The philosophical foundation: human social behavior follows rhythmic patterns. Markets are a reflection of collective human psychology, not random walks.
Description
Elliott Wave Theory rests on the premise that human social mood moves in a patterned, rhythmic manner — not randomly. Because stock prices reflect the collective psychology of millions of participants, they exhibit repeating patterns of optimism and pessimism at every degree of trend. This is fundamentally different from the Efficient Market Hypothesis.
Key Points
- Markets are not random — they reflect patterned collective human psychology
- Social mood is the primary driver of market prices (not fundamentals or news)
- The same 5-3 pattern repeats across all time frames (fractal structure)
- Elliott distinguished his theory from random walk theory by demonstrating the repetition of specific patterns
- The Wave Principle provides both a descriptive framework (what happened) and a predictive framework (what is likely)
