Classic Technique  |  SEP 2003

Fibonacci-Based Fractal Form And Elliott Waves by Robert R. Prechter Jr.

Fibonacci-Based Fractal Form And Elliott Waves by Robert R. Prechter Jr. The stock market is a tapestry of mathematical relations governed by Fibonacci number ratios. Here’s a look at how you can apply Elliott waves to find these ratios, from a master Elliottician. Mathematicians recognize that the stock market is a fractal, but they believe it is formless. They allow only that the irregularity of fluctuation is the same regardless of scale. R.N. Elliott observed that the stock market is a specific fractal and named it the wave principle. As defined in The Wave Principle Of Human Social Behavior (1999), the stock market is a robust fractal, meaning that it has certain specificities of form as well as quantitative variation. Figure 1 shows an idealized Elliott wave to one, two, and three iterations. Observe that the waves in each relative position look alike regardless of size. Although this diagram is necessarily rigid, actual waves vary considerably in extent and duration. Are quantitative variations random, or do they display recognizable mathematical properties? This article investigates whether there is quantitative specificity between a wave and its same-number component.

by Robert R. Prechter Jr.