Educational - Basis tenets of the Elliott Wave Principle

With c

With courtesy of Elliott Wave International:

Potxotxo has asked "what happens once wave 5 terminates in EUR/JPY?":

The chart above shows what we can expect once wave 5 terminates and below a simple explanation.

Now observe that within the corrective pattern illustrated as wave in Figure 3, waves (a) and (c), which point downward, are composed of five waves: 1, 2, 3, 4 and 5. Similarly, wave (b), which points upward, is composed of three waves: a, b and c. This construction discloses a crucial point: that impulsive waves do not always point upward, and corrective waves do not always point downward. The mode of a wave is greatly determined not by its absolute direction but by its relative direction. Aside from four specific exceptions, which will be discussed later in this booklet, waves divide in impulsive mode (five waves) when trending in the same direction as the wave of one larger degree of which it is a part, and in corrective mode (three waves or a variation) when trending in the opposite direction. Waves (a) and (c) are impulsive, trending in the same direction as wave . Wave (b) is corrective because it corrects wave (a) and is countertrend to wave . In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, at all degrees of trend.

As a quick guide to the Elliott Wave Principle you should read this description of the basic tenets from Elliott Wave International here: http://www.elliottwave.net/educational/basictenets/basicsforeword.htm

However I would recommend, that you read Frost's and Prechter's "Key To Market Behavoir". You can read it for free here: http://www.elliottwave.com/club/elliott-wave-principle/default.aspx?code=47567

I would also like to recommend Ramki's "Five Waves To Financial Freedom". You can only get the book from Amazon.com: http://www.amazon.com/Five-Waves-Financial-Freedom-ebook/dp/B005JC5WWU
I think it's one of the absolutely best books on the Elliott Wave Principle that you will ever read and to the price of USD 14.99 I doesn't come much cheaper than that.