Elliott Wave theory is a technical analysis method that is used to predict the future movements of financial markets. The theory was developed by Ralph Elliott in the 1930s, and is based on the idea that market movements are not random, but are instead driven by the actions and emotions of market participants.
The theory is based on the idea that market movements can be divided into patterns or "waves" of different degrees. The highest degree of wave is Grand SuperCycle, the lowest degree is Minute. Each degree is made up of a series of smaller waves, which themselves can be broken down into even smaller waves.
According to Elliott Wave theory, market movements can be divided into five waves in the direction of the trend (uptrend or downtrend) and three waves counter to the trend. These waves are labeled as 1, 2, 3, 4, 5 for the direction of trend and A, B, C for counter trend.
Elliott Wave traders look for patterns in the waves in order to make predictions about future market movements. They use these predictions to make trades, either by buying or selling securities.
It's important to note that Elliott Wave theory is a subjective method and different analysts may interpret the same market differently. Also, the theory has its critics and some traders argue that it is not possible to predict market movements with a high degree of accuracy.