In Elliott's model, it is believed that prices moves between two alternate phases, an impulsive or motive phase, and second a corrective phase and it happens on all time scales from minutes to yearly/multiyear. Further, these impulse moves are subdivided into 5 motive and 3 corrective waves and each wave can be divided further in another set of 5 motive and 3 corrective waves. Out of 5(namely 1,2,3,4 & 5) impulsive waves, wave 1,3 and 5 shows uptrend and 2 & 4 shows downtrend while out of 3( named a,b & c) corrective waves a & c shows fall while b shows a small bounce. So what we learned ?
Impulse Waves
According to Elliot, a trending market moves in a 5-3 pattern. Find out what that means here.
Corrective Waves
The Zig-Zag, the Flat, and the Triangle are all types of ABC
correction wave formations.
Elliott Waves Within an Elliott Wave
Always remember that each wave is comprised of smaller wave
patterns and that this pattern tends to repeat itself FOREVER.
Look at the picture below :
Just because we’ve been using a bull market as our primary example doesn’t mean the Elliott Wave Theory doesn’t work on bear markets. The same 5-3 wave pattern can look like this:
What is more important in elliott wave is correct wave count. To make this task easy for you we are telling you 3 most important rules which will make your wave count easy :
