CMT Elliott Wave Theory 1 — Questions and Answers
Question 1: Who developed Elliott Wave Theory after studying 75 years of stock market data in the 1930s?
- Robert Prechter
- Ralph Nelson Elliott (Correct answer)
- Charles Dow
- W.D. Gann
Correct answer: Ralph Nelson Elliott
Ralph Nelson Elliott developed the theory bearing his name in the 1930s after extensive study of historical market data.
Question 2: How many total waves make up one complete Elliott Wave cycle (full impulse plus corrective phase)?
- 5 waves
- 3 waves
- 8 waves (Correct answer)
- 13 waves
Correct answer: 8 waves
A complete Elliott Wave cycle consists of 8 waves: 5 motive impulse waves (1–5) followed by 3 corrective waves (A–B–C).
Question 3: Which inviolable Elliott Wave rule states that Wave 3 can never be the shortest among Waves 1, 3, and 5?
- Wave overlap rule
- Wave 2 retracement rule
- Wave 3 length rule (Correct answer)
- Wave alternation rule
Correct answer: Wave 3 length rule
Elliott's Wave 3 length rule prohibits Wave 3 from being the shortest of the three impulse waves (1, 3, and 5) — it is one of three rules that cannot be violated.
Question 4: According to Elliott Wave rules, Wave 4 must not overlap with which prior wave's price territory?
- Wave 2
- Wave 1 (Correct answer)
- Wave 3
- Wave 5
Correct answer: Wave 1
The non-overlap rule states that Wave 4 cannot enter the price territory of Wave 1, distinguishing a valid impulse from a corrective structure.
Question 5: What Fibonacci ratio is most commonly used to project the length of Wave 3 relative to Wave 1?
- 0.618
- 1.382
- 1.618 (Correct answer)
- 2.618
Correct answer: 1.618
Wave 3 frequently extends to 1.618 times the length of Wave 1, reflecting the golden ratio's prominence in Elliott Wave projections.
Question 6: What percentage range does Wave 2 most commonly retrace of Wave 1 in an Elliott impulse sequence?
- 23.6% to 38.2%
- 50% to 61.8% (Correct answer)
- 76.4% to 88.6%
- 100% or more
Correct answer: 50% to 61.8%
Wave 2 commonly retraces 50% to 61.8% of Wave 1 but must not reach 100%, as that would violate the rule that Wave 2 cannot exceed Wave 1's origin.
Question 7: Which wave in an Elliott impulse sequence is typically associated with the highest volume, strongest momentum, and widest price spread?
- Wave 1
- Wave 3 (Correct answer)
- Wave 5
- Wave B
Correct answer: Wave 3
Wave 3 is typically the strongest and most dynamic wave, exhibiting the highest volume and momentum — it is often called the 'heart' of the impulse.
CMT Elliott Wave Theory 1
Who developed Elliott Wave Theory after studying 75 years of stock market data in the 1930s?