The wave theory was propagated by Ralph Nelson Elliott. He is known as the father of the Wave Theory. Today, it is referred to as the Elliott Wave Principle. He was born in 1871 in Marysville, Kansas. He enjoyed a really long working life in accounting as well as business practices of several companies. At the age of 58, he unfortunately was relegated to the home thanks to an illness. Needing to keep himself occupied, he turned to studying the patterns of the stock market.
Elliott scrutinized annual, monthly, weekly as well as daily, hourly and half-hourly charts of the numerous indexes and went through around 75 years worth of stock market behavior. By the year 1934, he gained enough of confidence in his theory that he made a presentation to Charles J. Collins of Investment Counsel, Inc. in Detroit. And the rest is history.
This Principle is quite simply an in-depth description of how a number of groups of people tend to behave. It works on the understanding that mass psychology tends to move between pessimism and optimism and then return forming quite a natural sequence. This helps form a specific and measurable pattern.
The most popular of places to implement this Principle is at the financial markets. Financial markets are the one place where investor psychology is constantly changing and therefore one is able to form a pattern in price movements. Once you are able to recognize these patterns in prices and understand their forms of repetition, you will be able to invest in the right manner.
What the Elliott Wave Principle does is measure investor-based psychology which forms the actual fueling engine of the financial markets. Every time people are optimistic on an issue, the bidding price goes up. When people are optimistic about the future of a given issue, they bid the price up.
The Elliott Wave Principle can be understood as an exercise dealing in probability. A person who practices the principles of Elliott Wave will be able to recognize the structure of markets and be able to anticipate when the next move is likely to be based depending on current positions that are within those structures. Once you understand the wave patterns you will be able to predict what the market is going to do next as well as not do. When you use the Elliott Wave principle, you find the highest probable moves while assuming the most minimal of risks.