Elliott Waves

This chapter discusses the importance of Elliot waves in trading stocks. Elliott considered Fibonacci ratios to be the most important factors in determining the extent of price movements, including the time movements in any market. Fibonacci numbers are 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377 and so forth. Fibonacci ratios are used to target levels of support and resistance. Target levels are more reliable when they are arrived at using Fibonacci ratios than by other projection approaches. A high concentration of projections appearing in the same area, or in the proximity of the area, will be more dependable than that of a single projection target level. Price patterns are always in the progress of formation, unfolding over and over again in a structure of five waves in the direction of one larger trend and a structure of three waves when moving against that trend.