Elliott Wave Patterns and Guidelines

Source: Frost & Prechter, Elliott Wave Principle

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ew_impulse_wave: Impulse Wave

The impulse wave is a five-wave structure that moves in the direction of the main trend and represents the most fundamental pattern in Elliott Wave Theory. It is the most common form among all motive waves and can be observed across any timeframe. Wherever a market trend exists, an impulse wave is invariably operating within it.

Basic Structure

• 5-Wave Composition: Progresses as waves 1-2-3-4-5
• Odd Waves (1, 3, 5): Motive waves — all are actionary waves moving in the trend direction
• Even Waves (2, 4): Corrective waves — retracements against the trend
• Sub-wave 3: Must exhibit an impulse wave structure (if this condition is not met, the entire count must be reassessed)

Core Rules (Inviolable)

These three rules are absolute "laws" in Elliott Wave analysis. If even one is violated, the count cannot be classified as an impulse wave.

Rule	Description	Consequence of Violation
Wave 2 Constraint	Wave 2 cannot retrace beyond the starting point of wave 1	Impulse wave invalidated
Wave 3 Shortest Prohibition	Wave 3 cannot be the shortest among waves 1, 3, and 5	Impulse wave invalidated
Wave 4 Overlap Prohibition	Wave 4 cannot enter the price territory of wave 1 (except in diagonals)	Reclassified as diagonal

Validation Rules

IF wave 4 enters the price range of wave 1 → Not an impulse wave
IF any actionary wave (1, 3, 5) has a corrective structure → Not an impulse wave
IF sub-wave 3 is not an impulse wave → Pattern requires reassessment
IF wave 3 is the shortest → Absolutely not an impulse wave

Practical Application

• Real-time verification during wave progression: Monitor whether wave 4 violates wave 1 territory as it forms — this allows immediate validation of the impulse wave count
• Wave 3 strength confirmation: Verify that wave 3 is clearly longer than wave 1. Also check whether volume expands explosively during wave 3. A wave 3 without accompanying volume should raise suspicion of a counting error
• Wave 5 target setting: The expected length of wave 5 can be estimated through the relationship between waves 1 and 3 (see Equality Guideline)
• RSI/MACD divergence: When momentum indicators at the wave 5 peak register lower than at the wave 3 peak, this divergence serves as a strong supporting signal that the impulse wave completion is imminent

Market-Specific Characteristics

• Equities: Wave 3 extension is most common — the phase where broad public participation begins
• Commodities: Wave 5 extension is relatively frequent — supply shortages or speculative euphoria tend to concentrate at the end
• Forex: Wave 1 extension also occurs frequently — when initial shocks such as central bank policy shifts are significant
• Cryptocurrency: Both wave 3 and wave 5 extensions are frequent, and due to high volatility, wave 4–wave 1 overlap must be verified with even greater rigor

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ew_extension: Extension

An extension occurs when one of the three actionary waves (1, 3, or 5) within an impulse wave elongates significantly, revealing a distinct five-wave subdivision internally. When an extension develops, the overall impulse wave appears to form a 9-wave pattern on the surface, though technically the 9-wave and 5-wave structures are identical. Accurately identifying extensions provides critical insight into where the market stands within its current trend.

Extension Characteristics

• Frequency: In equity markets, wave 3 extensions are overwhelmingly the most common
• Re-extension: An extension can occur within an extension (particularly wave 3 of a wave 3 extension)
• Single extension: Typically only one wave extends within a given impulse wave
• Equality: The two non-extended waves tend to be similar in length. This property can be used to forecast the length of an incomplete wave

Extension Patterns by Market

Market	Primary Extension	Characteristics
Equities	Wave 3	Most frequent; accompanied by strong momentum and volume explosion
Commodities	Wave 5	Relatively high frequency; final speculative blow-off phase
Forex	Wave 1/3/5	Evenly distributed; dependent on monetary policy events
Cryptocurrency	Wave 3/5	Extreme FOMO psychology makes wave 5 extensions also frequent

