Elliott Wave Principal: Rules,Guidelines and Q&A

• Elliott Wave Classification
• Rules and Guidelines
• Notation and nomenclature
• Glossary of Terms

Russian version here

VK version here

Modes:

📈Motive

• Styles
• Patterns
• Variations

📉Corrective

• Groups
• Stylеs
• Patterns
• Variations

🔝Contents

R.N. Elliott did not specifically say that there is only one overriding form, the “five-wave” pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.

"Elliott Wave Principle - Key to Market Behavior. Robert Prechter and A.J. Frost"

🔝Elliott Wave Classification

🔝Contents

There are two modes of wave development: motive and corrective. Motive waves have a five-wave structure, while corrective waves have a three-wave structure or a variation thereof. Motive mode is employed by both the five-wave pattern of Figure 1-1 and its same-directional components, i.e., waves 1, 3 and 5. Their structures are called “motive” because they powerfully impel the market. Corrective mode is employed by all countertrend interruptions. Their structures are called “corrective” because each one appears as a response to the preceding motive wave yet accomplishes only a partial retracement, or “correction,” of the progress it achieved. Thus, the two modes are fundamentally different, both in their roles and in their construction, as will be detailed throughout this chapter.

Elliott Wave Principle - Key to Market Behavior. Robert Prechter and A.J. Frost

🔝Elliott Wave Classification

🔝Contents

There are two types of motive waves: impulse and diagonal. As a rule, they alternate in the position of waves 1-5 impulses and waves A-C of the zigzag.

🔝Elliott Wave Classification

🔝Contents

Five-wave action model. Creates forward progress.Motive waves are limited to three patterns: Impulse, Leading and Ending Diagonals.

🔝Elliott Wave Classification

🔝Contents

The corrective mode has two groups, simple and combined. Combined corrections are subdivided into simple corrective structures.

The group of simple corrections includes: flat, triangle and single zigzag. Combined group — multiple zigzag and combination.

🔝Elliott Wave Classification

🔝Contents

There are two styles of corrective processes: sharp and sideways. If wave two of an impulse is a sharp correction, expect wave four to be a sideways correction, and vice versa.

🔝Elliott Wave Classification

🔝Contents

Three-wave or five-wave (which have characteristics of both fives and threes) or their combination model of counteraction. Always produces a net retracement from the previous wave.

Corrective patterns include: single and multiple zigzags, triangle, flat, combination.

🔝Elliott Wave Classification

🔝Contents

Variations in Elliott Wave patterns can be divided into two conditional groups: variations in form and variations in the number of simple structures.

Impulses, diagonals, flats, triangles and single zigzag are identified by the relative length of sub-waves, which gives the model a special shape. Combined corrections, which include multiple zigzag and a combination, with an unchanged shape, are identified by the number of simple corrective structures.

🔝Elliott Wave Classification

🔝Contents

Motive Waves:

• Impulse
• Leading & Ending Diagonals

Corrective Waves

◯ Simple

●Sharp Corrections

• Single Zigzag

●Sideways corrections

• Triangle
• Flat

◯ Combined

●Sharp Corrections

• Multiple Zigzag

●Sideways corrections

• Combination

🔝Contents

Rules

• An impulse always subdivides into five waves.
• Wave ① always subdivides into an impulse or a diagonal.
• Wave ② always subdivides into a zigzag, flat or combination.
• Wave ② never moves beyond the start of wave ①.
• Wave ② always ends in the territory of wave ①, and wave ④ in the territory of wave ③.
• Wave ③ always subdivides into an impulse.
• Wave ③ is never the shortest wave.
• Wave ④ always subdivides into a zigzag, flat, triangle or combination.
• Wave ④ never moves beyond the start of wave ②.
• The termination point of wave ④ never moves beyond the end of wave ①.
• Wave ⑤ always subdivides into an impulse or a ending diagonal.
• Never are waves ①, ③ and ⑤ all extended.

