Индикатор Форекс Elliott Wave

If you’ve decided to work on your forex trading strategy in using new technical analysis methods, the Elliot Wave theory is a good place to start. Despite being a hundred years old, many forex traders today use it to keep track of price patterns and predict trends. This, in turn, allows them to take advantage of both short and long-term trends. Because the Elliot Wave Theory is a prevalent concept in the world of stock and forex trading, it’s worth understanding to make better sense of different charts and spot favorable trading opportunities. 

Let’s explore what Elliott Wave Theory is, the different types of waves involved, and how it can be used for forex trading. 

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What is The Elliot Wave Theory? 

In the s, Ralph Nelson Elliott came up with a technique to analyze stock price movements. After looking at many decades of stock market data across different indices, the American accountant and author managed to predict the stock market nadir. At the time, many investors believed that stock markets behaved in an unpredictable and random fashion. On the other hand, he believed that markets follow recurring cycles or waves. He was able to identify specific fractal patterns, which he referred to as ‘waves.’

Price Movements in Waves

His theory is that you can predict stock and forex price movement by looking at the price history. But how? He explained that markets move in wave-like patterns that occur as a result of investor psychology. Traders who find a favorable opportunity and make a profit from a market trend are referred to as ‘riding the wave.’

Perhaps the most important part of the theory is that they’re fractal. That means you can notice repetitions of the wave pattern across any timeframe. If you pull up a one-year chart for any forex pair, you’ll be able to spot the signature wave pattern. And if you zoom in to look at a single tick chart, you can still see the basic wave pattern.  

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The Elliot Wave Pattern

Speaking of which, the Elliott wave theory is based on a specific wave pattern. It&#;s the set of movements that Elliott noted as the fundamental aspect of stock market price action. The entire pattern is made up of eight waves, and each one moves in the opposite direction of the last wave. So, if one wave moves upwards, the subsequent wave will move downwards. 

The movement of the waves is dependent on the current trend, so it requires understanding whether the current trend is bullish or bearish. The first five waves in the pattern, which is called the motive phase, will always move in the direction of the overall current trend, whether it&#;s bullish or bearish. The last three waves make up the corrective phase, and they move against the overall current trend. 

Once these eight waves are completed, the motive phase will become the first wave of a much wider pattern. The corrective phase will form the second wave, and so on, allowing the pattern to continue infinitely. This is what gives the Elliott wave pattern its fractal nature.  

Types of Phases

In any Elliott wave pattern, you’ll see two types of phases: motive and corrective. 

Motive Phase 

These are then made up of 5 waves that make a net movement in the same direction. It includes the most common motive wave, wave 5, making it easier to spot. Besides showing the highest possible price level, it indicates the lowest price level, allowing forex traders to take on favorable positions. 

Among the five waves that make up this phase, three are motive waves, which means they follow the general market trend, while the other two are corrective trends. Therefore, they retrace the preceding waves and move in the opposite direction. 

For a wave formation to be called a motive phase, it must meet three conditions: 

• Wave 2 can’t retrace beyond percent of wave 1. This means it can’t indicate a greater price movement than wave 1. 
• Wave 3 can’t be the shortest of the 5 waves in the motive phase. 
• Wave 4 can’t retrace beyond wave 3 in the pattern formation.

Corrective Phase

This phase is made up of three waves that move against the existing market trend. Typically, the first and third waves, A and C, move downwards, while wave B retraces A. If the market was showing bullish sentiment, it signals that the market is now correcting itself from the last trend. It also distinguishes the highest price level in the market, which is important for traders to sell their positions or take on short positions.  

For a wave formation to be a corrective phase, it must follow three conditions: 

• Wave A must be less than 50 percent of the last wave, wave 5. 
• Wave B must be the smallest increase in the current wave formation. 
• Wave C must be the longest to show the fall in price movement. 