Validation Rules

IF equity market AND wave 3 extension → Normal pattern
IF commodity market AND wave 5 extension → Relatively common
IF wave 1 ≈ wave 3 in length → Increased probability of wave 5 extension
IF wave 3 extension → Wave 5 expected to resemble wave 1 in form
IF wave 5 extension → Watch for fast, deep retracement (double retracement) after completion

Measurement Guidelines

• Extension ratio: Typically 1.618× or 2.618× the length of the other two actionary waves
• Equality principle: Non-extended waves tend to be similar in length — knowing one allows prediction of the other
• Time relationship: Extended waves are longer not only in price but also in duration
• Double retracement: After a wave 5 extension completes, the market tends to retrace sharply to the starting point of the extension, then rally back to near the extension's endpoint — a distinctive pattern to anticipate

Practical Application

• Early identification: When wave 3 exceeds 1.618× the length of wave 1, actively consider a wave 3 extension
• Target measurement: Set the extension target as non-extended wave × 1.618 or × 2.618
• Wave 5 prediction: Once a wave 3 extension is confirmed, wave 5 is likely similar in length to wave 1 — add the wave 1 length to the wave 4 endpoint to calculate the wave 5 target
• Post-extension retracement preparation: Especially after a wave 5 extension, an extremely rapid price decline can follow — profit-taking plans should be established in advance

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ew_truncation: Truncation

A truncation (formerly called a "failure") occurs when wave 5 fails to surpass the endpoint of wave 3. It develops when market energy is exhausted after an extremely powerful wave 3. Since large-degree truncations have been very rare since 1932, truncation should never be the first choice in wave counting.

Identification Criteria

• Price condition: Wave 5 endpoint falls short of wave 3 endpoint (in a bullish impulse, wave 5 high < wave 3 high)
• Structural condition: Wave 5 must still maintain a complete five-wave subdivision internally. If the internal structure of wave 5 is not a five-wave pattern, it cannot be classified as a truncation
• Preceding condition: A powerful wave 3 must precede it — if wave 3 was unremarkable, the probability of truncation is extremely low
• Confirmation condition: A strong reversal movement must follow after wave 5 completion

Validation Rules

IF wave 5 endpoint ≥ wave 3 endpoint → Not a truncation (normal impulse)
IF wave 5 internal structure ≠ 5-wave → Truncation cannot be established
IF wave 3 was weak → Truncation probability very low
IF large degree → Exercise extreme caution in truncation identification

Practical Application

• Internal structure verification: Always confirm on lower timeframes that wave 5 internally contains a complete five-wave structure
• Volume analysis: A truncated wave 5 typically appears alongside a marked decline in volume. Severe divergence on momentum indicators (RSI, MACD) also accompanies it
• Reversal signal: When a truncation is confirmed, it signifies complete exhaustion of the prior trend's energy — expect a very strong move in the opposite direction
• Conservative approach: Do not rush to label a truncation. Always examine other possibilities first — an ongoing complex wave 4, a different wave at a larger degree, a diagonal, etc. Truncation should be treated as a "last resort"

Alternative Interpretations (Must Be Reviewed Before Concluding Truncation)

• A complex wave 4 correction may still be in progress
• At a larger degree, the structure may represent an entirely different wave
• It may be part of another pattern such as a diagonal
• The wave count itself may have been incorrect from the beginning

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ew_diagonal_triangle: Diagonal Triangle

A diagonal is a motive wave that simultaneously possesses corrective characteristics — a special pattern. Unlike standard impulse waves, wave 4–wave 1 overlap is permitted, and the pattern takes a wedge shape. There are two types: ending diagonals and leading diagonals.

