The Elliott Wave Principle also introduces the concept of Fibonacci ratios to determine the potential price targets and retracement levels for a given wave. Fibonacci ratios, such as 0.618, 0.382, and 1.618, are derived from the Fibonacci sequence and are believed to represent natural mathematical relationships found in various phenomena, including financial markets.

Traders and analysts who use the Elliott Wave Principle attempt to identify these wave patterns on price charts and use them to make predictions about future market movements. By recognizing the current wave count and applying the principles of wave formation, practitioners of the Elliott Wave theory aim to anticipate potential turning points, target levels, and the overall direction of the market.

However, it’s important to note that the Elliott Wave Principle is a subjective form of analysis and interpretation. Different analysts may come up with different wave counts and interpretations, leading to some degree of subjectivity and disagreement among practitioners. As with any form of technical analysis, it is recommended to use the Elliott Wave Principle in conjunction with other tools and indicators to increase the probability of making accurate predictions.