subject: What Is Elliott Indicator? [print this page] The Elliott indicator applies the principle where it uses a technical analysis method to predict the trends of the financial forex market. It was introduced by an accountant who came up with the conceptual theory that the market prices frequently unfold in some specific patterns does possible to be estimated. The inventor was highly inspired by the Dow Theory and through vast observations of the nature; Ralph Nelson Elliott proposed that the fluctuations of the market can be envisaged by immense identifications and observations of the repetitive trends.
As a matter of fact, Elliott did not just believe that the financial market is predictable; he concluded that the similar Elliot wave theory can be applied to all human activities. This is because all happenings, including the forex trend are affected by specialized distinguishable waves of movements. He constructed his inference according to Dow Theory where it clearly corresponds to the wavy trends hence leading to Elliott revealing the nature of the market progress. From there he began conducting an in depth analysis of the market, discerning the characteristics of the wave patterns as well as executing a rough predictions based on his findings.
Later on during the 1930s, Elliott realized from his research that the market is indeed showing some rhythmic cycle. His main study was the Dow Jones Industrial Average market data where he identified specific waves that incessantly recurred in the market thus naming it Elliot wave. The repetitive patterns that took place were categorized in five distinctive waves although most people concluded against his theory that there existed only three apparent waves, labeled the A, B and C. They can be analyzed either in short-term or long-term charts.
Another approach to explain how the theory that leads to the invention of Elliott indicator works is applying an analogy of broccoli. If the smaller piece breaks off from the larger piece, it still remains like a big piece. This concept, merging with the Fibonacci relationships of the waves will serve traders the prediction or accurate anticipation of the trading opportunities with calculated risk ratios or rewards.
