1.the Most Recent and Revolutionary Interpretation of The Elliott Wave Theory, NeoWave by Glenn Neely - Liteforex

2/2/2021 The most recent and revolutionary interpretation of the Elliott wave theory, NeoWave by Glenn Neely | Liteforex
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Neo Wave theory. Part 1. Rules of creating charts
NeoWave theory by Glenn Neely. Basic concepts. Major principles and rules of building Neo
Waves
Dear friends!
There are many tools to analyze the markets, from stock markets to forex, based on the Elliott wave theory. These systems of the analysis
of the market prices nd a response from a variety of participants in exchange trading. We have already studied the classical readings of
the Elliott wave theory o ered by Robert Prechter and Bill Williams, and I can’t bu mention a more modern and revolutionary NeoWave
approach developed by a nancial analyst Glenn Neely.
This a completely new approach to the wave analysis that, according to the author and his followers, has stronger predictive powers
compared to earlier studies. We shall nd out if it is really so in the process of studying the NeoWave theory. We shall start with the
answers to the major questions of the Wave theory that were never published before Glenn Neely’s Mastering Elliott Waves was written.
What are waves, monowaves and complex waves?

Remarkably, but in books by Elliott and his followers, there is now a clear de nition of a wave, which the whole theory is based on. Neely
de nes a wave as a straight line of any length moving in any direction, except vertical. Waves result from the imbalances in the number of
buy and sell orders шт the market. Neely also introduced a completely new term of Monowave, which is a kind of building block of all wave
patterns. A monowave is the simplest type of wave that is the price movement starting from a change in the price direction until the next
change in the price direction occurs.
(https://cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.03.09/BTCUSD_hyipov_1.jpg?
q=75&s=c760d81ece109d1cced18d32718310b3)
The monowave is marked by the blue line in the chart, the yellow line marks the movement in the opposite direction. A monowave can be
a section of the price chart of any length where the price is moving in the same direction, before this section and after it, there occurs a
change in the price action.
An idealized monowave is a straight line, but it rarely occurs in practice.
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https://www.liteforex.com/blog/for-professionals/neo-wave-theory-part-1-rules-of-creating-charts/ 1/18
q=75&s=07f26a0a32a1061f579f7974ec85dc58)
In the above chart, blue lines mark the price movement with multiple insigni cant changes in the price direction. This movement can be
called a monowave until the change in the general direction occurs, it happens when an up movement reverses down (marked with an
orange line).
Neely calls a combination of three or ve monowaves a polywave, the wave that includes three or ve polywaves is referred to as a
multiwave, and the combination of three or ve multiwaves is a macro-wave. The patterns of a higher degree are also called macro-waves,
thus the author abandons the classical hierarchy described in the article, devoted to the wave degrees
(https://www.liteforex.com/blog/for-professionals/market-wave-theory-by-robert-prechter-part-2-wave-degrees-and-more-guidelines-of-
wave-alternation/).
Rules of chart construction

One of the major di erences of Glenn Neely’s Mastering Elliot Wave from the approaches described by Prechter and Williams is the
principle of chart construction. The analyst developed a completely new system of technical analysis and data management that we are
now going to study.
At the rst stage, we divide the chart into a few equal time periods.
q=75&s=002facee826011d10650a96cdb086e2f) Live Chat (https://my.liteforex.com/?openPm=2)
In our example, the time units will be daily sessions marked by blue dotted lines in the chart.
q=75&s=98ab92d3d023323bca5752ed9c304abf)
Next, we divide the de ned period into two parts. Now, we need to de ne the low and the high of each period (not the half, but of the
entire day). You can use the high and low for the entire day and plot them in the order they occurred.
If the low of the day comes rst, you put a dot in the middle of the rst half (the left part), in the middle of the other half (the right one),
you put the dot corresponding to the high. If the situation is the opposite and the high of the day comes rst, you plot it rst, and the low
is plotted second.
q=75&s=ab8e9a498dcb4d8ed54420ba3bd81353)
The above chart displays an example of such an analysis. In the rst left time period, there comes the low rst, so, we plot the low in the
left time slot (the very rst bald blue dot in the chart), and we plot the high in the right time slot (a blue dot a little more to the right). The
same situation is on the second day. On the third day, the high is reserved rst in the left time slot, and the low is plotted in the right slot.

