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Elliott Wave Theory was developed by Ralph Nelson Elliott in 1930. As per him, Stock markets behave in a random, unpredictable and disorganized manner and are traded in a repetitive manner.


Elliott stated that financial prices Trends are a result of investors’ predominant psychology

His findings showed that fluctuations in mass psychology perpetually showed up in the same recurring chaotic patterns, or "waves," in financial markets. 

Market Predictions Based on Wave Patterns

Elliott calculated predictions on the stock market were built on proven characteristics present in the wave patterns.  

Here, The Impulse wave travelling in the direction similar to that of Larger trend shows five waves in its pattern, and the corrective wave travels in the opposite direction of the main trend.

Elliott made detailed stock market predictions based on reliable characteristics he discovered in the wave patterns. An impulse wave, which net travels in the same direction as the larger trend, always shows five waves in its pattern. A corrective wave, on the other hand, net travels in the opposite direction of the main trend. On a smaller scale, within each of the impulsive waves, five waves can again be found.

As a matter of fact -  in financial markets, “if something goes up, it has to come down” 

Because a fluctuation price or price movement is followed by a contrary movement. 

Point to note - Price action is split into two parts i.e. trends and corrections, where trends show the main direction of the prices and corrections move against the trends.


(ELLIOTT WAVE)Price action trading -  most simplistic and highly effective forms of trading. Learning ELLIOTT WAVE’s price action trading being a newbie in the trading business is a great start. 


Under Price action trading, Price movements of an asset impacts trading decisions and no other indicators or methods of analysis are used in the process.

If a stock moves upward in the list, then it indicates price action traders that people are buying that stock. It is then traders role to assess whether the same would continue or not by analyzing the aggressiveness of the stock purchase.

The price action trader analyses real-time price information i.e offer, volumes, velocity etc and use historical charts data to find a suitable entry point for doing trade.

This favorable entry point allows the trader to control the risk and provides a potential profit along.


Elliott wave correction 

It is a three-wave pattern (as shown below) causing a halt against price movement in one direction.

It can be broken down into a number of several internal patterns where the main patterns are in simple (535) zigzag pattern and the flat (335) corrections.


It is the simplest form of correction and usually creates retraces the largest amount of the previous trend move.

What are the main Elliott wave flat correction rules?

Below mentioned are the main Elliott wave correction rules for ABC Flat corrections:-


1: The flat correction pattern subdivides into the 3-3-5 internal wave pattern.

2: Waves C tends towards 100% the length of wave A.

3: The flat correction wave can appear in any corrective position.

4: A flat correction wave will usually target the 50% level of the previous move.