What is Elliott Wave theory and how can you benefit from it?

The study of the same recurring patterns in the financial markets assists in developing trading strategies

One of the most renowned theories in technical analysis is “Elliott Wave Theory”, which was developed by Ralph Nelson Elliot. This theory speaks about Waves (patterns). Elliot believed that the mass psychology depicts the same recurring patterns in the financial markets. He speaks about waves in 5-3 moves, wherein five waves move in an upward direction of the main trend, known as impulse and three waves move in the corrective phase. These 3 moves are also referred to as ABC.

This theory helps in gauging the upward trend and the correction that are likely to happen in the near future.