Elliott Wave Rules and Guidelines
A correct Elliott wave "count" must observe three rules:
- Wave 2 always retraces less than 100% of wave 1.
- Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3 and 5.
- Wave 4 does not overlap with the price territory of wave 1, except in the rare case of a diagonal triangle.
A common guideline observes that in a five-wave pattern, waves 2 and 4 will often take alternate forms; a sharp move in wave 2, for example, will suggest a mild move in wave 4. Corrective wave patterns unfold in forms known as zigzags, flats, or triangles. In turn these corrective patterns can come together to form more complex corrections.
Read more about this topic: Elliott Wave Principle
Famous quotes containing the words wave and/or rules:
“Children are as destined biologically to break away as we are, emotionally, to hold on and protect. But thinking independently comes of acting independently. It begins with a two-year-old doggedly pulling on flannel pajamas during a July heat wave and with parents accepting that the impulse is a good one. When we let go of these small tasks without anger or sorrow but with pleasure and pride we give each act of independence our blessing.”
—Cathy Rindner Tempelsman (20th century)
“Let’s start with the three fundamental Rules of Robotics.... We have: one, a robot may not injure a human being, or, through inaction, allow a human being to come to harm. Two, a robot must obey the orders given it by human beings except where such orders would conflict with the First Law. And three, a robot must protect its own existence as long as such protection does not conflict with the First or Second Laws.”
—Isaac Asimov (1920–1992)