The Fibonacci Sequence

The Elliott wave principle was established by R. N. Elliott and was first published in a series of articles in Financial World in 1939.

The Elliott wave principle was established by R. N. Elliott and was first published in a series of articles in Financial World in 1939. The basis of the Elliott wave theory developed from the observation that rhythmic regularity has been the law of creation since the beginning of time.

Elliott noted that all cycles in nature, whether of the tide, the heavenly bodies, the planets, day and night, or even life and death, had the capability for repeating themselves indefinitely. Those cyclical movements were characterized by two forces: one building up and the other tearing down.

The principal part of the theory is concerned with form or wave patterns, but other aspects include ratio and time. In this case, pattern does not refer to the types of chart pattern formation, but to a waveform. Ratio refers to the concept of price retracements and time to the period separating important peaks and troughs.

Elliott wave principle price retracements based on Fibonacci number sequence. This same sequence forms the basis for retracement and time development in Elliott theory.