Elliott Wave Theory is a cornerstone of Technical Analysis, which interprets price movements in financial markets through recurrent fractal wave patterns. Elliott Wave Theory says that market prices tend to move in repeating wave patterns because investor emotions rise and fall in cycles. It breaks these movements into “impulse waves” that follow the trend and “corrective waves” that move against it, often using Fibonacci ratios to estimate how far prices might move. Traders use it to guess future trends, but it isn’t exact, so it works best when combined with other tools.