Elliott Wave Theory: Reading Market Psychology

Core Idea

Markets move in repeating fractal patterns of five impulsive waves followed by three corrective waves — reflecting shifts in mass psychology from optimism to pessimism.

The Basic Pattern

• Impulse (with trend): 5 waves labeled 1-2-3-4-5.
• Waves 1, 3, 5 = motive (in trend direction)
• Waves 2, 4 = corrective retracements
• Correction (against trend): 3 waves labeled A-B-C.