Eliot believes that the fluctuation of both stock and commodity prices, like waves in nature, has a considerable degree of regularity, showing the characteristics of periodic cycle, and any fluctuation is followed.
Eliot believes that the characteristics of waves are: the rise and fall of stock price index will appear alternately; Push wave and adjustment wave are the two most basic forms of price fluctuation. Push waves (that is, waves consistent with the market trend) can be divided into five small waves, generally represented by 1 wave, the second wave, the third wave, the fourth wave and the fifth wave; The adjustment wave can also be divided into three small waves, which are usually represented by A wave, B wave and C wave. After the above eight waves (five ups and three downs) are completed, one cycle is completed and the trend enters the next eight-wave cycle. The length of time will not change the shape of waves, because the market will still develop according to its basic shape. Waves can be stretched or contracted, but their basic form remains the same.
In a word, wave theory can be summarized in one sentence, that is "eight-wave cycle".