Elliott Wave Theory, Simplified by Koos van der Merwe
Elliott wave counts can get complicated,
but it doesn’t have to. Here’s a simplified
look at how to study Elliott wave theory.
IN the late 1920s, Ralph
Nelson Elliott came to the
conclusion that the movement
of the stock market
could be predicted by identifying
a repetitive pattern of waves. He
theorized that movement in the market
was the result of investors’ reaction to
Over my years as a trader and investor
in the stock market, I came to realize that
the outside influences that Ralph Elliott
believed moved the market was nothing
other than emotion. In my 50 years as a
pharmacist, I found that emotion played a
tremendous part in the physical and mental
health of a patient. I also found that
health and emotion occurred in cycles
more obvious in women than in men.
Eventually, I determined that the gravitational
attraction by the moon plays a real
part in how a trader trades. After all, the
gravitational pull creates the tides in the
ocean. More than 80% of the human body
consists of water. So even by a small
degree, that same lunar gravitation must
influence the movement of water, chemicals,
and proteins within the human body,
and in this way influence the emotions of
a person, especially of a trader who lives
high on the knife edge of emotion.
Ralph Elliott came to the conclusion that the market moves upward in five
waves, and corrects in three waves. I first
encountered the Elliott wave theory in 1969 and have been an avid follower and student since then.
I have studied wave patterns but over the years have found
that the complexity of the wave theory leads only to complexity
in interpretation. Thus, I decided that simplicity was the
answer, and so, the simpler the wave, the easier the interpretation.
To achieve this simplification, I decided on the following
set of rules.