Wave theory is a technical analysis tool used to and describe the patterns of volatility in movements. According to the Elliott Wave Theory, the rise and fall of ** can be classified as a specific wave pattern. These include five waves in an uptrend and three waves in a downtrend. The following is a specific interpretation of how to count waves in the wave theory:
1.Five waves**
In an uptrend, there are usually five waves. These five waves are divided into three waves (marked as and 5) and two waves (marked as 2 and 4). Neutral 5 is the ascending major wave, while 2 and 4 are the minor waves of ** or adjustment.
2.Three waves**
In a downtrend, there are usually three waves. These three waves are divided into two waves (marked A and C) and one wave (marked B). Among them, A and C are the main waves of the decline, while B is the secondary wave of ** or adjustment.
3.Long-term vs. short-term waves
According to the wave theory, these rising and falling waves can be observed on different time scales. Five and three waves in a long-term trend may represent ups and downs in a large cycle, while five and three waves in a short-term trend may represent ups and downs in a small cycle.
4.Proportions and relationships of waves
Wave theory also emphasizes specific proportions and relationships between each wave. For example, in a five-wave, the second wave usually does not exceed the low of the first wave, while the fourth wave usually does not exceed the high of the third wave.
Investors should note that the Wave Theory is a tool based on technical analysis, which assumes that market behavior has patterns and laws. However, market volatility is influenced by a variety of factors, including economic data, company performance, market sentiment, etc., so it does not always conform to the laws of wave theory. Therefore, when applying the wave theory, it should be combined with other technical indicators and fundamental analysis, and market risks should be carefully assessed.