Also read:

Different Wave Patterns

Let’s take a look at the different wave patterns that these formations make: 

Flat 

If the market is currently showing an uptrend, a flat wave pattern shows a downward market momentum. This is usually a signal for traders to exit the market. And if the market is showing a downtrend, the flat wave pattern shows upward momentum and signals traders to enter the market.    

Zig-Zag 

This is a corrective wave pattern that indicates a strong upward or downward price movement. Waves A and C are motive waves that move in the direction of the market, while B moves against the market. During a continued uptrend, the zig-zag wave pattern brings down the price of a currency pair, signaling traders to sell. But if it’s a continued downtrend, it signals traders to buy. 

Diagonal

The diagonal pattern has several waves that move in the direction of the market. It comprises multiple sub-waves with no specific count, and it shows traders that the existing momentum is strong. It also signals appropriate entry or exit levels depending on whether the market is bullish or bearish.  

Triangle 

This is a corrective pattern comprising five waves that balance the existing market direction. It includes three corrective waves and two motive waves. In a contraction, the waves become smaller in length, while expansions show the waves increasing in length. In simple terms, this pattern indicates that the market is moving back to its previous position.  

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How Do Elliott Waves Work? 

According to Ralph Nelson Elliott, the signature wave pattern follows specific rules. 

• Level 5, which is where wave 5 ends and the corrective phase begins, is the peak of an individual wave pattern. In a bull market, this indicates the highest price, where traders get an exit signal. On the other hand, in a bear market, level 5 indicates the lowest price. 
• Level 2, which is where wave 2 ends, is the lowest price for a specific forex pair, and it&#;s where traders get an entry signal. If the market is bearish, level 2 indicates the highest price. 

Keep in mind that within each phase, certain waves move against the phase. So, in the motive phase, which moves upward in a bull market, wave 2 and 4 move downward. And in the corrective phase, which goes downward, wave B moves upward as it retraces from A. It’s important that these waves aren’t bigger than the preceding waves. Therefore,

• Wave 2 can’t be bigger than wave 1
• Wave 4 can’t be bigger than wave 3
• Wave B can’t be bigger than wave A

Interpreting the Theory 

Here&#;s how you can interpret the Elliott wave theory: The first five waves of the pattern follow the overall market trend. So, if the market is showing a bullish or bearish trend, waves 1, 2, 3, 4, and 5 will follow this trend, even though waves 2 and 4 are retracements. 

This is followed by three more waves, A, B, and C, which make up the corrective phase. The last three aren’t numbered because they move in a different direction from the first phase. So, if the first phase moves up, the corrective phase will go downward and vice versa in the event of a bear market. Then, the motive and corrective phase become the first and second waves of the next bigger wave pattern. Although the pattern continues, the timespan of each wave varies. 

Does Elliott Wave Theory Work For Forex Trading?

All this talk about the Elliott wave theory begs the question, &#;Does it work for forex trading?&#; Yes, it&#;s possible to use Elliott waves in Forex trading, as investors who apply it are able to take advantage of favorable opportunities. 

What’s The Relationship Between Elliot Waves and Fibonacci Theory? 

If you’re still a beginner, you may struggle to implement the theory as part of your strategy. At this stage, a strategy with more objective rules is much easier to track. That’s why many forex traders combine it with other theories for a well-rounded strategy. That’s where the Fibonacci theory comes in. 

Since Elliott wave formations are highly subjective and fractal in nature, you can apply the Fibonacci theory for a comprehensive strategy. Using Fibonacci retracement levels, you can predict when the corrective waves 2, 4, and B will end. Similarly, you can use Fibonacci extensions to predict when impulse waves 1, 3, 5, A, and C will end. 

According to the Fibonacci system, wave 2 can be 50, , , or percent of wave 1 since these percentages are classic retracement levels over 50 percent. Since wave 3 is an extension of wave 1, it can reach percent of the first motive wave. While it sounds a little complicated, rest assured that you won’t need to do this manually. Most trading platforms come with a Fibonacci drawing tool as part of their charting software. With this tool, you’ll be able to plot Fibonacci levels on an Elliott wave. 