Two Types

Ending Diagonal

• Position: Occurs in wave 5 or wave C
• Structure: 3-3-3-3-3 (all sub-waves exhibit corrective behavior, typically zigzags)
• Shape: Contracting wedge — two boundary lines converge toward a point
• Significance: Indicates that the prior trend moved too fast or too far, foreshadowing a sharp trend reversal
• Wave 5 throw-over: The final wave 5 of an ending diagonal frequently pierces the upper trendline briefly before reversing sharply

Leading Diagonal

• Position: Occurs in wave 1 or wave A
• Structure: 5-3-5-3-5 (actionary waves have impulse wave structure)
• Shape: Contracting wedge
• Significance: Reflects a new trend beginning but still hesitating. Rare, but when identified, it implies a very strong subsequent trend

Common Characteristics

• Overlap permitted: In both types, wave 4 can enter the price range of wave 1 — this is the key distinction from standard impulse waves
• Converging shape: Forms a wedge where the upper and lower boundary lines meet
• Diminishing momentum: The price range and volume of each successive wave gradually decrease
• Fibonacci relationships: Internal waves tend to contract to approximately 66–81% (roughly 0.618–0.786) of the preceding wave

Validation Rules

IF ending diagonal → All sub-waves = 3-wave structure
IF leading diagonal → Actionary waves (1, 3, 5) = 5-wave structure, corrective waves (2, 4) = 3-wave structure
IF either type → Wave 4–wave 1 overlap permitted
IF expanding form (boundary lines diverge) → Not a diagonal (with extremely rare exceptions)
IF two boundary lines do not converge → Reassess diagonal classification

Trading Strategy

• Completion forecasting: The converging nature of diagonals allows relatively precise prediction of the pattern's completion point and price zone
• Target setting: After an ending diagonal completes, a rapid retracement to at least the diagonal's starting point is typical
• Entry timing: Prepare for a counter-trend entry at the final wave 5 (especially on a throw-over)
• Stop-loss placement: For ending diagonals, invalidation occurs if price exceeds the wave 5 extreme
• Volume confirmation: Confirming markedly reduced volume in the final segment of an ending diagonal increases pattern reliability

Practical Identification Tips

• At the wave 5 position: If progressively weakening upward waves converge into a wedge shape after a long advance, suspect an ending diagonal
• At the wave 1 position: If an uncertain rally develops in a wedge shape after a major correction, suspect a leading diagonal
• Relationship to wedge patterns: What traditional technical analysis calls rising/falling wedge patterns corresponds to diagonals in Elliott Wave analysis

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ew_zigzag: Zigzag (5-3-5)

The zigzag is the sharpest corrective pattern, with an A(5)-B(3)-C(5) structure. It moves strongly against the main trend direction, achieving the correction's price objective quickly and efficiently. It appears most frequently in wave 2 and is also commonly observed in wave A.

Structural Characteristics

• Wave A: 5-wave motive structure (impulse wave or leading diagonal). The fact that wave A is a 5-wave pattern is the key distinction from flats
• Wave B: 3-wave corrective structure; cannot retrace to the starting point of wave A
• Wave C: 5-wave motive structure; must exceed the endpoint of wave A

Complex Zigzags

When a single zigzag fails to reach the corrective target, complex zigzags form:

• Double zigzag: W-X-Y (when the first zigzag falls short, a second zigzag follows via connecting wave X)
• Triple zigzag: W-X-Y-X-Z (very rare; more than three zigzags do not occur)
• Wave X: A connecting wave, typically a zigzag or another corrective pattern

Validation Rules

IF wave A ≠ 5-wave structure → Not a zigzag (possible flat)
IF wave B ≠ 3-wave structure → Not a zigzag
IF wave B ≥ wave A starting point → Not a zigzag
IF wave C ≠ 5-wave structure → Not a zigzag
IF wave C fails to exceed wave A endpoint → Zigzag incomplete or truncated

Fibonacci Ratio Guide

• Wave B retracement: 38.2–61.8% retracement of wave A is most common; shallow retracements of 23.6% occasionally occur
• Wave C length: Equal to wave A (1.0×) or 1.618× wave A are the primary targets. Rarely, it terminates at 0.618×
• Overall zigzag: 38.2%, 50%, and 61.8% retracements of the preceding motive wave are typical

