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How Does Elliott Wave Analysis Work?

Elliott wave analysis is based upon the Elliott Wave Principle, which states that investor psychology is the real engine behind the stock markets.

Robert Prechter, Elliott Wave International's founder and president, explains: “The Wave Principle is a catalog of the ways that the crowd goes from the extreme point of pessimism at the bottom to the extreme point of optimism at the top. It is a description of the steps human beings go through when they are part of the investment crowd, in order to change their psychological orientation from bullish to bearish. Since people don’t change much, the path they follow in moving from extreme pessimism to extreme optimism and back again tends to be the same over and over, regardless of news and extraneous events.”

Therefore, Elliott wave analysis involves deciphering the psychological orientation of the investment crowd through the wave patterns evolving in various stock markets. And since we here at Elliott Wave International use Elliott wave analysis on all of the world’s major stock indexes, we're confident we can gauge how investor psychology is trending.

In order to utilize Elliott wave analysis, you must become familiar with the Elliott Wave Principle. The Elliott Wave Principle enables you to properly decipher the wave patterns unfolding in each stock market and then make predictions on which wave patterns are most likely to occur next — this is the basis of Elliott wave analysis.

Each Elliott wave structure carries with it unique personality traits and is followed by another specific and unique structure. Studying these patterns eventually allows analysts to be able to predict both what may occur next, and — possibly even more importantly — what won’t happen next.

Most people that are new to Elliott wave analysis find our Club EWI homepage to be the best place to start.

Elliott Wave Analysis requires patience and diligence, but it is very simple to employ, and we can get you started.


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Learn the Why, What, and How of the Elliott Wave Principle

Watch the 3 Video Crash Course, FREE! The Elliott Wave Crash Course is a series of three FREE videos that demolishes the widely held notion that news drives the markets. Each video will provide a basis for using the Wave Principle in your own trading and investing decisions.

Simply create a FREE Club EWI profile to view the Elliott Wave Video Crash Course, FREE! It takes just a few minutes.

Club EWI is the world's largest Elliott Wave Community with more than 325,000 members. In addition to downloading your free videos, you will gain permanent access to the valuable club resources featured on your club homepage.

Already a Club EWI member? Access this video series now.