The Elliott Wave Theory is a technical analysis method used to predict price movements based on market psychology patterns. Developed by Ralph Nelson Elliott, the theory argues that prices move in regular patterns, consisting of impulsive waves and corrective waves.
- Impulsive Wave : Consists of five sub-waves that follow the direction of the main trend. These waves reflect the strength of the trend.
- Corrective Waves : Consists of three sub-waves that move against the direction of the main trend, indicating a reversal or consolidation phase.
This theory assumes that wave patterns can be found across multiple time frames and reflect investors' emotions and behavior. In the context of the crypto market, Elliott wave analysis helps traders to identify potential price turning points and plan trading strategies based on those predictions.