Applied Elliott Wave

Home Study Program

www.appliedelliottwave.com

MODES OF DEVELOPMENT

T here are two modes of wave development.

• Motive
• Corrective.

Motive waves are composed of five waves, and they resolutely move the market in one
direction. It can be said that when markets move from one price territory to another, they sport
motive waves. Motive waves are also called Impulses or Fives. A motive wave is a fast price
movement in the shortest possible time.

Corrective waves on the other hand unfold in a three wave pattern and achieve only a partial
retracement of the earlier wave. They are also called three's. They serve to put a pause to the
price movement achieved by the motive wave. A corrective is the shortest possible price
movement in the longest possible time. Both modes have a very specific roles to play in the
scheme of the market.
5

3 b

4 a
1

2 c

Motive waves are labeled in numbers: 1, 2, 3 , 4 ,5 and the corrective waves are labeled with
alphabets as shown: a, b and c.
 THE BASIC PATTERN

O ne full cycle of the market consists of eights waves. Fives waves in the motive or

impulsive mode and three waves in the corrective mode. They can also be labeled 1 & 2.

51

3 b

a
1 4

c2
2

On completion of wave 2, which also marks the end of one full cycle, another cycle unfolds and
the second cycle is then followed by another five wave structure. Thus the entire larger cycle
unfolds essentially the same pattern 5-3 pattern, albeit a larger pattern.

5 1

3 b

4 a
1

5 c
3 b 2
2
1 4 a
c
2
 FULL MARKET CYCLE
OR FULL MARKET PICTURE
1
5
5
2 b
3
c

3 1 4
a
5 4 2
1
b 3 b
1
3 5 4
a 2 a

3
1 4
c
4 5
5 1 c
3 b 2

a 2

4
1
c
2
2

T his picture illustrates a full market cycle. See how motive and corrective waves nest

within each other to form larger waves and the basic pattern of fives and threes are repeated
over and over again. We can build larger and larger waves based on the same principle. This
form building is constant and repetitive.

Waves can be categorized by their relative size, and in Elliott parlance, by degrees. Thus five
waves of one degree, form a motive wave of a larger degree and three waves of one degree
form a corrective wave of a larger degree. These larger degree waves will again string together
to form a wave of yet another larger degree.

This pattern can also be said to represent markets at all stages. We could fit the present
market position at some point into this pattern and have a fairly reasonable forecast of future
market movement.
This picture presents the true essence of R N Elliott's Pioneering work. Though idealised, you
will observe later that markets move within the above complete cycle at any given point of
time and it is a very easy task to pinpoint the present position and forecast where the markets
are likely to be when the pattern and the cycle end.

Within the broad classification of Motive and Corrective waves, we need to understand the
different kinds of Motives and Correctives to analyse the market in detail and also narrow down
on the probable wave formation likely to unfold. Our task is greatly complicated as markets are
unfolding on all degrees at the same time and it needs a certain amount of skill and
understanding to pinpoint the present market position.

We shall study this picture in depth at a later stage. Let us now look at the possible variations
within Motive and Corrective waves..........