Elliot Waves Complete Guide | Chapter 3.1 - "Corrective Waves"
מעודכן
Hello Traders. Welcome to Chapter 3, where we talk about corrective waves. In chapter 3.1, we will be discussing Zig-Zag waves. The zig zag wave is one of the common of patterns in corrective Elliot Waves. Many of us see this on a daily basis, but did you know that there was a meaning behind all of the fluctuations in the price action?
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction, Expanded Flat
3.3 Running Flat, Contracting Flat
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
-----
We have to understand that markets also move against the trend of one greater degree only with struggle due to intraday traders. This is why Elliot Waves is another technique to organize the chaos within the market, as two forces are pulling in each direction regardless of how we want it to move. Let's talk about the MAIN important note for correction waves - they never have five waves. If they do, they are only a motive part of the overall corrective pattern. It's that simple. Corrections can be classified into two different classes of styles. There are the sharp corrections, which move sharply against the major trend. Their angle is rather steep. On the other hand are sideways corrections, they don’t retrace much in price, but can take a long time to finish.
Apart from the two styles are in general three correction pattern:
• Zig-Zag (5-3-5)
• Flat (3-3-5) (regular, expanded, running)
• Triangle (3-3-3-3-3) (contracting, barrier, expanding and running)
Combination of these pattern form either a double three or triple three correction. These prolonged corrections are separated by a wave X. All of these will be discussed in the following chapters.
Zig-Zag Patterns
A single Zig-Zag is a simple three-waved corrective movement which is labelled as an ABC wave. It’s structure is 5-3-5, and the top of wave B is noticeably lower than the start of wave A as shown above. There are rules to this. If you are still not sure of what we are talking about, you need to go back and review chapter 2.
Rules:
• Wave A has to be a motive or diagonal
• Wave B can only be a corrective pattern
• Wave B has to be shorter than Wave A
• Wave C has to be an impulse or ending diagonal along the way
This is the most common corrective pattern in Elliott Wave Theory and is usually a sharp correction within a descending wedge structure. For those not able to see it from an Elliot wave perspective, most traders can identify this pattern as a pennant continuation pattern. But the chaotic movements inside can be organized via Elliot Waves.
The length of wave C is between 100%-161.8% of wave A.
Zig-Zag corrections appear most of the time as a wave 2 only, but are also very common as a connective wave in more complex corrections like a double as shown above! Occasionally Zig-Zag corrections will occur in two, sometimes even three times in a row. This happens usually when the first Zig-Zag does not correct far enough from a price action perspective.
❗If a double Zig-Zag occurs, the single ZigZags are separated by a three-waved reactionary move, which is labelled as Wave X and is always corrective on the way down.
Note: Zig-Zag corrections often fit into a parallel channel! It is drawn between the highs of wave A & B to determine the end of wave C.
Thank you!
Trade Safe.
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction, Expanded Flat
3.3 Running Flat, Contracting Flat
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
-----
We have to understand that markets also move against the trend of one greater degree only with struggle due to intraday traders. This is why Elliot Waves is another technique to organize the chaos within the market, as two forces are pulling in each direction regardless of how we want it to move. Let's talk about the MAIN important note for correction waves - they never have five waves. If they do, they are only a motive part of the overall corrective pattern. It's that simple. Corrections can be classified into two different classes of styles. There are the sharp corrections, which move sharply against the major trend. Their angle is rather steep. On the other hand are sideways corrections, they don’t retrace much in price, but can take a long time to finish.
Apart from the two styles are in general three correction pattern:
• Zig-Zag (5-3-5)
• Flat (3-3-5) (regular, expanded, running)
• Triangle (3-3-3-3-3) (contracting, barrier, expanding and running)
Combination of these pattern form either a double three or triple three correction. These prolonged corrections are separated by a wave X. All of these will be discussed in the following chapters.
Zig-Zag Patterns
A single Zig-Zag is a simple three-waved corrective movement which is labelled as an ABC wave. It’s structure is 5-3-5, and the top of wave B is noticeably lower than the start of wave A as shown above. There are rules to this. If you are still not sure of what we are talking about, you need to go back and review chapter 2.
Rules:
• Wave A has to be a motive or diagonal
• Wave B can only be a corrective pattern
• Wave B has to be shorter than Wave A
• Wave C has to be an impulse or ending diagonal along the way
This is the most common corrective pattern in Elliott Wave Theory and is usually a sharp correction within a descending wedge structure. For those not able to see it from an Elliot wave perspective, most traders can identify this pattern as a pennant continuation pattern. But the chaotic movements inside can be organized via Elliot Waves.
The length of wave C is between 100%-161.8% of wave A.
Zig-Zag corrections appear most of the time as a wave 2 only, but are also very common as a connective wave in more complex corrections like a double as shown above! Occasionally Zig-Zag corrections will occur in two, sometimes even three times in a row. This happens usually when the first Zig-Zag does not correct far enough from a price action perspective.
❗If a double Zig-Zag occurs, the single ZigZags are separated by a three-waved reactionary move, which is labelled as Wave X and is always corrective on the way down.
Note: Zig-Zag corrections often fit into a parallel channel! It is drawn between the highs of wave A & B to determine the end of wave C.
Thank you!
Trade Safe.
הערה
Elliot Waves Complete Guide | Chapter 1 - "The Overall Cycle"
הערה
Elliot Waves Complete Guide | Chapter 2.1 - "Motive Waves"
הערה
Elliot Waves Complete Guide | Chapter 2.2 - "Ending Diagonal"
הערה
Elliot Waves Complete Guide | Chapter 2.3 - "Extensions"
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