Practical Application

• Early identification: When wave A completes as a 5-wave structure, prioritize zigzag as the primary scenario
• Entry strategy: Prepare for entry in the direction of wave C within the 38.2–61.8% retracement zone of wave B
• Target measurement: Wave C target = wave A length × 1.0 or 1.618, projected from the wave A endpoint
• Completion confirmation: The pattern is complete when wave C exceeds wave A's extreme and finishes its internal 5-wave structure
• Oscillator usage: RSI oversold/overbought readings combined with divergence at the wave C termination point can be used as reversal signals

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ew_flat: Flat (3-3-5)

The flat is a sideways corrective pattern with an A(3)-B(3)-C(5) structure. It displays a gentler, more lateral movement than a zigzag, and the key distinguishing feature from a zigzag (where wave A is 5 waves) is that wave A is a 3-wave structure. Flats serve as brief pauses to catch breath within a strong trend.

Three Variations

Regular Flat

• Wave B retracement: 90% or more of wave A (nearly full recovery)
• Wave C endpoint: Near or slightly beyond wave A's endpoint
• Characteristics: The most basic form; a relatively balanced correction

Expanded Flat

• Wave B retracement: Exceeds wave A's starting point (creates a new extreme)
• Wave C endpoint: Significantly exceeds wave A's endpoint
• Characteristics: The most frequent flat variation. Because wave B surpasses the end of the prior trend, it is easily mistaken for a trend resumption. However, the subsequent wave C moves powerfully in the opposite direction, requiring particular caution

Running Flat

• Wave B retracement: Exceeds wave A's starting point
• Wave C endpoint: Falls short of wave A's endpoint (wave C ends weakly)
• Characteristics: An extremely rare form that appears only when the main trend's force is extraordinarily strong. Hastily labeling an uncertain situation as a running flat will result in errors with very high probability

Validation Rules

IF wave A ≠ 3-wave structure → Not a flat (this is the key distinction from zigzags)
IF wave B ≠ 3-wave structure → Not a flat
IF wave C ≠ 5-wave structure → Not a flat
IF running flat suspected → Never conclude with certainty if uncertain (almost certainly an error)

Flat Classification Table

Type	Wave B Level	Wave C Level	Frequency	Subsequent Movement
Regular	90–100% of wave A	Near wave A endpoint	Moderate	Prior trend resumes
Expanded	Exceeds wave A start	Exceeds wave A endpoint	Most common	Strong trend resumption
Running	Exceeds wave A start	Falls short of wave A endpoint	Very rare	Extremely strong trend continuation

Practical Application

• Early identification: When wave A completes as a 3-wave structure, prioritize flat as the primary scenario. At this point, you can already distinguish it from a zigzag
• Wave B monitoring: The degree of wave B's retracement helps predict the flat type — if wave B exceeds wave A's starting point, it is either an expanded flat or running flat
• Wave C target: In an expanded flat, wave C = wave A × 1.618 is the typical target
• Trap awareness: Wave B of an expanded flat creates a new high (or low), causing many traders to mistake it for a trend resumption. A sharp wave C reversal can follow, so exercise caution
• Running flat conservative approach: Do not conclude hastily — consider a running flat only after all other interpretations have been eliminated

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ew_triangle: Horizontal Triangle (3-3-3-3-3)

The horizontal triangle is a sideways pattern where buying and selling forces gradually find equilibrium. It consists of five waves — A-B-C-D-E — each with a 3-wave structure. Its defining characteristic is consuming time while progressively narrowing the range of price fluctuation. After the triangle completes, a swift and decisive breakout (thrust) follows.

