There are three important aspects of wave theory -- pattern, ratio, and time -- in that order of importance. Pattern refers to the wave patterns or formations that comprise the most important element of the theory. Ratio analysis is useful in determining retracement points and price objectives by measuring the relationships between the different waves. Finally, time relationships also exist and can be used to confirm the wave patterns and ratios, but are considered by some Elliotticians to be less reliable in market forecasting.
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The numbers shown so far 1,2,3,5,8,13,21,34,55,89,144 -- are not just random numbers. They are part of the Fibonacci number sequence, which forms the mathematical basis for the Elliott Wave Theory.
John Murphy, Technical Analysis of the Financial Markets
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