Developed by Ralph Nelson Elliott in the 1930s, the theory says a trend unfolds in five waves, three impulsive and two corrective, followed by a three-wave correction labelled A, B and C. Each wave subdivides into the same pattern at a smaller scale.
There are a few hard rules. Wave two cannot retrace all of wave one, wave three cannot be the shortest of the three impulse waves, and wave four cannot overlap wave one's territory in a standard impulse. Beyond those, most of the framework is guidelines rather than rules.
The appeal is that it offers a complete description of market behaviour at all scales. The problem is that it offers too many valid alternative counts, so it explains everything after the fact and commits to very little in advance. See elliott-wave-criticism before building anything on it.
Related: impulse-wave, corrective-wave, elliott-wave-criticism, wave-extension, dow-theory