In the 1930's Ralph Nelson Elliott observed repeated patterns in stock market movements. He recognized markets move in five waves up, followed by three waves down. He saw this basic pattern linked together to form larger versions of itself, in ever increasing size. He called his discovery the Elliott Wave Principle.

Elliot waves are predictable repeating patterns, in form but not in time. Elliot waves can be observed in any market of reasonable size. Markets are complex systems which undergo punctuated growth; a period of expansion followed by partial retracement. Elliot wave is a principle that uses the idea that people engage in repeated predictable patterns of behavior. Once this principle is understood, it should be clear that it is applicable to any buy or sell position with any market.

If markets such as the djia and forex markets move in predictable patterns, surely this is knowledge you could use to profit from? The sure answer is of course it is! Elliot wave traders make good profits using this principle every day, including the writer of this article.

Elliotwave is at its simplest form five waves up (impulse waves) followed by three waves down (corrective waves). The end point of the corrective waves down is a fibonacci retracement (0.618) of the upwards impulse waves. There are more subtleties, but this is the basic principle. If you realise the implications of being able to predict markets, short and long term, you will want to use the many free educational materials available to begin learning more about this powerful principle.

One of the most powerful pieces of Elliott Wave Analysis is the application of fibonacci ratios to retracements. Once the market has clearly turned, applying fibonacci ratios to the corrective wave provides traders with an eventual target the retracement will reach. Traders can set limits on trades with confidence by applying Fibonacci Retracements.

Most economists think events drive social mood and the markets. The Elliott Wave Principle flips this idea on its head and says it is social mood that drives events and market behavior. The stock market is the most real time up to date indicator of social mood, so studying the stock market gives insight into social mood and events society may engage in.

To learn how to apply elliot waves in your trading, a thorough understanding of elliot wave theory is necessary. Fortunately this is easy and plenty of information is available for traders education.

More and more traders and investors are using elliott wave analysis in their trading. As the public begin to realize mainstream economists did not predict the current economic crisis with any accuracy, indeed they mostly called for continued growth just before the economy dove off a cliff, investors are seeking out those who have systems and understandings that provide more accurate predictions. Elliot Wave is one of those.

Elliott Wave International is the authoritative site on elliott wave theory. They have many services tailor made for all subscribers, and offer many updates and reports on a daily basis.

Can you afford to not learn about the elliott wave principle? There are many free educational resources you can use to begin your education, and yesterday was the time to do so.