Four Types

• Contracting triangle (symmetrical): Upper boundary descends, lower boundary ascends — most common
• Ascending triangle: Upper boundary horizontal, lower boundary ascending
• Descending triangle: Upper boundary descending, lower boundary horizontal
• Expanding triangle: Upper boundary ascending, lower boundary descending — very rare (reverse triangle)

Occurrence Positions

Triangles do not appear at arbitrary positions. They occur only in these three locations:

• Wave 4 of an impulse wave: The most common position
• Wave B of an A-B-C correction: A sideways phase within a correction
• Final element of a combination: Serves as a signal that a complex correction is ending

Validation Rules

IF position ≠ wave 4 / wave B / final element of combination → Not a triangle
IF any sub-wave (A–E) ≠ 3-wave structure → Not a triangle
IF wave E breaches the B-D trendline → Triangle invalidated
IF a sub-wave within the triangle is itself a triangle → Usually occurs in wave E (permissible)

Thrust

The breakout movement that follows triangle completion is called a "thrust":

• Distance: Typically travels a distance equal to the widest part of the triangle (the width of wave A)
• Speed: Unfolds quickly and sharply — energy trapped within the triangle is released all at once
• Direction: Same direction as the trend that preceded the triangle

Trading Strategy

• Pattern confirmation: Observe waves D and E to confirm the triangle formation
• Entry timing: Enter upon breakout of the triangle boundary after wave E completes. Increased volume accompanying the breakout adds reliability
• Target setting: Add the triangle's maximum width to the breakout point to calculate the target
• Stop-loss placement: If price re-enters the triangle interior after the breakout, the pattern may be invalidated — apply a stop-loss
• Wave E fakeout caution: Wave E may temporarily breach the A-C trendline (throw-over) before returning inside the triangle. Do not mistake this for a genuine breakout

Time and Volume Characteristics

• Extended duration: Takes longer than other corrective patterns
• Narrowing range: Price range contracts progressively over time
• Volume: Gradually decreases as the triangle progresses; surges on the breakout
• Bollinger Bands: Extreme band contraction (squeeze) during the triangle phase visually confirms that a significant move is imminent

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ew_combination: Combination (Double/Triple Three)

A combination is a sideways corrective structure that joins two or three different corrective patterns, with the primary purpose of extending time. When a single corrective pattern has achieved its price objective but lacks temporal balance, additional corrective patterns are appended to sustain the sideways movement.

Structural Patterns

• Double three: W-X-Y (two corrective patterns connected by wave X)
• Triple three: W-X-Y-X-Z (three corrective patterns — the maximum limit of combination; a fourth pattern does not occur)

Component Constraints

• Zigzag: A maximum of one is permitted (if two or more zigzags appear, it is classified as a double/triple zigzag, not a combination)
• Triangle: Can only appear as the final component (Y or Z) — if a triangle appears in the middle, it is not a combination
• Wave X: A connecting wave that links the components, typically taking zigzag form
• Alternation principle: Components tend to assume different forms from one another

Validation Rules

IF zigzag components > 1 → Not a combination (double/triple zigzag)
IF triangle ≠ final component → Not a combination
IF a fourth corrective pattern appears → Combination limit exceeded (counting error)
IF vertical movement > horizontal movement → Combination unlikely (possible zigzag family)

Component Combination Examples

W	X	Y	Valid?	Rationale
Zigzag	Zigzag	Flat	✅ Yes	Only 1 zigzag component
Flat	Zigzag	Triangle	✅ Yes	Triangle in final position
Flat	Zigzag	Flat	✅ Yes	No zigzag as W or Y component
Zigzag	Zigzag	Zigzag	❌ No	Exceeds zigzag limit
Flat	Zigzag	Triangle not in Y but in W	❌ No	Triangle position violation

Practical Application

• Long-term holding perspective: During a combination, direction is ambiguous — patience is essential
• Sideways expectation: Most combinations progress horizontally with minimal sharp price movements
• Completion signal: When the final component (especially a triangle) completes, the original trend resumes
• Time cost: Combinations take longer than other corrections — consider time-related costs for leveraged positions (funding fees, etc.)
• Trading range strategy: During combination phases, range-bound strategies (buying support, selling resistance) outperform trend-following approaches

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ew_alternation: Alternation Guideline

The alternation guideline describes the tendency for consecutive waves of the same degree to differ in form, depth, complexity, or duration. This is a "guideline" rather than a "rule," so it does not always apply — but it is observed so frequently that it proves highly useful in practice. The core application is determining "what will NOT happen" rather than "what will happen."