Guidelines

• Wave ④ will almost always be a different corrective pattern than wave ②. If the second wave is a sharp correction, then the fourth wave will usually be a sideways correction, and vice versa (alternation).
• Wave ② is usually a sharp correction in the form of a single or multiple zigzag.
• Wave ④ is usually a sideways correction in the form of a flat, triangle, or combination.
• In rare cases, a triangle (one that does not include a new price extreme) in the fourth wave position will take the place of a sharp correction and alternate with another type of sideways pattern in the second wave position.
• In the process of editing ⭕️
• Wave ④ typically ends when it is within the price range of subwave four of ③.
• In an impulse wave, wave ④ should significantly break the trend channel formed by the subwaves of wave ③.
• Wave ④ often subdivides the entire impulse into Fibonacci proportion in time and/or price.
• On rare occasions, wave ④ subwaves can enter the territory of wave ①. As a strong guideline, no portion of wave ④ of an impulse wave can enter the price territory of wave ① or wave ②.
• Second waves of impulse waves would tend to go beyond the previous fourth wave at one lesser degree. As a minimum, wave ② should retrace to the area of subwave ④ within wave ①.
• Sometimes wave ⑤ does not move beyond the end of wave ③ (in which case it is called a truncation).
• Wave ⑤ often ends when meeting or slightly exceeding a line drawn from the end of wave ③ that is parallel to the line connecting the ends of waves ② and ④, on either arithmetic or semilog scale.
• The center of wave ③ almost always has the steepest slope of any equal period within the parent impulse except that sometimes an early portion of wave ① (the "kickoff") will be steeper.
• Wave ①, ③ or ⑤ is usually extended. (An extension appears "stretched" because its corrective waves are small compared to its impulse waves. It is substantially longer, and contains larger subdivisions, than the non-extended waves).
• Often, the extended subwave is the same number (③, ③ or ⑤) as the parent wave.
• Rarely do two subwaves extend, although it is typical for waves ③ and ⑤ both to extend when they are of Cycle or Supercycle degree and within a fifth wave of one degree higher.
• Wave ① is the least commonly extended wave.
• If wave ③ of the impulse is the leading diagonal, then one should not expect wave 5 in the form of the ending diagonal.
• When wave ③ is extended, waves ① and ⑤ tend to have gains related by equality or the Fibonacci ratio.
• When wave ⑤ is extended, it is often in Fibonacci proportion to the net travel of waves ① through ③.
• When wave ① is extended, it is often in Fibonacci proportion to the net travel of waves ③ through ⑤. In addition, wave ② can subdivides the entire impulse into Fibonacci proportion in time and/or price.
• In the process of editing ⭕️

🔝Rules and Guidelines

🔝Contents

General rules

• A diagonal always subdivides into five waves.
• Wave ② never goes beyond the start of wave ①.
• Wave ③ always goes beyond the end of wave ①.
• Wave ④ never moves beyond the end of wave ②.
• Wave ④ always ends within the price territory of wave ① (overlap).
• An ending diagonal always appears as wave ⑤ of an impulse or wave Ⓒ of a zigzag or flat.
• A leading diagonal always appears as wave ① of an impulse or wave Ⓐ of a zigzag.
• Waves ①, ②, ③, ④ and ⑤ of an ending diagonal, and waves ② and ④ of a leading diagonal, always subdivide into zigzags.
• In a leading diagonal, wave ⑤ always ends beyond the end of wave ③.

• Subwave ratios must be observed on both linear and logarithmic scales, while the model may differ in shape depending on the selected scale (for example: on a linear scale, the model corresponds to a tapering type of diagonal, while on a logarithmic scale, the diagonal will correspond to an expanding type). (TWEWA)

General guidelines

• Waves ①, 3 and 5 of a leading diagonal usually subdivide into zigzags but sometimes appear to be impulses (all zigzags or all impulses).
• Within an impulse, if wave ① is a diagonal, wave ③ is likely to be extended.
• Within an impulse, wave ⑤ is unlikely to be a diagonal if wave ③ is not extended.
• A leading diagonal in the wave one position is typically followed by a zigzag retracement of 78.6% (ϕ√).

