Elliott Wave Theory

Elliott based part his work on the Dow Theory, which also defines price movement in terms of waves, but Elliott discovered the fractal nature of market action. Thus Elliott was able to analyse markets in greater depth, identifying the specific characteristics of wave patterns and making detailed market predictions based on the patterns he had identified.

In the 70s, the Elliott Wave Principle gained popularity through the work of Frost and Prechter. They published a legendary book (a must for every wave student) entitled "Elliott Wave Principle...key to stock market profits" in 1978, wherein they predicted, in the middle of the crisis of the 70s, the great bull market of the 1980s. Not only did they correctly forecast the bull market but Robert R. Prechter also predicted the crash of 1987 in time and pinpointed the high exactly.

Only after years of study, did R.N. learn to detect these recurring patterns in the stock market. Apart from these patterns he also based his market forecasts on Fibonacci numbers. Everything he knew has been published in several books, which laid the foundation for people like Bolton, Frost and Prechter, to make profitable forecasts, not only for stock markets, but for all financial markets.

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