Areas of Application

Corrective Wave Alternation Within Impulse Waves (Most Important)

• Wave 2 sharp (zigzag) → Wave 4 sideways (flat/triangle/combination)
• Wave 2 sideways (flat) → Wave 4 sharp (zigzag)
• Wave 2 simple → Wave 4 complex
• Wave 2 short duration → Wave 4 long duration
• Wave 2 deep retracement → Wave 4 shallow retracement

Alternation Within Corrective Waves

• Wave A flat → Wave B zigzag (or vice versa)
• Form alternation among components in complex corrections

Alternation Between Impulse Waves

• Wave 1 extension → Waves 3 and 5 normal length
• Wave 3 extension → Waves 1 and 5 similar in length
• Alternation in character and duration between waves

Validation Rules

IF wave 2 = zigzag → wave 4 ≠ zigzag expected (high probability)
IF wave 2 = flat/triangle → wave 4 = zigzag expected
IF diagonal → Alternation guideline does not apply
IF alternation violated → Reassess wave count (not necessarily an error, but a warning signal)

Exceptions

• Diagonals: The alternation guideline does not apply within diagonals
• Extension present: When an extension occurs, the alternation pattern may be modified
• Extreme market conditions: When liquidity is extremely low or external shocks occur, alternation may not be clearly evident

Practical Application

• Wave 4 advance prediction: Examining the form of wave 2 enables advance prediction of wave 4's character. For example, if wave 2 was a deep, fast zigzag, prepare for a long, complex sideways correction in wave 4
• Wave count verification: When the alternation principle is violated, use it as a trigger to re-examine the current count
• Timing planning: If wave 2 was short and sharp, prepare psychologically for wave 4 to consume more time
• Position management: If wave 4's character can be anticipated, unnecessary entries during sideways phases can be avoided, allowing you to target wave 5 entry after the correction completes

Relationship to Investor Psychology

• Guard against habitual thinking: The assumption that "this correction will be the same as the last one" is dangerous
• Market adaptiveness: Markets tend to move in ways that contradict participants' expectations and habits
• Diversity principle: Like the natural world, markets resist monotonous repetition

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ew_correction_depth: Correction Depth Guideline

This guideline addresses how far a corrective wave retraces the preceding motive wave, playing a critical role especially in predicting the maximum retracement range of wave 4. It is directly applicable to setting appropriate support levels and stop-loss criteria.

Core Principles

• Wave 4 limit: The correction tends to complete within the range of the previous wave 4 at one lesser degree
• Near the endpoint: Most commonly finds support near the endpoint of the lesser-degree wave 4
• When wave 1 extends: The low of the lesser-degree wave 2 acts as the boundary
• Zigzag exception: When wave 2 takes zigzag form, it may retrace more deeply (connected to the alternation principle)

Fibonacci Retracement Guidelines

Wave	Typical Retracement	Maximum Limit	Notes
Wave 2	50–78.6%	99% (just before wave 1 start)	61.8–78.6% frequent in zigzags
Wave 4	23.6–50%	Range of previous lesser-degree wave 4	Alternation applies; 38.2% most common
Wave B	Varies by pattern	Pattern-specific limits	Can exceed starting point in expanded flats

Practical tip: If wave 2 holds support at the 50% retracement level, it is a relatively healthy correction; if it exceeds 78.6%, the count should be questioned. For wave 4, the 38.2% retracement is the most frequently observed level.

