3-wave countertrends then rectify and reverse the 5-wave trends.
To track the correction, letters are utilized instead of numbers.
Take a look at this smokin’ hot corrective 3-wave pattern!
The fact that I’ve been using a bull market as my major example does not imply that the Elliott Wave Theory does not function in bear markets.
The identical 5-3 wave pattern can appear as follows:
Types of Correction Wave Patterns
Elliott describes 21 corrected ABC patterns that range from simple to complex.
“Uh, 21? I can’t possibly remember everything! The fundamentals of Elliott Wave Theory are already mind-boggling!”
Take your time, little padawan. The best part about Elliott Wave is that you don’t have to be of legal drinking age to trade it!
You don’t need a false ID or know all 21 sorts of corrected ABC patterns because they are comprised of three extremely simple and easy-to-understand shapes.
Consider the following three formations. The examples below are for uptrends, but if you’re dealing with a downtrend, simply invert them.
The Zig-Zag Formation
Zig-zag formations are extremely steep price swings that run counter to the dominant trend.
Wave B is usually shorter in length than Waves A and C.
In a correction, these zig-zag patterns can occur twice or even three times (2 to 3 zig-zag patterns linked together).
Each of the waves in zig-zag patterns, like all waves, might be split up into 5-wave patterns.
The Flat Formation
Flat formations are straightforward sideways corrective waves.
The lengths of the waves on flats are GENERALLY EQUAL, with wave B reversing wave A’s move and wave C erasing wave B’s move.
We say generally because wave B can sometimes extend past the start of wave A.
The Triangle Formation
Flat formations are straightforward sideways corrective waves.
The lengths of the waves on flats are GENERALLY EQUAL, with wave B reversing wave A’s move and wave C erasing wave B’s move.
We say generally because wave B can sometimes extend past the start of wave A.
Next Lesson: Fractals: Elliott Waves Within an Elliott Wave
