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Elliott Wave Theory

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Definition of 'Elliott Wave Theory'

Ralph Nelson Elliott came up with a theory that stock markets moved in waves. Simply put he stated that the market moved up in 5 waves and then down in 3 waves. Each of these waves could themselves be comprised of a set of 5 up and 3 down waves and this pattern continues forever.

One of the key difference between Elliott Wave Theory and other cyclical theories is that this principal suggests no absolute time requirements for a cycle to complete.

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