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Using Fibonacci Retracements and Extensions 

In case you weren’t aware of what Fibonacci retracements are, here’s a quick rundown. These levels are horizontal lines on your chart that show the possible locations for support and resistance levels of a forex pair, stock price, etc. It indicates the extent to which the prior movement will be retraced while the direction of the overall trend continues. 

Although Fibonacci retracements help predict support levels, extensions can narrow down possible price targets in the overall trend. They go beyond the usual retracement levels, and you can use these extensions to set stop-loss or take-profit orders. 

Using Elliot Waves For Forex Trading in

If you plan on using the Elliott wave theory for forex trading strategy in , start by finding out if the current market is facing a bullish or bearish trend. Then, you must determine if it’s currently in the motive or corrective phase of the pattern. Of course, finding out the current phase also depends on the timeframe. It’s possible that a day chart shows a motive phase while a one-year chart shows a corrective phase. 

That’s why the theory has gained traction among swing traders, who try to capitalize on price movements in wider trends. They do so by finding out which wave the market is currently in and where it will move next. Let’s suppose the overall trend of the market is moving upward. One example is that they may buy while it’s in the motive phase and sell once the corrective phase begins.   

That being said, it’s complicated to implement an Elliott wave strategy because it takes time to master the skill of identifying different waves and phases. Before you start trying your hand at using Elliott waves in forex trading, it’s recommended to read pricing charts for different forex pairs across different time frames. It’s an effective practice exercise that improves your ability to spot wave patterns and builds confidence in using the theory for forex trading.    

Read:

1) Elliott Wave Theory: Modern Theory for 21st Century Market

2) Fibonacci

3) Motive Waves

4) Elliott Waves Personality

5) Corrective Waves

6) 14 Day Trial

1) Elliott Wave Theory: Modern Theory for 21st Century Market

What is Elliott Wave Theory?

Elliott Wave Theory is named after Ralph Nelson Elliott (28 July – 15 January ). He was an American accountant and author. Inspired by the Dow Theory and by observations found throughout nature, Elliott concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves.

Elliott was able to analyze markets in greater depth, identifying the specific characteristics of wave patterns and making detailed market predictions based on the patterns. Elliott based part his work on the Dow Theory, which also defines price movement in terms of waves, but Elliott discovered the fractal nature of market action. Elliott first published his theory of the market patterns in the book titled The Wave Principle in

Basic Principle of the &#;s Elliott Wave Theory

Simply put, movement in the direction of the trend is unfolding in 5 waves (called motive wave) while any correction against the trend is in three waves (called corrective wave). The movement in the direction of the trend is labelled as 1, 2, 3, 4, and 5. The three wave correction is labelled as a, b, and c. These patterns can be seen in long term as well as short term charts.

Ideally, smaller patterns can be identified within bigger patterns. In this sense, Elliott Waves are like a piece of broccoli, where the smaller piece, if broken off from the bigger piece, does, in fact, look like the big piece. This information (about smaller patterns fitting into bigger patterns), coupled with the Fibonacci relationships between the waves, offers the trader a level of anticipation and/or prediction when searching for and identifying trading opportunities with solid reward/risk ratios.

The Five Waves Pattern (Motive and Corrective)

In Elliott&#;s model, market prices alternate between an impulsive, or motive phase, and a corrective phase on all time scales of trend. Impulses are always subdivided into a set of 5 lower-degree waves, alternating again between motive and corrective character, so that waves 1, 3, and 5 are impulses, and waves 2 and 4 are smaller retraces of waves 1 and 3.

