mantacharts Elliott Waves.
Since 1938.
The main method of mantacharts analyses: in 1938, Ralph Nelson Elliott described the patterns in which prices rise and fall.
An accountant and 75 years of the stock market.
Ralph Nelson Elliott (1871–1948) worked as an accountant, for many years for railroad companies in Mexico and Central America. When an illness forced him into retirement, he went through 75 years of American stock index prices, from the yearly to the half-hour chart. He found patterns that repeat at every scale and wrote down their rules.
- 1871Born on July 28 in Marysville, Kansas.
- 1934Shows his work to investment adviser Charles J. Collins in Detroit.
- 1938“The Wave Principle” is published on August 31, with Collins.
- 1939Twelve articles on the principle in the magazine “Financial World.”
- 1946“Nature’s Law – The Secret of the Universe,” his most comprehensive work.
- 1948Died on January 15.
Five waves with the trend, three against it.
According to Elliott, a trend runs in five waves: 1, 3, and 5 carry it, while 2 and 4 correct in between. A correction in three waves, A, B, and C, follows. Each of these waves is made up of smaller waves in the same pattern and is itself part of a larger one. Elliott called these levels degrees; in the terminal you draw counts in 15 degrees.
5 /\ / \ /\ B /\ / \/ \ /\ 3 / \/ \ / \ /\ /\ /\ / \/\ /\/ \/ \ / \ / \ / \/ \ /\ / \ / \ /\ / A \ /\ / \ / \ / \ / \/ \/ \ / \ / \/ \ / \ / \/ \/ C / 4 / 1 / /\ /\ / / \ / \ / /\ / \ /\ / \ / / \/ \ / \ / \/ / \/ \ / / \/ /\ / 2 / \/ / /
5 /\ B 3 / \ /\ /\ / \ / \ / \ / \/ \ / \ / A \ / \/ C / 4 1 / /\ / / \ / / \ / / \/ / 2 /
Three rules for every impulse.
A count is valid only if its impulse obeys all three. If the price breaks one of them, the count is wrong and another one is needed.
Wave 2 never retraces more than all of wave 1.
It ends before the price reaches the start of wave 1.Wave 3 is never the shortest of waves 1, 3, and 5.
It is often the longest.Wave 4 does not enter the price range of wave 1.
The exception is diagonals, a special form at the start or end of a trend.
Guidelines, not rules
- Alternation: If wave 2 is sharp, wave 4 usually runs sideways, and vice versa.
- Wave 3 often reaches 161.8% of the length of wave 1.
- Corrections: Wave 2 often retraces 50 to 61.8% of wave 1, and wave 4 often around 38.2% of wave 3.
They often hold, but not always. The drawing above follows exactly these ratios.
From count to analysis.
Every analysis starts with a count: where in the pattern is the market? The main scenario follows from that and, where a second count fits, the alternative. Price targets come from the ratios of the waves, the invalidation from the rules. Updates show how it develops.
An example analysis on the terminal’s chart. With Pro, you add any analysis to your chart like this. Analyses are assessments, not investment advice.
A scenario, not a certainty.
Elliott Waves organize how a market has moved. They don’t reliably predict what it will do next, and several counts often fit. That’s why a count names its alternative and the level at which it is wrong.