Rules

• In the contracting variety, wave ③ is always shorter than wave ①, wave ④ is always shorter than wave ②, and wave ⑤ is always shorter than wave ③ (①>③>5 and ②>④).
• Going forward in time, a line connecting the ends of waves ② and ④ converges towards with the line connecting the ends of waves ① and ③.

Guidelines

• In the contracting variety, wave ⑤ usually ends beyond the end of wave ③. (Failure to do so is called a truncation.)
• In the contracting variety, wave ⑤usually ends at or slightly beyond a line that connects the ends of waves ① and ③. (Ending beyond that line is called a throw-over.)
• In the contracting variety, wave 3 may be equal .618 to .786 the length of wave ①, and wave ⑤ may be equal .618 to .786 the length of wave ③.

🔝Rules and Guidelines

🔝Contents

Rules

• In the expanding variety, wave ③ is always longer than wave ①, wave ④ is always longer than wave ②, and wave ⑤ is always longer than wave ③ (①<③<⑤ and ②<④).
• Going forward in time, a line connecting the ends of waves ② and ④ diverges from with the line connecting the ends of waves ① and ③.
• Wave ⑤ always goes beyond the end of wave ③.

Guidelines

• Waves ② and ④ each usually retrace .66 to .81 of the preceding wave.
• In the expanding variety, wave ③ may be equal to 1.618 the length of wave ①, and wave ⑤ may be equal to 1.618 the length of wave ③.
• In the expanding variety, wave ⑤ usually ends slightly before reaching a line that connects the ends of waves ① and ③.

🔝Diagonal

🔝Rules and Guidelines

🔝Contents

Rules

• A zigzag always subdivides into three waves.
• Wave Ⓐ always subdivides into an impulse or leading diagonal.
• Wave Ⓒ always subdivides into an impulse or ending diagonal.
• Wave Ⓑ always subdivides into a zigzag, flat, triangle or combination thereof.
• Wave Ⓑ never moves beyond the start of wave Ⓐ.
• Wave Ⓑ always ends within the price territory of wave Ⓐ.
• Wave Ⓒ almost always ends beyond the end of wave Ⓐ. (failure to comply with this requirement is called «truncation»)*

*guideline, but should be followed as a rule

Guidelines

• Wave Ⓒ should not fail to reach the end of wave Ⓐ by more than 10% of the length of wave Ⓐ. (Q&A EWI)
• In a zigzag, the length of wave Ⓒ is usually equal to that of wave Ⓐ, although it is not uncommonly 1.618 or .618 times the length of wave Ⓐ (rarely 2.618).
• Wave Ⓑ typically retraces 38 to 79 percent of wave Ⓐ.
• If wave Ⓑ is a contracting triangle, it will typically retrace 38 to 50 percent of wave Ⓐ.
• If wave Ⓑ is a running contracting triangle, it will typically retrace between 10 and 40 percent of wave Ⓐ.
• If wave Ⓑ is a zigzag, it will typically retrace 50 to 79 percent of wave Ⓐ.
• In a zigzag, if wave Ⓐ is a leading diagonal, then we would not expect to see an ending diagonal for wave Ⓒ.
• A line connecting the ends of waves Ⓐ and Ⓒ is often parallel to a line connecting the end of wave Ⓑ and the start of wave Ⓐ. (Forecasting guideline: Wave Ⓒ often ends upon reaching a line drawn from the end of wave Ⓐ that is parallel to a line connecting the start of wave Ⓐ and the end of wave Ⓑ.)
• Waves Ⓐ and Ⓒ within the zigzag often appear in the form of impulses, but more often alternate according to the type of motive waves: if wave Ⓐ is an impulse, expect wave Ⓒ in the form of a diagonal, and vice versa. It is much less common to find waves Ⓐ and Ⓒ in the form of diagonals, but in this case they will alternate in form: contracting / expanding, and vice versa. (TWEWA)
• If a similar amplitude and duration of waves Ⓐ and Ⓒ within a single zigzag is expected, the line passing through the top of Ⓐ, which is parallel to the line connecting the beginning of wave Ⓐ and the end of wave Ⓑ, often turns out to be the level of completion of wave Ⓒ. In case of a extended wave Ⓐ within a single zigzag, expect the wave Ⓒ to reach the middle line of the channel, and in case of signals in favor of a extended wave Ⓒ, it is worth resorting to the technique of doubling the channel to determine potential support or resistance. (TWEWA)

