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Summary Elliott Wave Theory

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					Summary: Elliott Wave Theory


Elliott Waves are fractals. Each wave can be split into parts, each of
which is a very similar copy of the whole. Mathematicians like to call
this property "self-similarity".
A trending market moves in a 5-3 wave pattern.
The first 5-wave pattern is called impulse wave.
One of the three impulse waves (1, 3, or 5) will always be extended. Wave
3 is usually the extended one.
The second 3-wave pattern is called corrective wave. Letters are used
instead of numbers to track the correction.
Waves 1, 3 and 5, are made up of a smaller 5-wave impulse pattern while
Waves 2 and 4 are made up of smaller 3-wave corrective pattern.
There are 21 types of corrective patterns but they are just made up of
three very simple, easy-to-understand formations.
The three fundamental corrective wave patterns are zig-zags, flats, and
triangles.



There are three cardinal rules in labeling waves:
Rule Number 1: Wave 3 can NEVER be the shortest impulse wave
Rule Number 2: Wave 2 can NEVER go beyond the start of Wave 1
Rule Number 3: Wave 4 can NEVER cross in the same price area as Wave 1
If you look hard enough at a chart, you'll see that the market really
does move in waves.
Because the market never moves in text book perfect fashion, it will take
many, many hours of practice analyzing waves before you start to get
comfortable with Elliott waves. Stay diligent and never give up!


Read more: http://www.babypips.com/school/summary-of-elliott-wave-
theory.html#ixzz1Z0FaNujq

				
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