In Figure 1, wave 1, 3 and 5 are motive waves and they are subdivided into 5 smaller degree impulses labelled as ((i)), ((ii)), ((iii)), ((iv)), and ((v)). Wave 2 and 4 are corrective waves and they are subdivided into 3 smaller degree waves labelled as ((a)), ((b)), and ((c)). The 5 waves move in wave 1, 2, 3, 4, and 5 make up a larger degree motive wave (1)

Corrective waves subdivide into 3 smaller-degree waves, denoted as ABC. Corrective waves start with a five-wave counter-trend impulse (wave A), a retrace (wave B), and another impulse (wave C). The 3 waves A, B, and C make up a larger degree corrective wave (2)

In a bear market the dominant trend is downward, so the pattern is reversed—five waves down and three up

Wave Degree

Elliott Wave degree is an Elliott Wave language to identify cycles so that analyst can identify position of a wave within overall progress of the market. Elliott acknowledged 9 degrees of waves from the Grand Super Cycle degree which is usually found in weekly and monthly time frame to Subminuette degree which is found in the hourly time frame. The scheme above is used in all of EWF&#;s charts.

The Rise of Algorithmic / Computer-based Trading

The development of computer technology and Internet is perhaps the most important progress that shape and characterize the 21st century. The proliferation of computer-based and algorithmic trading breed a new category of traders who trade purely based on technicals, probabilities, and statistics without the human emotional aspect. In addition, these machines trade ultra fast in seconds or even milliseconds buying and selling based on proprietary algos.

No doubt the trading environment that we face today is completely different than the one in the &#;s when Elliott first developed his wave principle. Legitimate questions arise whether Elliott Wave Principle can be applied in today&#;s new trading environment. After all, if it&#;s considered to be common sense to expect today&#;s cars to be different than the one in the &#;s, why should we assume that a trading technique from can be applied to today&#;s trading environment?

The New Elliott Wave Principle – What is Changing in Today&#;s Market

The biggest change in today&#;s market compared to the one in s is in the definition of a trend and counter-trend move. We have four major classes of market: Stock market, forex, commodities, and bonds. The Elliott Wave Theory was originally derived from the observation of the stock market (i.e. Dow Theory), but certain markets such as forex exhibit more of a ranging market.

In today&#;s market, 5 waves move still happen in the market, but our years of observation suggest that a 3 waves move happens more frequently in the market than a 5 waves move. In addition, market can keep moving in a corrective structure in the same direction. In other words, the market can trend in a corrective structure; it keeps moving in the sequence of 3 waves, getting a pullback, then continue the same direction again in a 3 waves corrective move. Thus, we believe in today&#;s market, trends do not have to be in 5 waves and trends can unfold in 3 waves. It&#;s therefore important not to force everything in 5 waves when trying to find the trend and label the chart.

2) Fibonacci

Introduction

Leonardo Fibonacci da Pisa is a thirteenth century mathematician who discovered the Fibonacci sequence. In , he published a paper entitled Liber Abacci which introduced the decimal system. The basis of the work came from a two-year study of the pyramids at Giza. Fibonacci is most famous for his Fibonacci Summation series which enabled the Old World in the 13th century to switch from Roman numbering (XXIV = 24) to the Arabic numbering (24) that we use today. For his work in mathematics, Fibonacci was awarded the equivalent of today&#;s Nobel Prize.

Fibonacci Summation Series

One of the most popular discoveries by Leonardo Fibonacci is the Fibonacci Summation series. This series takes 0 and adds 1 as the first two numbers. Succeeding numbers in the series adds the previous two numbers and thus we have 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 to infinity. The Golden Ratio () is derived by dividing a Fibonacci number with another previous Fibonacci number in the series. As an example, 89 divided by 55 would result in

Fibonacci Ratio Table

Various Fibonacci ratios can be created in a table shown below where a Fibonacci number (numerator) is divided by another Fibonacci number (denominator). These ratios, and several others derived from them, appear in nature everywhere, and in the financial markets. They often indicate levels at which strong resistance and support will be found. They are easily seen in nature (seashell spirals, flower petals, structure of tree branches, etc), art, geometry, architecture, and music.

