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Trends & Market Structure

What Is Elliott Wave Theory, in Plain Words

Elliott wave theory is the claim that a trend moves in five waves — three with it and two against it — and is then corrected by three, and that the same shape repeats at every size. This paper shows you one count of the euro's 2025 drawn from its turning points, the idea as a swell arriving in sets, the count on the weekly chart, the theory's three rules checked against that count — two pass and one fails — and the object on your platform that writes the numbers.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Five up, three down

Elliott wave theory is a claim about the shape of trends: a trend moves in five waves — three with it, numbered 1, 3 and 5, and two against it, 2 and 4, between them — and is then corrected by three waves, lettered A, B and C. Count the euro's 2025 that way and 1 runs from January to March, 2 to 7 April, 3 to 21 April, 4 to 12 May, 5 to 1 July; then A to 17 July, B to 24 July, C to 1 August. It is a count made afterwards, on turns that had already happened, and other readers count the same months differently.

A swell arriving in sets

The picture is a swell coming in to a beach. Surfers know that waves arrive in sets, and that a set has a shape: a few building, the biggest in the middle, then smaller. Elliott's idea is that the market's moves come in sets with a fixed shape, five with the trend and three against it, and that the shape repeats at every size, so that each wave is made of smaller waves with the same count. It is a claim about the shape of sets. The sea does not always agree with it.

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