By R.N. Elliott theory WAVES reflects the psychology, sentiment of the crowd. Different psychologies of investors creates the various wave actions.
This picture describes where the differing types of investors decides to get in and out of the market.

These are the patterns Elliott discovered some 80 years ago. Since the Elliott Wave theory is a law of nature, they are still applicable today with the same success rate. If you have been following everything till now, you have probably noticed the Wave Principle’s ability to forecast reversals. This is maybe its best quality. While the majority of traders and investors simply rely on the trend, Elliotticians have an edge of being able to prepare for a probable change in the trend’s direction. We do not say that the method is easy to learn and apply, but if you work and study hard, we promise it will become your favorite.