Definition of ABC Wave Theory

Elliott Wave Theory, or ABC wave theory, is a term for three-wave counter trend price movement. Here, wave A is the first price wave that is against the trend of the entire market. B wave is a corrective wave for wave A. Wave C shows the final price move to complete the counter trend price move.

Points to remember

• Alphabetical labeling helps to differentiate between the degree or level of the wave. It speaks to the span of the basic pattern.
• The patterns begin with the biggest degree and work their way down to influxes of lesser degree.
• There are two sorts of waves: Impulse and Corrective. Impulse waves move toward the bigger degree wave. Corrective waves move against the bigger degree wave.