Some of the key Fibonacci ratios can be derived as follow:

• is derived by dividing any Fibonacci number in the sequence by another Fibonacci number that immediately follows it. For example, 8 divided by 13 or 55 divided by 89
• is derived by dividing any Fibonacci number in the sequence by another Fibonacci number that is found two places to the right in the sequence. For example, 34 divided by 89
• (Golden Ratio) is derived by dividing any Fibonacci number in the sequence by another Fibonacci number that is found 1 place to the left in the sequence. For example, 89 divided by 55, divided by 89

Fibonacci Retracement and Extension

Fibonacci Retracement in technical analysis and in Elliott Wave Theory refers to a market correction (counter trend) which is expected to end at the areas of support or resistance denoted by key Fibonacci levels. The market is then expected to turn and resume the trend again in the primary direction.

Fibonacci Extension refers to the market moving with the primary trend into an areas of support and resistance at key Fibonacci levels where target profit is measured. Traders use the Fibonacci Extension to determine their target profit.

Below is the list of important Fibonacci Retracement and Fibonacci Extension ratios for the financial market:

Relation Between Fibonacci and Elliott Wave Theory

Fibonacci Ratio is useful to measure the target of a wave&#;s move within an Elliott Wave structure. Different waves in an Elliott Wave structure relates to one another with Fibonacci Ratio. For example, in impulse wave:

• • Wave 2 is typically 50%, %, %, or % of wave 1
• • Wave 3 is typically % of wave 1
• • Wave 4 is typically %, %, or % of wave 3
• • Wave 5 is typically inverse &#; % of wave 4, equal to wave 1 or % of wave 1+3

Traders can thus use the information above to determine the point of entry and profit target when entering into a trade.

3) Motive Waves

In Elliott Wave Theory, the traditional definition of motive wave is a 5 wave move in the same direction as the trend of one larger degree. There are three different variations of a 5 wave move which is considered a motive wave: Impulse wave, Impulse with extension, and diagonal.

EWF prefers to define motive wave in a different way. We agree that motive waves move in the same direction as the trend and we also agree that 5 waves move is a motive wave. However, we think that motive waves do not have to be in 5 waves. In today&#;s market, motive waves can unfold in 3 waves. For this reason, we prefer to call it motive sequence instead.

Impulse

Guidelines

• • Impulse wave subdivide into 5 waves. In Figure 2, the impulse move is subdivided as 1, 2, 3, 4, 5in minor degree
• • Wave 1, 3, and 5 subdivision are impulse. The subdivision in this case is ((i)), ((ii)), ((iii)), ((iv)), and ((v)) in minute degree.
• • Wave 2 can&#;t retrace more than the beginning of wave 1
• • Wave 3 can not be the shortest wave of the three impulse waves, namely wave 1, 3, and 5
• • Wave 4 does not overlap with the price territory of wave 1
• • Wave 5 needs to end with momentum divergence

Fibonacci Ratio Relationship

• • Wave 2 is 50%, %, %, or % of wave 1
• • Wave 3 is %, %, %, or % of wave
• • Wave 4 is %, %, or % of wave 3 but no more than 50%
• • There are three different ways to measure wave 5. First, wave 5 is inverse &#; % retracement of wave 4. Second, wave 5 is equal to wave 1. Third, wave 5 is % of wave

Impulse with Extension

Guidelines

• • Impulses usually have an extension in one of the motive waves (either wave 1, 3, or 5)
• • Extensions are elongated impulses with exaggerated subdivisions
• • Extensions frequently occur in the third wave in the stock market and forex market. Commodities market commonly develop extensions in the fifth wave

Leading Diagonal

Guidelines

• • Special type of motive wave which appears as subdivision of wave 1 in an impulse or subdivision of wave A in a zigzag
• • In Figure 4A, the leading diagonal is a subdivision of wave 1 in an impulse. In Figure 4B, the leading diagonal is a subdivision of wave A in a zigzag
• • Leading diagonal is usually characterized by overlapping wave 1 and 4 and also by the wedge shape but overlap between wave 1 and 4 is not a condition, it may or may not happen
• • The subdivision of a leading diagonal can be or The examples above show a leading diagonal with subdivision