Application by Degree

• Grand Supercycle: Even very deep corrections remain confined within specific ranges from a historical perspective
• Supercycle: Identify the previous wave 4 range on long-term charts
• Cycle: Set ranges using monthly/weekly charts
• Primary and below: Measure precisely on daily/hourly charts

Validation Rules

IF wave 4 retracement > previous lesser-degree wave 4 range → Reassess wave count
IF wave 1 extension AND wave 4 > lesser-degree wave 2 low → Possible counting error
IF zigzag wave 2 AND deep retracement → Permissible (61.8–78.6%)
IF wave 4 enters wave 1 territory → Possible diagonal or counting error

Practical Application

• Support level setting: Set the endpoint of the previous lesser-degree wave 4 as the key support level. This level is the primary candidate for buy entries
• Stop-loss criteria: If the boundary range is breached, immediately reassess the wave count and re-evaluate the validity of existing positions
• Buy timing: Consider entry when the market approaches the boundary while momentum indicators display reversal signals
• Fibonacci clusters: Zones where retracement ratios and the previous wave 4 range overlap act as particularly strong support/resistance
• Multi-timeframe analysis: Also check the wave 4 range at larger degrees to evaluate support strength across multiple layers

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ew_equality: Equality Guideline

This guideline concerns the length and time relationships among motive waves. Within a five-wave structure, the two non-extended actionary waves tend to progress equally in time and magnitude. This property allows pre-calculation of targets for incomplete waves.

Length Relationship Principles

• Non-extended wave equality: When wave 3 extends, wave 1 ≈ wave 5 (the most practical application)
• Corrective wave equality: In zigzags and flats, wave A ≈ wave C
• Imperfect equality: A 0.618× ratio relationship rather than exact equality is also frequent
• Fibonacci ratio extensions: 1.618× and 2.618× relationships also appear

Time Relationships

• Equal time: Waves of the same degree tend to consume similar durations
• Fibonacci time: 1.618× and 2.618× time relationships are also observed
• Symmetry: A natural time balance between advance and decline tends to form

Measurement Standards

• Intermediate degree and above: Measure in percentage (%) terms — use log-scale charts
• Below Intermediate degree: Measure in arithmetic (points/dollars) terms — use linear-scale charts
• Cryptocurrency: Due to high volatility, percentage-based measurement is advantageous even at smaller degrees

Validation and Forecasting

IF wave 1 length ≈ wave 3 length → Increased probability of wave 5 extension
IF wave 3 extension confirmed → Wave 5 ≈ wave 1 expected (project wave 1 length from wave 4 endpoint)
IF wave A measurement complete → Wave C = wave A × (1.0 or 1.618) target
IF time equality → Estimate completion time as previous wave duration × Fibonacci ratio

Practical Measurement Methods

• Target setting: Calculate previous wave length × 1.0, 0.618, 1.618, and 2.618 to derive multiple target candidates
• Time forecasting: Estimate wave completion timing as previous wave duration × Fibonacci ratios
• Probability assessment: Among multiple target candidates, prioritize those consistent with the equality principle
• Early warning: When the equality point is reached, the probability of wave completion increases — consider taking profits or reducing position size
• Fibonacci clusters: Zones where equality targets overlap with other Fibonacci levels are especially powerful turning point candidates

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ew_channeling: Channeling

Elliott waves tend to progress within parallel channels, and these channels serve as highly practical tools for forecasting wave direction, velocity, and targets. When the wave count is correct, the waves fit neatly within the channel; when they deviate, it provides a clue to reassess the count.

