Understanding the Basics of

Trading with Elliott Wavecc: rsmithing - https://www.flickr.com/photos/50048137@N00

In the early 20th century, an accountant named

Ralph Nelson Elliott discovered a very important

pattern in the markets.

He discovered that when the price is trending it creates five

legs. Three of these are impulse waves that move in the

direction of the trend and the other two are corrective moves

which move counter to the trending movecc: ClickFlashPhotos / Nicki Varkevisser - https://www.flickr.com/photos/27015396@N08

He further found that when this trend phase gets exhausted,

the price action shifts to a corrective phase, which could be

tracked in three moves counter to the trending move.

cc: DavidSpinks - https://www.flickr.com/photos/28669457@N04

ELLIOTT WAVE COUNT

• He concluded that there would be 5 moves that make up the trending phase, and 3 moves that make up the corrective phase.

• This is known as the 5-3 Elliott Wave count.

The 5-3 Elliot Wave Count

Elliott Wave Rules and

Guidelinescc: Ed.ward - https://www.flickr.com/photos/44423341@N00

ELLIOTT WAVE RULES

• Wave 2 cannot retrace more than 100% of Wave 1.

• Wave 3 can never be the shortest of the three impulse waves

• Wave 4 can never overlap Wave 1.

ELLIOTT WAVE GUIDELINES

• Guideline of Alternation states that Wave 2 and Wave 4 will alternate.

• Guideline of Corrective Wave Depth – The corrective A, B, C sequence with typically retrace within the territory of the previous Wave 4.

• The Guideline for Channeling – The use of Elliott Wave parallel trend lines helps to project end points of impulse waves

Fibonacci Ratios in Elliott

Wave Patternscc: Paw Prints Pix - https://www.flickr.com/photos/58563729@N06

COMMON RELATIONSHIPS

Wave 2 – 50.0%, or 61.8% of Wave 1.

Wave 3 – 161.8%, 261.8% of Wave 1

Wave 4 – 38.2%, 50.0%. 61.8 of Wave 3

Wave 5 – 100% of Wave 1 or 161.8% of Wave 4

COMMON RELATIONSHIPS

Wave A – 161.8%, 100%, 61.8%, or 50.0% of Wave 5.

Wave B – 50.0%, 61.8 of Wave A.

Wave C – 100% or 161.8% of Wave A, or 161% of Wave B

The Best Elliott Waves to

Tradecc: freshwater2006 - https://www.flickr.com/photos/77422674@N00

TRADE SETUPS• The most powerful wave within the

Elliott Wave Sequence is Wave 3.

• Wave 5 also provides a good trading opportunity.

• Within the corrective phase, Wave C provides the highest probability trade setup.

Check Out the “IN DEPTH”

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