What it is:
How it works/Example:
Elliot Wave Theory is a method for predicting stock prices by identifying certain trading patterns. Specifically, the theory states that markets move up in a series of five waves but move down in a series of three waves. The theory looks to investor psychology for key information.
Generally speaking, though, a "wave" is a term used to describe a new way of doing things. For example, Congress could pass new legislation to encourage "crowdfunding," which in turn could drive a new wave of startups who get their capital from online, fund-raising websites. The change could forever change the pathways through which capital reaches companies, and as a result more people may engage in the startup economy. This in turn could create markets for other crowdfunding websites, due diligence consulting firms, startup legal services and branding work.