How To Count Elliott Waves
By: Stephanie
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This lesson will teach you how to count waves in an Elliott Wave.
The Wave Principle would be easy if the Wave forms would be ideal. Unfortunately in the real world the market behavior is not usually ideal. Every wave functions as either an action or a reaction. A wave may either benefit the general trend or interrupt it. A wave that trends in the same direction as the general trend is known as an actionary or trend wave. A wave that moves in the opposite direction to the general trend is known as a reactionary or countertrend wave.
Elliott Wave Count Rules
Based on the market pattern, we can identify 'where we are' in terms of wave count. Nevertheless, as the market pattern is relatively simplistic, there are several rules for valid counts:
- A completed cycle consists of a 5-3 pattern.
- Waves are measured by distance covered on the chart (by price).
- Wave 2 should never break below the beginning of wave 1.
- Wave 3 in an impulsive 5-wave move is usually longer and never shorter than waves 1 and 5.
- Two of the Three impulses in a 5-wave sequence tend toward equality, usually waves 1 and 5.
- Waves 2 and 4 tend toward equality.
- The bottom of wave 4 should not penetrate the bottom of wave 2.
- Often, but not always, wave 4 is equal to wave 1.
- Often, but not always, wave 5 is equal to wave 2.
- Waves A and C tend toward equality.
- Wave B of the ABC correction must never penetrate below the bottom of wave A.
- ABC Corrections typically retrace one third of the previous 5-wave sequence.
- ABC corrections tend to stop at the bottom of wave 4 in an upward trend and the top of wave 4 in a downward trend.
So there are the rules to counting Elliott Waves. In our next lesson, we will explain wave forms in the Impulse Wave. Keep learning and mastering Forex with us, here at PipsAngels.com.