Impulse Wave Channeling

Initial Channel (1-3 Connection)

1. Baseline: Connect the endpoint (high) of wave 1 and the endpoint (high) of wave 3
2. Parallel line: Draw a line parallel to the baseline from the endpoint (low) of wave 2
3. Purpose: Identify the expected support zone for wave 4 — wave 4 tends to complete near this lower parallel line

Final Channel (2-4 Connection)

1. Baseline (lower boundary): Connect the endpoints of wave 2 and wave 4
2. Parallel line (upper boundary): Draw a line parallel to the baseline from the endpoint of wave 3
3. Purpose: Identify the expected target zone for wave 5 — wave 5 tends to reach or complete near this upper boundary

Special Situations

• Vertical wave 3 rally: When wave 3 rises almost vertically, the 2-4 connection may be impractical. In this case, drawing a parallel line from the wave 1 endpoint (high) to the lower boundary serves as a more useful upper boundary
• Throw-over: When wave 5 breaks above the upper boundary with increasing volume, it signals an extension. However, if it breaks through without volume and quickly returns inside the channel, consider the possibility of an ending diagonal or truncation

Corrective Wave Channel

• Baseline: Connect the correction's starting point and the wave B endpoint
• Boundary line: Draw parallel lines at the extremes of waves A and C
• Converging channel: In triangles, confirm the pattern with progressively converging boundary lines

Practical Trading Strategy

• Entry points: Consider buying at lower channel boundary touches and selling at upper boundary touches
• Target points: Set the opposite channel line as the profit-taking target
• Breakout signals: A channel breakout signals wave completion or extension — respond immediately
• Count confirmation: When waves progress cleanly within the channel, the count's reliability increases
• Log-scale note: On long-term charts, channels must be drawn on log-scale for accurate boundary lines. Linear-scale channels can produce distorted results

Validation Factors

IF waves repeatedly break the channel → Reassess wave count
IF wave 5 upper breakout + volume increase → Possible wave 5 extension
IF wave 5 upper breakout + volume decrease → Possible ending diagonal or false breakout
IF lower boundary breach → Correction may be deeper than expected
IF correction significantly exceeds channel boundaries → Consider alternative corrective pattern

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ew_wave_personality: Wave Personality

Each wave reflects a unique investment psychology and set of market characteristics. Understanding wave personality allows you to read the market's "emotional state" beyond mechanical counting. Particularly when multiple interpretations are possible, comparing the current market mood against the personality profile of each candidate wave provides a powerful clue for selecting the correct count.

Impulse Wave Personality in Detail

Wave 1: The Initial Move

• Market psychology: Skepticism and disbelief — "This is just a temporary bounce"
• Volume: Relatively low but beginning to increase from the bottom
• Form: Dynamic rally after base building, or a quiet advance
• Media: Negative news still dominates
• Investors: Cautious institutional buying; the public remains in a state of fear
• Technical characteristics: Starts below long-term moving averages; early stages of short-term moving average golden cross

Wave 2: The Testing Wave

• Market psychology: Despair — "I knew it wouldn't work" — denies wave 1's advance
• Volume: Noticeably decreases (a sign that selling energy is exhausted)
• Form: Deep and frightening correction (often close to wave 1's starting point; 61.8–78.6% retracement common)
• Media: The worst news headlines pour out
• Investors: Short selling increases; weak hands are liquidated
• Technical characteristics: RSI/MACD maintain levels higher than at the wave 1 low (hidden divergence)

Wave 3: The Core Wave

• Market psychology: Gradually shifts to optimism; conviction grows
• Volume: Maximum and explosive — the largest volume of any wave
• Form: The most powerful and broad movement; extension occurs most frequently
• Media: Positive news increases; reports of improving fundamentals
• Investors: Broad public participation begins; nearly all sectors and assets rally together
• Technical characteristics: Gaps, surge phases, momentum indicators reaching extremes. Short squeezes (forced liquidation of short positions) frequently occur during the middle phase of wave 3

Wave 4: The Wave of Confusion

• Market psychology: Mixed emotions, uncertainty — opinions split on whether the advance is over or will continue
• Volume: Decreases
• Form: Sideways, complex correction; triangles and combinations frequently appear
• Media: Conflicting forecasts; emphasis on uncertainty
• Investors: Selective investing; differentiation between sectors (stock selection becomes critical)
• Technical characteristics: A zone where support and resistance levels interweave