Ending Diagonal

Guidelines

• • Special type of motive wave which appears as subdivision of wave 5 in an impulse or subdivision of wave C in a zigzag
• • In Figure 5A, the ending diagonal is a subdivision of wave 5 in an impulse. In Figure 5B, the ending diagonal is a subdivision of wave C in a zigzag
• • Ending diagonal is usually characterized by overlapping wave 1 and 4 and also by the wedge shape. However, overlap between wave 1 and 4 is not a condition and it may or may not happen
• • The subdivision of an ending diagonal is either or

Motive Sequence

Motive waves move in the same direction of the primary trend, but in today&#;s time, we believe it doesn&#;t necessarily have to be in impulse. We instead prefer to call it motive eunic-brussels.eu define a motive sequence simply as an incomplete sequence of waves (swings). The structure of the waves can be corrective, but the sequence of the swings will be able to tell us whether the move is over or whether we should expect an extension in the existing direction.

Motive sequence is much like the Fibonacci number sequence. If we discover the number of swings on the chart is one of the numbers in the motive sequence, then we can expect the current trend to extend further.

Motive Sequence: 5, 9, 13, 17, 21, 25, 29, …

4) Waves Personality

Wave 1 and wave 2

Wave 1: In Elliott Wave Theory, wave one is rarely obvious at its inception. When the first wave of a new bull market begins, the fundamental news is almost universally negative. The previous trend is considered still strongly in force. Fundamental analysts continue to revise their earnings estimates lower; the economy probably does not look strong. Sentiment surveys are decidedly bearish, put options are in vogue, and implied volatility in the options market is high. Volume might increase a bit as prices rise, but not by enough to alert many technical analysts

Wave 2: In Elliott Wave Theory, wave two corrects wave one, but can never extend beyond the starting point of wave one. Typically, the news is still bad. As prices retest the prior low, bearish sentiment quickly builds, and &#;the crowd&#; haughtily reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave two than during wave one, prices usually do not retrace more than % (see Fibonacci section below) of the wave one gains, and prices should fall in a three wave pattern

Wave 3

Wave 3: In Elliott Wave Theory, wave three is usually the largest and most powerful wave in a trend (although some research suggests that in commodity markets, wave five is the largest). The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to &#;get in on a pullback&#; will likely miss the boat. As wave three starts, the news is probably still bearish, and most market players remain negative; but by wave three&#;s midpoint, &#;the crowd&#; will often join the new bullish trend. Wave three often extends wave one by a ratio of

Wave 3 rally picks up steam and takes the top of Wave 1. As soon as the Wave 1 high is exceeded, the stops are taken out. Depending on the number of stops, gaps are left open. Gaps are a good indication of a Wave 3 in progress. After taking the stops out, the Wave 3 rally has caught the attention of traders

Wave 4

At the end of wave 4, more buying sets in and prices start to rally again. Wave four is typically clearly corrective. Prices may meander sideways for an extended period, and wave four typically retraces less than % of wave three. Volume is well below than that of wave three. This is a good place to buy a pull back if you understand the potential ahead for wave 5. Still, fourth waves are often frustrating because of their lack of progress in the larger trend.

Wave 5

Wave 5: In Elliott Wave Theory, wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top. Volume is often lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high but the indicators do not reach a new peak). At the end of a major bull market, bears may very well be ridiculed (recall how forecasts for a top in the stock market during were received)

The wave 5 lacks huge enthusiasm and strength found in the wave 3 rally. Wave 5 advance is caused by a small group of eunic-brussels.eugh the prices make a new high above the top of wave 3, the rate of power or strength inside wave 5 advance is very small when compared to wave 3 advance

Wave A, B, and C

Wave A: Corrections are typically harder to identify than impulse moves. In wave A of a bear market, the fundamental news is usually still positive. Most analysts see the drop as a correction in a still-active bull market. Some technical indicators that accompany wave A include increased volume, rising implied volatility in the options markets and possibly a turn higher in open interest in related futures markets

