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:
“I hear
the tide turning. Last
eager wave over-
taken and pulled back
by first wave of the ebb.”
—Denise Levertov (b. 1923)
“As no one can tell what was the Roman pronunciation, each nation makes the Latin conform, for the most part, to the rules of its own language; so that with us of the vowels only A has a peculiar sound.”
—Henry David Thoreau (1817–1862)