Projecting Elliott Patterns in Different Degrees of Waves for Analyzing Financial Market Behavior

Abstract

In the financial market, investors rely on technical and fundamental indicators to estimate the price behavior of an asset to reduce investment risks. Indicators from time series of historical prices are widely used since the past behavior is expected to have a high probability of reflecting itself in future behavior. In this sense, Elliott waves can be used for this purpose since they can describe the patterns and relationships in such historical data. The rules to identify Elliott are well-defined. The challenge remains in projecting patterns with different time frames. Some studies consider Elliott waves for pattern prediction but don’t consider how the pattern will be formed. This paper presents a way to project different patterns of lower degrees onto waves of a higher-degree pattern. The solution is a modular model that uses Fibonacci proportions from wavelengths inside the patterns and thus chooses the pattern that is most likely to happen again, considering the type of pattern desired. The results show that the model is accurate when patterns of different degrees are projected.