🔝Rules and Guidelines

🔝Contents

General Rules

• A triangle always subdivides into five waves.
• At least four waves among waves Ⓐ, Ⓑ, Ⓒ, Ⓓ and Ⓔ are subdivided into a single zigzag.
• In a triangle, only one subwave can be a multiple zigzag or triangle.

General gidelines

• Usually, wave Ⓒ subdivides into a "multiple zigzag" that is longer lasting and contains deeper percentage retracements than each of the other subwaves.
• Usually, wave Ⓓ subdivides into a "multiple zigzag" that is longer lasting and contains deeper percentage retracements than each of the other subwaves.
• Alternating waves of a triangle may be in Fibonacci proportion to each other by a ratio of 0.618 for contracting triangles and 1.618 for expanding triangles. For example, in a contracting triangle, look for wave Ⓒ to equal 0.618 of wave Ⓐ.
• A triangle can be wave ④ impuls, wave Ⓑ of a zigzag, wave Ⓧ of a double or second wave of an Ⓧ of a triple zigzag, sub-wave Ⓒ, Ⓓ or Ⓔ of a triangle and the last structure of a combination.

Rules

• Wave Ⓒ never moves beyond the end of wave Ⓐ, wave Ⓓ never moves beyond the end of wave Ⓑ, and wave Ⓔ never moves beyond the end of wave Ⓒ. The result is that going forward in time, a line connecting the ends of waves Ⓑ and Ⓓ converges with a line connecting the ends of waves Ⓐ and Ⓒ.
• Waves Ⓐ and Ⓑ never subdivide into a triangle.
• In a running contracting triangle, wave B should be no more than twice as long as wave A. (Q&A EWI)

Guidelines

• Sometimes one of the waves, usually wave Ⓒ, Ⓓ or Ⓔ, subdivides into a contracting or barrier triangle. Often the effect is as if the entire triangle consisted of nine zigzags.
• About 60% of the time, wave Ⓑ goes beyond the beyond the start of wave Ⓐ. When this happens, the triangle is called a running contracting triangle.

🔝Triangle

🔝Rules and Guidelines

🔝Contents

Rules

• Wave Ⓒ never moves beyond the end of wave Ⓐ, wave Ⓓ never moves beyond the end of wave Ⓑ, and wave Ⓔ never moves beyond the end of wave Ⓒ. The result is that going forward in time, a line connecting the ends of waves Ⓑ and Ⓓ converges with a line connecting the ends of waves Ⓐ and Ⓒ.
• Waves Ⓑ and Ⓓ end at essentially the same level.
• In a running barrier triangle, wave Ⓑ should be no more than twice as long as wave Ⓐ. (Q&A EWI)

Guidelines

• About 60% of the time, wave Ⓑ goes beyond the beyond the start of wave Ⓐ. When this happens, the triangle is called a running barrier triangle.
• When wave ⑤ follows a barrier triangle, it is typically either a brief, rapid movement or an exceptionally long extension.

Notes

• We have yet to observe a 9-wave barrier triangle, implying that this form may not extend.

