Before beginning about patterns in concept, we must remember that there are 3 commandments, stated by R.N Elliott that are imperative to theory: (See attached 4 hour GBPCAD chart for example).
Impulse Wave 3 can never be the shortest wave
Wave 2 can never retrace beyond the start of Wave 1
Wave 4 can never cross into the same price area as Wave 1
These rules, just like all rules in general, are bent sometimes, so don’t be afraid to think outside the box and question everything. What I would suggest is that when one of these 3 rules are broken, then a review needs to be done for the wave count.
Wave Sequence:
In a Dominant Trend, progress ultimately takes the form of 5 Waves, which are labeled with
numbers; 1,2,3,4,5.
Three of these swings, which are 1, 3 and 5, affect the overall direction in favor of the Dominant Trend. These Swings are known as Motive Waves or Impulses.
Within the 5 Wave Sequence, the 3 Waves that unfold in favor of the Dominant Trend are separated by 2 counter-trend interruptions, which are labeled as 2 and 4. These Swings represent a temporary interruption of the Impulse Waves, hence why they are called
Corrective Waves.
Wave Principle states that; a Full Cycle is made up of 8 Swings. The Market moves with 5 Waves in the direction of the Main Trend with 3 Waves against it.
Once the Impulsive Phase is complete, then the Trend Corrective Legs unfold and act as a pull-back. Labeled A, B & C.
Impulse Wave 3 can never be the shortest wave
Wave 2 can never retrace beyond the start of Wave 1
Wave 4 can never cross into the same price area as Wave 1
These rules, just like all rules in general, are bent sometimes, so don’t be afraid to think outside the box and question everything. What I would suggest is that when one of these 3 rules are broken, then a review needs to be done for the wave count.
Wave Sequence:
In a Dominant Trend, progress ultimately takes the form of 5 Waves, which are labeled with
numbers; 1,2,3,4,5.
Three of these swings, which are 1, 3 and 5, affect the overall direction in favor of the Dominant Trend. These Swings are known as Motive Waves or Impulses.
Within the 5 Wave Sequence, the 3 Waves that unfold in favor of the Dominant Trend are separated by 2 counter-trend interruptions, which are labeled as 2 and 4. These Swings represent a temporary interruption of the Impulse Waves, hence why they are called
Corrective Waves.
Wave Principle states that; a Full Cycle is made up of 8 Swings. The Market moves with 5 Waves in the direction of the Main Trend with 3 Waves against it.
Once the Impulsive Phase is complete, then the Trend Corrective Legs unfold and act as a pull-back. Labeled A, B & C.