01/08/2011 – Read About the Elliott Wave Principle in R.N. Elliott’s Own Words on his Birthday

* * * * *

The Basis of the Wave Principle
by R. N. Elliott
First published on October 1, 1940

Civilization rests upon change. This change is cyclical in origin
and characteristics. A rhythmic series of extreme changes constitutes
a cycle. When a cycle has been completed, another cycle is started.
The rhythm of the new cycle will be the same as that of the previous
cycle, although the extent and duration may vary. The cycle progresses
in accordance with the natural law of movement.

The behavior of cycles has been studied extensively by puzzled
economists, bankers and businessmen. In this connection, the conservative
London Economist in a recent issue, commenting upon the
results of a long study of trade cycles made by Sir William Beveridge,
the noted British economist, said:

Sir William’s researches have emphasized once again that the more
the trade cycle is studied, the more it seems to follow the pressure
of forces which, if they are not wholly beyond the reach of human
control, have at least enough of the inexorable in their nature
to make the policies of governments resemble the struggles of
fish caught in the tides. Sir William pointed out that the trade
cycle ignores politics; he might have added that it overrides
economic policies.

The causes of these cyclical changes seem clearly to have their
origin in the immutable natural law that governs all things, including
the various moods of human behavior. Causes, therefore, tend to
become relatively unimportant in the long term progress of the
cycle. This fundamental law cannot be subverted or set aside by
statutes or restrictions. Current news and political developments
are of only incidental importance, soon forgotten; their presumed
influence on market trends is not as weighty as is commonly believed.

This law of natural change is inevitable, and applies to the seasons
and the movements of the tides and planets. It has truly been
said that change is the only “immutable thing in life.”
Being a natural phenomenon, it necessarily governs all human activities,
even the relatively static sciences of biology and botany. Even
time and mathematics appear to be amenable to the application
of this law of rhythm from the small unit of hours to the great
intervals of decades, centuries and millennia. Measuring the behavior
of cycles should therefore offer a reliable means of forecasting
changes, regardless of the cause, and thus yield handsome profits.

In an independent study of the available data, extending over
a period of many years, the writer has observed certain recurring
behavior of change in movement. Apparently these changes follow
a natural law that inevitably influences the mass. Finally there
evolved certain principles, which were carefully tested back over
a long period of years.

By 1934, I was able to resolve the various trends of changes in
stock prices to a rhythmic series of component waves, which I
called a “cycle.” This cyclical rhythm has occurred
regularly and repeatedly not only in the available records of
the various stock exchanges, but also in commodities, industrial
production, temperature, music, variation in color, electric output,
population movements to and from cities, etc. In fact, it is manifest
so widely, not only in human activities but also in the working
of nature itself, that I have termed this discovery “The
Wave Principle.”

Understanding of this law enables the close student to forecast
the terminations of cycles by means of the market itself. The
Wave Principle is not a “market” system or theory. The
forecasting principle involved goes far beyond the concept of
any known formula….

Learn more about the Elliott Wave Principle and how applying it to your market analysis can improve your investing and trading. Take the entire online course — The Elliott Wave Tutorial: 10 Lessons on the Wave Principle — FREE! Click here to access the 10 Lessons