🔝Triangle

🔝Rules and Guidelines

🔝Contents

Rules

• Wave Ⓒ, Ⓓ and Ⓔ each moves beyond the end of the preceding same-directional subwave. (The result is that going forward in time, a line connecting the ends of waves Ⓑ and Ⓓ diverges from a line connecting the ends of waves Ⓐ and Ⓒ.)
• Subwaves Ⓑ, Ⓒ and Ⓓ each retrace at least 100 percent but no more than 150 percent of the preceding subwave.

Guidelines

• Subwaves Ⓑ, Ⓒ and Ⓓ usually retrace 105 to 125 percent of the preceding subwave.

Notes

• No subwave has yet been observed to subdivide into a triangle.

🔝Triangle

🔝Rules and Guidelines

🔝Contents

General rules

• A flat always subdivides into three waves.
• Wave Ⓐ is always a zigzag, flat or combination.
• Wave Ⓑ is always a zigzag. (Q&A EWI)
• Wave Ⓒ is always an impulse or a ending diagonal.

General guidelines

• Wave Ⓐ is usually a zigzag.

Rules

• Wave Ⓑ always ends after the start of wave Ⓐ.
• Wave Ⓒ always ends past the end of wave Ⓐ.

Guidelines

• Wave Ⓑ usually retraces 123.6 or 138.2% of wave Ⓐ, less often — 161.8%.
• Wave Ⓒ is often equal to 161.8% of wave Ⓐ, less often — 261.8%.
• The most common type of flat correction.

🔝Flat

🔝Rules and Guidelines

🔝Contents

Rules

• Wave Ⓑ always ends after the start of wave Ⓐ.
• Wave Ⓒ never goes beyond the end of wave Ⓐ.

Guidelines

• Within such a flat wave Ⓑ should end well above the origin of wave Ⓐ and that means wave Ⓒ might reflect a 61.8% or even a 100% relationship to wave Ⓐ.
• A running flat indicates that the forces in the direction of the larger trend at next higher degree are powerful.
• Wave Ⓑ is usually no more than twice the length of wave Ⓐ.
• Keep in mind that a running flat is rare.

🔝Flat

🔝Rules and Guidelines

🔝Contents

Rules

• Wave Ⓑ never goes beyond beyond the start of wave Ⓐ .
• Wave Ⓑ always retraces at least 90 percent of wave Ⓐ .
• Wave Ⓒ always ends past the end of wave Ⓐ .

Guidelines

• The rarest type of flat correction.

🔝Flat

🔝Rules and Guidelines

🔝Contents

Rules

• A Multiple Zigzag comprise two (or three) single zigzags separated by one (or two) corrective pattern(s) in the opposite direction, labeled Ⓧ. In the first case, it is called «double zigzag», in the second - «triple zigzag» (The first single zigzag is labeled Ⓦ, the second Ⓨ, and the third, if there is one, Ⓩ.)
• Waves Ⓦ, Ⓨ and Ⓩ are always single zigzags.
• Wave Ⓧ never goes beyond the beginning of waves Ⓦ and Ⓨ.
• Wave Ⓨ always ends past the end of the Ⓦ,and wave Ⓩ, if any, always ends past the end of the Ⓨ.
• The first Ⓧ wave always ends on the territory of the Ⓦ wave, the second Ⓧ, if any, on the territory of the Ⓨ wave.
• In a triple zigzag, the first Ⓧ wave is always a zigzag, flat or combination. The second Ⓧ wave is always a zigzag, flat, triangle or combination.
• In a double zigzag, wave Ⓧ is always a zigzag, flat, triangle, or combination.
• Double and triple zigzags replace single zigzags, but cannot appear as Ⓦ, Ⓨ, or Ⓩ waves.

