Ralph Nelson Elliott - Elliott Wave Theory

Elliott Wave Theory

In the early 1930s, Elliott began his systematic study of seventy-five years of stock market data, including index charts with increments ranging from yearly to half-hourly. In August 1938, he detailed the results of his studies by publishing his third book (written in collaboration with Charles J. Collins), entitled The Wave Principle. Elliott stated that, while stock market prices may appear random and unpredictable, they actually follow predictable, natural laws and can be measured and forecast using Fibonacci numbers. Soon after the publication of The Wave Principle, Financial World magazine commissioned Elliott to write twelve articles (under the same title as his book) describing his new method of market forecasting.

In the early 1940s, Elliott expanded his theory to apply to all collective human behaviors. His final major work was his most comprehensive: Nature's Law–The Secret of the Universe published in June, 1946, two years before he died.

In the years after Elliott's death, other practitioners (including Charles Collins, Hamilton Bolton, Richard Russell and A.J. Frost) continued to use the wave principle and provide forecasts to investors. Frost and Robert Prechter wrote Elliott Wave Principle, published in 1978 (Prechter had come across Elliott's works while working as a market technician at Merrill Lynch; his prominence as a forecaster during the bull market of the 1980s helped bring Elliott's wave principle its greatest exposure up to that time).