The Basic Idea
Elliott Wave Theory calls movement in the direction of the trend an "impulse wave" (made up of five waves) and movement against the trend a "corrective wave" (made up of three waves), with this combination said to repeat across time frames of various sizes, large and small. It is known as a theory devised by the American accountant Ralph Elliott.
How to Read It, and What to Watch Out For
Judging the wave count — that is, which wave the market is currently in — is prone to differing interpretation among analysts, and the shape of a wave often becomes clear only in hindsight. It is not a method for accurately predicting future price movement, and should be treated as no more than one analytical approach for organizing a view of the market.