Elliot Wave Patterns(1) – Part 2
Studying the patterns is very important in order to apply the Elliott Wave Principle correctly. The pattern of the market action, if correctly determined, not only tells you to what price levels the market will rise or decline, but also in which way (or pattern) this will happen.
There are Classic Elliot Wave patterns(following Classic Rules) and Modern Elliot Wave patterns(following Modern rules).
For the part 1, we will be focusing on Classic Patterns.
Classic Elliot Wave patterns
1- Trends
a) Impulse pattern
Impulses are always composed of five waves, labeled 1,2,3,4,5. Waves 1, 3 and 5 are themselves each impulsive patterns and are approximately equal in length. Waves 2 and 4 on the contrary are always corrective patterns.
Rules:-
-Wave 2 cannot be longer in price than wave 1, and it must not go beyond the origin of wave 1.
-Wave 3 is never the shortest when compared to waves 1 and 5.
-Wave 4 cannot overlap wave 1, except in diagonal triangles and sometimes in wave 1 or A waves, but never in a third wave. In most cases there should not be an overlap
between wave 1 and A.
-As a guideline the third wave shows the greatest momentum, except when the fifth is the extended wave.
-Wave 5 must exceed the end of wave 3.
-As a guideline the internal wave structure should show alternation, which means different kind of corrective structures in wave 2 and 4.
b) Extension pattern
-Just like impulse wave, but wave 1,3 or 5 can be extended, becoming a much longer wave( consist of a few smaller waves in it).
c) Diagonal triangle type 1 Pattern
-Diagonals are relatively rare phenomena for large wave degrees, but they do occur often in lower wave degrees on intra-day charts.
Rules:-
It is composed of 5 waves.
Waves 4 and 1 do overlap.
Wave 4 cant go beyond the origin of wave 3.
Wave 3) cannot be the shortest wave.
Internally all waves of the diagonal have a corrective wave structure.
Wave 1 is the longest wave and wave 5 the shortest.
The channel lines of Diagonals must converge.
As a guideline the internal wave structure should show alternation, which means different kind of corrective structures.
d) Diagonal triangle type 2 Pattern
2- Corrections
a) ZigZag pattern
-A Zigzag is the most common corrective structure, which starts a sharp reversal.
-A zigzag can extend itself into a double or triple zigzag, although this is not very common.
Rules:-
It is composed of 3 waves.
Waves A and C are impulses, wave B is cor
The B wave retraces no more then 61.8% o
The C wave must go beyond the end of A.
The C wave normally is at least equal to A.
b) Flat pattern
-Flats are very common forms of corrective patterns, which generally show a sideways direction.
Rules:-
It is composed of 3 waves.
Wave C is an impulse, wave A and B are corrective.
Wave B retraces more then 61.8% of A.
Wave B often shows a complete retracement to the end of the previous impulse wave.
Wave C shouldnt go beyond the end of A.
Normally wave C is at least equal to A.
c) Contracting Triangle pattern
It is composed of 5 waves.
Wave 4 and 1 do overlap.
Wave 4 cant go beyond the origin of wave 3.
Wave 3 cannot be the shortest wave.
Internally all waves of the diagonal have a corrective wave structure.
In a contracting Triangle, wave 1 is the longest wave and wave 5 the shortest. In an expanding Triangle, wave 1 is the shortest and wave 5 the longest.
Triangles normally have a wedged shape, which follows from the previous.
As a guideline the internal wave structure should show alternation.
d) Expanding Triangle pattern
