EURUSD 1.1773 USDJPY 112.14 USDCAD 1.2385 EURCZK 26.034 USDCZK 22.107 EURPLN 4.2867 USDPLN 3.6409
EURUSD 1.1773 USDJPY 112.14 USDCAD 1.2385 EURCZK 26.034 USDCZK 22.107 EURPLN 4.2867 USDPLN 3.6409

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Elliot waves combined with Fibonacci ratios may be used to forecast potential price targets

Rule of thumb

Ralph Elliot (1871-1948), himself an accountant, formulated in the 30's and 40's  of the XX-century the Elliot theory

 

It is still popular among contemporary traders with hi-tec computers and other IT equipment

After observing the stock markets, Ralph Elliott (the author of the so-called Elliott theory), concluded that prices tend to move in waves. The Elliott wave theory has been successfully used by traders to predict price movements and/or patterns.

 

Elliot waves

 

Waves according to Elliott may be divided into two types. The first ones are called “impulse waves”, and are regarded as the main waves moving according to  price trend. The second are called “corrective waves” which are considered to be medium/short-term waves moving against  a trend. Elliott got even further by stating that impulse waves are divided into five smaller waves (of which two are corrective waves), while corrective waves are divided into three smaller waves.

 

Elliot waves downward

 

Elliott waves together with Fibonacci ratios may present very interesting results regarding potential price targets. The most important Fibonacci ratios are 38.2% and 61.8%, beside the 0% and the 100% levels. After defining the beginning of a wave (i), 0% level is defined. The end of wave (i) is defined as  38.2%. Together with an impulse wave, using the Fibonacci ratios, it is possible to potentially define the target level of  a wave.

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