What is wave analysis and how to use it?
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Every market has existing crowd psychology and based on this crowd psychology is a notion that markets follow specific patterns called Waves, which are the result of a natural rhythm of crowd psychology. There are 5 types of waves, namely Elliott wave, Neo wave, Sine wave, Wolfe wave, and Kondratieff Wave
Impulsive phases establish the trend while corrective phases retrace the trend. According to Eliott Wave, prices alternate between these two phases, with impulsive phases having five lower degree waves and corrective phases having three lower degree waves. They can form different patterns such as ending diagonals, expanded flats, zigzag corrections, and triangles.
Neo Wave theory is an expansion of Elliott Wave theory and considers time to be the most important logic. The completion of a pattern is determined by the time duration of the pattern segments. There are a lot of rules and regulations for Neo wave theory and corrective chart patterns such as the neutral triangle, the diametric formation, the 5th failure terminal, and the 3rd Extension Terminal.
Sine waves are based on advanced mathematics and you use this tool to identify the start and finish of a trending move as well as possible shifts in the trend. There are two lines the Sine Wave and the Lead Wave. The lines will either crossover or will run parallel from each other. When running parallel it indicates the price is trending. Crossovers between these lines could signal turning points and generate buy or sell signals under the right conditions.
Wolfe waves are based on the principle of supply and demand. There are patterns made up of 5 waves four of which define a wedge and the last extends beyond this wedge, which is usually traded. You can use this trading technique to predict the Estimated Price at Arrival (EPA) and an Estimated Time of Arrival (ETA).
The Kondratieff Wave is a cycle-like phenomenon affecting all markets. Proposed over a century ago this wave believes periods of evolution and self-correction in capitalist economies that were part of a regular, sinusoidal cycle. There are three phases that are repetitive: expansion, stagnation, and recession. There’s a period of change followed by each wave with new professions taking over and emerging industries.