However, today, a lot has changed in terms of the application of R.N ElliotвЂ™s theories and many took unorthodox turns to transform the existing principles into hybrid routes. However, EW theory is rarely used as a stand-alone approach and is often combined with the principles of Fibonacci ratios or other Support & Resistance levels. The main application of the theory for any trader is to detect the presence of the most destructive wave formation which later can be used in oneвЂ™s favour. The theory is widely accepted nowadays and actively used in the day-to-day trading of both beginner and expert traders. However, the Elliott Wave theory is a unique concept that has been brilliant in describing the fractal nature of various financial markets. Ralph Elliott used quite a lot from the Dow Theory and borrowed three impulses and two correlations. The upward and downward swings were the reflections of the tradersвЂ™ emotions and these swings got the name of вЂњwavesвЂќ.

These cycles represented the predominant emotions of investors worldwide and reappeared on the market from time to time. Elliott saw that the patterns were behaving in a repetitive cycle. Instead of the chaotic and unpredictable manner in which everyone considered the market trends to behave he identified an intrinsic narrative. It was in 1934 when Ralph Nelson Elliott noticed one crucial thing about price action charts.

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