Wave B: Prices reverse higher, which many see as a resumption of the now long-gone bull market. Those familiar with classical technical analysis may see the peak as the right shoulder of a head and shoulders reversal pattern. The volume during wave B should be lower than in wave A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative

Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to times wave A or beyond

5) Corrective Waves

The classic definition of corrective waves is waves that move against the trend of one greater degree. Corrective waves have a lot more variety and less clearly identifiable compared to impulse waves. Sometimes it can be rather difficult to identify corrective patterns until they are completed. However, as we have explained above, both trend and counter-trend can unfold in corrective pattern in today&#;s market, especially in forex market. Corrective waves are probably better defined as waves that move in three, but never in five. Only motive waves are fives.

There are five types of corrective patterns:

• • Zigzag ()
• • Flat ()
• • Triangle ()
• • Double three: A combination of two corrective patterns above
• • Triple three: A combination of three corrective patterns above

Zigzag

Guidelines

• • Zigzag is a corrective 3 waves structure labelled as ABC
• • Subdivision of wave A and C is 5 waves, either impulse or diagonal
• • Wave B can be any corrective structure
• • Zigzag is a structure

Fibonacci Ratio Relationship

• • Wave B = 50%, %, % or % of wave A
• • Wave C = %, %, or % of wave A
• • If wave C = % of wave A, wave C can be a wave 3 of a 5 waves impulse. Thus, one way to label between ABC and impulse is whether the third swing has extension or not

Flat

A flat correction is a 3 waves corrective move labelled as ABC. Although the labelling is the same, flat differs from zigzag in the subdivision of the wave A. Whereas Zigzag is a structure, Flat is a structure. There are three different types of Flats: Regular, Irregular / Expanded, and Running Flats.

Regular Flats

Guidelines

• • A corrective 3 waves move labelled as ABC
• • Subdivision of wave A and B is in 3 waves
• • Subdivision of wave C is in 5 waves impulse / diagonal
• • Subdivision of wave A and B can be in any corrective 3 waves structure including zigzag, flat, double three, triple three
• • Wave B terminates near the start of wave A
• • Wave C generally terminates slightly beyond the end of wave A
• • Wave C needs to have momentum divergence

Fibonacci Ratio Relationship

• • Wave B = 90% of wave A
• • Wave C = %, %, or % of wave AB

Expanded Flats

Guidelines

• • A corrective 3 waves move labelled as ABC
• • Subdivision of wave A and B is in 3 waves
• • Subdivision of wave C is in 5 waves impulse / diagonal
• • Subdivision of wave A and B can be in any corrective 3 waves structure including zigzag, flat, double three, triple three
• • Wave B of the pattern terminates beyond the starting level of wave A
• • Wave C ends substantially beyond the ending level of wave A
• • Wave C needs to have momentum divergence

Fibonacci Ratio Relationship

• • Wave B = % of wave A
• • Wave C = % &#; % of wave AB

Running Flats

Guidelines

• • A corrective 3 waves move labelled as ABC
• • Subdivision of wave A and B is in 3 waves
• • Subdivision of wave C is in 5 waves impulse / diagonal
• • Subdivision of wave A and B can be in any corrective 3 waves structure including zigzag, flat, double three, triple three
• • Wave B of the pattern terminates substantially beyond the starting level of wave A as in an expanded flat
• • Wave C fails travel the full distance, falling short of the level where wave A ended
• • Wave C needs to have momentum divergence

Fibonacci Ratio Relationship

• • Wave B = % of wave A
• • Wave C = % &#; % of wave AB

Triangles

A triangle is a sideways movement that is associated with decreasing volume and volatility. Triangles have 5 sides and each side is subdivided in 3 waves hence forming structure. There are 4 types of triangles in Elliott Wave Theory: Ascending, descending, contracting, and expanding. They are illustrated in the graphic below

Guidelines

• • Corrective structure labelled as ABCDE
• • Usually happens in wave B or wave 4
• • Subdivided into three ()
• • RSI also needs to support the triangle in every time frame
• • Subdivision of ABCDE can be either abc, wxy, or flat