Guidelines

• In a double zigzag, wave Ⓨ can equal wave Ⓦ, .618 wave Ⓦ, 1.618 wave Ⓦ, or .terminate at a distance equal to .618 wave Ⓦ past wave Ⓦ. In a triple zigzag, there can be equality among waves Ⓦ, Ⓨ and Ⓩ, or wave Ⓩ can equal .618 wave Ⓨ, 1.618 wave Ⓨ, or .terminate at a distance equal to .618 wave Ⓨ, past wave Ⓨ. In a triple zigzag, the Fibonacci relationships between waves Ⓦ and Ⓨ, would be the same as a double zigzag.
• The Fibonacci relationships between waves Ⓦ and Ⓧ in a double zigzag, and waves Ⓨ and ⓍⓍ in a triple zigzag are analogous to the relationships between waves Ⓐ and Ⓑ in a single zigzag
• In a double zigzag, as a guideline, wave b of wave Ⓨ should not break the trendline that connects the beginning of wave Ⓦ with the end of wave Ⓧ.
• As a guideline, wave Ⓧ (second wave Ⓧ of the triple zigzag) of a double zigzag should break the trend channel formed by the first zigzag in wave Ⓦ (Ⓨ) and be greater than 80% of subwave b of wave Ⓦ (Ⓨ and Ⓩ).
• When a zigzag appears too small to be the entire wave with respect to the preceding wave (or, if it is to be wave ④, the preceding wave ②), the complication of the structure to a multiple zigzag will probably follow.
• In the process of editing ⭕️

🔝Rules and Guidelines

🔝Contents

Rules

• A “double three” combination comprise two corrective patterns separated by one corrective patternin the opposite direction, labeled Ⓧ. The first corrective pattern is labeled Ⓦ, the second Ⓨ.
• A "double three" combination comprises (in order) a zigzag and a flat, a flat and a zigzag , a flat and a flat, a zigzag and a triangle or a flat and a triangle.
• Wave Ⓧ appears as a zigzag or flat. (TWEWA)
• Wave Ⓧ always retraces at least 90 percent of wave Ⓦ.
• Combinations have a sideways look. With respect to waves Ⓦ and Ⓨ in a double three, only one of those waves in each type of combination appears as a single zigzag.
• Combinations can occur in the same wave positions as flats and triangles (except for the triangle subwave) but cannot occur in waves Ⓦ and Ⓨ.

Guidelines

• Wave Ⓧ is often 123.6-138.2% the Ⓦ wavelength, less often wave Ⓧ retraces 161.8% or more. Don't expect wave Ⓧ to be more than 261.8% of wave Ⓦ. (TWEWA)
• Wave Ⓧ is usually a single or multiple zigzag.
• When a zigzag or flat appears too small to be the entire wave with respect to the preceding wave (or, if it is to be wave ④, the preceding wave ②), a combination is likely.

Notes

• An expanding triangle has yet to be observed as a component of a combination.

🔝Rules and Guidelines

🔝Contents

...

🔝Contents

• The «Right Look»
• Alternation (guideline of)
• Equality (guideline of)
• Channeling
• Orthodox Tops and Bottoms
• Overlap
• Expanding (expanded correction)
• Extension
• Truncation (truncated wave)
• One-two, one-two
• Third of a Third
• Previous Fourth Wave
• Sharp Correction
• Sideways Correction
• Motive Wave
• Corrective Wave

In the process of editing ⭕️

🔝Contents

• Compiled and supplemented (where no source is indicated):

Trade Waves / Elliott Wave Analysis ©

• Infographics: Trade Waves / Elliott Wave Analysis ©

• References:

📚Elliott Wave Principle - Key to Market Behavior. Robert Prechter and A.J. Frost

📚The Socionomic Theory of Finance (Translation of articles on Socionomics and Elliott Wave Theory from ewitranslate)

📚Q&A EWI, RSWA

As well as author's observations and research

© Copyright:

— The use of materials from the Trade Waves / Elliott Wave Analysis © community requires the mention of the author and a link to this community. Any editing of copyrighted images is strictly prohibited.

All rights reserved.

💨Trade Waves / Elliott Wave Analysis ©🌊

.