Understanding the Basics:
Impulse Waves (1, 3, 5): These move in the direction of the main trend and consist of five smaller waves. They are typically followed by a corrective wave (2 or 4).
Corrective Waves (2, 4): These move against the trend and are usually composed of three smaller waves (A, B, C).
Wave Degree: Elliot Wave patterns occur across different time scales, from minutes to years. Understanding the degree (e.g., Grand Supercycle, Cycle, Primary, etc.) helps in recognizing the wave's significance.
@Key Concepts:
Fractals: Each wave can be broken down into smaller waves of the same pattern, making the market behavior fractal in nature.
@Wave Extensions: Sometimes, one of the impulse waves (often Wave 3) can extend beyond the standard length, leading to extended patterns.
@Guidelines and Rules:
Wave 2 never retraces more than 100% of Wave 1.
Wave 3 is never the shortest among Waves 1, 3, and 5.
Wave 4 does not overlap with the price territory of Wave 1, except in rare cases like a "diagonal triangle".
#Practical Application:
Pattern Recognition: Start by practicing pattern recognition on historical charts. Look for clear five-wave impulses and three-wave corrections.
#Counting Waves: Begin with larger time frames to identify the primary trend and then zoom into smaller time frames for more detailed wave counts.
#Using Ratios: Fibonacci ratios are often used in Elliot Wave analysis for projections. Wave 3 is often 1.618 times the length of Wave 1, and Wave 5 can be equal to Wave 1 or extend to 1.618 times Wave 1.
#Corrections: Understand different types of corrections (zigzags, flats, triangles) and how they might unfold in Wave 2, 4, or the corrective phase A, B, C.
#Volume and Momentum: Use volume and momentum indicators to confirm wave counts. For instance, volume typically increases in the direction of the main trend.