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Elliot Wave Techniques Simplified: How to Use the Probability Matrix to Profit on More Trades by Bennett McDowell

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CHAPTER 2

Manias, Panics, Bubbles, and Crashes

Everything You Need to Know About the Psychology That Creates Financial Market Events

The Elliott Wave Principle states that bullish and bearish crowd psychology moves in five waves. At the end of Wave 5, the crowd shifts in mood causing a change in trend.

OPTIMISM AND PESSIMISM ARE WHAT DRIVE THE MARKETS

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Usually the crowd’s mood shifts between optimism and pessimism in predictable patterns, or waves. Typically the crowd will linger in a state of optimism longer than it should, feeding on itself and causing irrationally inflated bubbles and inflated prices. At some point, the crowd will eventually ...

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