Elliott WaveIn The Elliott Wave Principle — A Critical Appraisal, Hamilton Bolton made this opening statement:
As we have advanced through some of the most unpredictable economic climate imaginable, covering
depression, major war, and postwar reconstruction and boom, I have noted how well Elliott's Wave
Principle has fitted into the facts of life as they have developed, and have accordingly gained more
confidence that this Principle has a good quotient of basic value.
"The Wave Principle" is Ralph Nelson Elliott's discovery that social, or crowd, behavior trends and
reverses in recognizable patterns. Using stock market data as his main research tool, Elliott
discovered that the ever-changing path of stock market prices reveals a structural design that in turn
reflects a basic harmony found in nature. From this discovery, he developed a rational system of
market analysis. Elliott isolated thirteen patterns of movement, or "waves," that recur in market price
data and are repetitive in form, but are not necessarily repetitive in time or amplitude. He named,
defined and illustrated the patterns. He then described how these structures link together to form
larger versions of those same patterns, how they in turn link to form identical patterns of the next
larger size, and so on. In a nutshell, then, the Wave Principle is a catalog of price patterns and an
explanation of where these forms are likely to occur in the overall path of market development. Elliott's
descriptions constitute a set of empirically derived rules and guidelines for interpreting market action.
Elliott claimed predictive value for The Wave Principle, which now bears the name, "The Elliott Wave
Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting
tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an
immense amount of knowledge about the market's position within the behavioral...