Double Three

Double three is a sideways combination of two corrective patterns. We&#;ve already looked at several corrective patterns including zigzag, flat, and triangle. When two of these corrective patterns are combined together, we get a double three. In addition,

Guidelines

• • A combination of two corrective structures labelled as WXY
• • Wave W and wave Y subdivision can be zigzag, flat, double three of smaller degree, or triple three of smaller degree
• • Wave X can be any corrective structure
• • WXY is a 7 swing structure

Fibonacci Ratio Relationship

• • Wave X = 50%, %, %, or % of wave W
• • Wave Y = %, %, or % of wave W
• • Wave Y can not pass % of wave W

Below are examples of different combinations of two corrective structures which form the double threes:

Above figure is a combination of a flat and a zigzag

Above figure is a combination of a flat and a triangle

Above figure is a combination of two double threes of lesser degree

Triple Three

Triple three is a sideways combination of three corrective patterns in Elliott Wave Theory

Guidelines

• • A combination of three corrective structures labelled as WXYXZ
• • Wave W, wave Y, and wave Z subdivision can be zigzag, flat, double three of smaller degree, or triple three of smaller degree
• • Wave X can be any corrective structure
• • WXYZ is an 11 swing structure

Fibonacci Ratio Relationship in Elliott Wave Theory

• • Wave X = 50%, %, %, or % of wave W
• • Wave Z = %, %, or % of wave W
• • Wave Y can not pass % of wave W or it can become an impulsive wave 3

Below are examples of different combinations of three corrective structures which form the triple threes:

Above figure is a combination of a flat, double three, and zigzag

Above figure is a combination of three double threes

Elliott wave analysis helps traders accomplish three crucial objectives: Identify the trend, stay with the trend, and know when the trend is over.

This course teaches you how to accomplish these objectives. Your instructor is one of the best in the world – Jim Martens, EWI&#;s Senior Currency Strategist. Jim has been applying Elliott to the markets, publicly, as an EWI analyst for over two decades.

In this online course, Jim shares with you valuable, practical techniques to help you formulate and execute your own forex trading strategy.

Bonus: Order now and get Basics of the Wave Principle FREE ($79 value)

This minute online video covers all the basics of the Elliott Wave Principle &#; from its rules and guidelines, to wave personalities, to wave structures, to Fibonacci relationships. By the time you&#;re done, you&#;ll know how to spot the basic formations in price data and what to expect next.

Meet Your Instructor:

Jim MartensChief Commodity Analyst

A year market veteran, Jim Martens has taught Elliott waves at dozens of trading seminars around the world and has always enjoyed interacting with subscribers. Jim began his study of R.N. Elliott’s Wave Principle in the mids, which led to a position with Sabin Commodities at the Commodity Exchange Center in New York. He joined EWI in and soon became the editor EWI’s Currency Outlook of our Currency & Commodities Forecast. In , Jim accepted an invitation to join Nexus Capital Ltd. as their Chief Technical Analyst. He returned to EWI in to lead our FX and cryptocurrency teams. Jim now runs our Commodities Pro Service and Commodity Junctures.

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Elliott Wave theory is one of the most accepted and widely used forms of technical analysis. It describes the natural rhythm of crowd psychology in the market, which manifests itself in waves. The essence of Elliott waves is that prices alternate between impulsive phases that establish the trend and corrective phases that retrace the trend. In their most basic and straightforward form, impulses contain 5 lower degree waves and corrections contain 3 lower degree waves.

Elliott Wave is fractal and the underlying pattern remains constant. The 5 + 3 waves define a complete cycle. They can form different patterns such as ending diagonals, expanded flats, zigzag corrections and triangles. Fifteen different degrees of waves can be identified with each of the 5 smart drawing tools, allowing users to visually identify different degrees of waves on a chart. The key to trading Elliott waves successfully is counting them correctly for which there are rules and guidelines.