trend

4.1 Elliott Wave Cycle

The chart above shows this eight-wave structure in a declining market.

If you saw this pattern on a chart, depending on HTF, you might expect another five waves down.

This pattern is known as "Wave Bearish Cycle"