Elliott Wave Principle & Mass Psychology
Foundation of wave structure, chart geometry & natural market proportion.
Mass Psychology in Price
Markets are crowds reacting to uncertainty. Fear and greed produce patterns that repeat across all timeframes.
Price movement is the geometry of collective emotion.
A wave is not just data — it is behavior made visible.
Geometry Creates Market Structure
Visual structure reveals intent:
- Strong trend → clean upward or downward slope
- Weak trend → overlapping bars & reduced momentum
- Shallow vs deep retracements → confidence shift
Proportion Before Wave Counts
If the proportions look wrong — the wave count is wrong.
- Length rhythm → consistency of distance traveled
- Time rhythm → duration balance
- Alternation → shifts in volatility
Analysts must see proportion before placing labels.
Swings vs Elliott Waves
Not all highs and lows are waves.
| Price Swing | Elliott Wave |
|---|---|
| Any fluctuation | Meaningful structure |
| No psychological story | Reflects crowd emotions |
| Hard to predict | Geometric rules apply |
Fibonacci Harmony (Natural Proportion)
Financial markets reflect universal growth ratio — 0.618 and its expansions.
- Retracements show correction depth
- Extensions show trend strength
- Symmetry = emotional balance in waves
Impulses show expansion (1.618 / 2.618)
Corrections show retracement (0.382 / 0.618)
Trends vs Corrections (Emotion Map)
| Structure | Behavior | Emotion |
|---|---|---|
| Impulse (Trend) | Directional expansion | Optimism → Euphoria |
| Correction | Sideways / Retrace | Uncertainty → Fear Relief |
Practical Exercises
- Mark major highs/lows and compare distances
- Observe which swings overlap → find fatigue
- Check if retracements compress near 0.618
- Note tempo slowdowns at correction boundaries
📝 Key Summary
- Waves are the visual form of crowd psychology
- Geometry + proportion define valid market structure
- Fibonacci laws govern expansion & retracement
- Foundation for Impulses (Ch.2) & Corrections (Ch.4)