Hello everyone! We are excited to present a series of short videos aimed at serving as a reference for the wave patterns that comprise the Elliott Wave Principle. In this article, we will delve into the first and most important wave pattern: the standard impulse wave.
The standard impulse wave is characterized by a strong trending price move and represents the overriding form of market progress. This wave pattern manifests during strong trends in either direction—upward or downward.
Impulse waves always subdivide into five distinct waves, of which three are impulsive, and two are corrective. The impulsive waves are designated as waves 1, 3, and 5, while the corrective waves are noted as waves 2 and 4.
Each of the impulsive waves—waves 1 and 5—can take the form of diagonals. However, wave 3 must be classified as a non-overlapping standard impulse wave.
There are three simple rules that define impulse waves:
Additionally, although not a strict rule, the two corrective waves (waves 2 and 4) typically alternate in form.
As always, the sub-waves of a standard impulse should demonstrate Fibonacci relationships to one another. A key concept here is known as Fibonacci pinball. This method involves taking the length of wave 1 and projecting it from the bottom of wave 2.
Upon doing so, wave 3 typically reaches the 1.618 extension, wave 4 retraces to the 1.0 extension, and wave 5 will often achieve the 2.0 extension.
Understanding these principles can greatly enhance your ability to navigate the complexity of market movements based on Elliott wave analysis. Stay tuned for more videos in our series as we explore additional wave patterns and their implications for stock chart analysis!
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