q=75&s=68467b45845a4d8af90c70ece67f83cd)
Now, we connect the dots with a line and see a pattern consisting of monowaves.
q=75&s=01e4651c93904f8b2827211eeac91dde)
Note that some of the monowaves can be combined into a single wave. Namely, they are two waves in the green area, and two waves -in
the yellow area.
As for the practical application of Neely’s method, we don’t have to draw the layout manually. If you switch the daily session layout in the
settings of the TradingView chart, you will see an automatic layout of the daily sessions where you can right away plot the starting and the
nal points of monowaves.
There's even a simpler way to construct the chart using the NeoWave V0 indicator, which can be easily found in the Trading View library.
Identi cation of zero (starting) point and scaling

The e ciency of the NeoWawe analysis much depends on the right choice of the starting point for your observations. At the rst stage, we
pick up the market and plot a chart of monthly highs and lows in the way I described above.

q=75&s=e2b6998d3f6669dab62d716de8a8ed16)
Highs and lows are connected by blue lines on the chart. Now, we should de ne the monowave that is the closest to the center of the time
period.
q=75&s=a392da35130cbe8996de632f7fbc4697)
First, we plot the high and low for the period we study. The high is at 17215 USD it is marked by the green circle. The low is 3204 USD. I
marked it with a red circle.
We shall nd the arithmetic mean of two values.
(17215 + 3204)/2 = 10209

I marked this level by the horizontal pink line in the chart. Now, the monowave is clear, its starting and nal points are the closest to the
center of the entire price range we have just identi ed.

q=75&s=e799143bc8cb4f99c f6210670a7a2d)
This monowave crosses the pink line above a zero level. I marked it with a pink circle in the chart.
This will be the starting point for the chart of a lower degree. If we rst used a four-day timeframe, we shall now switch to the four-hour
chart. Neely notes that the second chart must include about 60 bars.
q=75&s=941f5e7a539591e4e83dd1cdf00c803b)
The above chart displays the 60-bar sequence that starts with the zero point identi ed earlier. For you to see it clearer, I put a pink circle
around this point. Now, we need to identify the important high and low. In the sequence under study, there is an important low, it is
marked by the red circle in the chart.

q=75&s=977dd12cc218361be89460c923a52cf0)
Now, we switch to the two-hour timeframe and draw a chart that is twice more detailed than the current chart. The important low will be
the starting point of the nal chart for analysis, it is marked with the red circle. Besides, we must observe the rule of proportion that I’ll
explain below.
If you want, you may employ other timeframes, which suit more to your current tasks. The most important is to observe the rule of
proportion, which I will cover below.
q=75&s=a01d11f63cf5c21c9f2ef0b8ca917aa6)
At the nal stage, we check if we can combine the monowaves if they move in the same direction. The above chart presents two such
cases (marked with green areas) when two monowaves can be united into a single formation.
Rule of proportion
The e ciency of the visual analysis of the market situation much depends on the chart's appearance. In his book, Glenn Neely introduces
the concept of ideal, based on the Elliot Wave Principle, chart according to the market action.
There are two types of the action: Directional, composed of a series of monowaves, which as a whole create an increase or decrease in a
market’s value; Non-Directional action, which we often call a sideways trend or a at, create stagnation of a market’s value.
Directional actions continue until the lengths of the down monowaves are visibly shorter than the lengths of the up waves (it is the
opposite for a bear trend). (https://www.liteforex.com/company/detail/news/77798/)
Besides, the second monowave of a Directional period is no longer than 61.8% of the rst wave.
☰
q=75&s=0042797c13a0e5c2a2b8ddf696cd12dc)
The above chart displays a part of the analyzed pattern, which is a vivid example of the Directional action. The green circle marks the low
of the correction. As you see, it is at 0.618. The next correction, whose low is marked by the red circle, runs further than level 0.618, which
signals the Directional action should nish soon.
In a Non-Directional period, the second wave always retraces the rst monowave more than 61.8%. Furthermore, all phases of a Non-
Directional action must be retraced by at least 61.8% (with the occasional exception of one phase and a retracement in a series of
monowaves). When the price goes beyond the range of the entire Non-Directional period, it usually means the termination of the Non-
Directional action.
q=75&s=fb2550466fa391af350df324962ab138)
The above chart displays a Non-Directional action. I deliberately marked the rst retracement by pink lines to show that it can be seen as
single monowave according to the Rule of Neutrality that I will cover a little later. As a result, the rst retracement is roughly equal to the
preceding up movement. Next retracements are also considerably longer than the proportion of 0.618.

q=75&s=8e1a7cc 2e9679d6c836920a473c962)
This chart displays the signal of the termination of the Non-Directional action. The next price action nishes below level 1.618 (marked with
the red circle) of the entire non-directional period (the extreme price levels are marked with black horizontal lines).
The e cient use of Neely’s method requires sticking to a correct price-to-time ratio, which will produce an angle of ascent or descent
according to the type of market action unfolding. If it is a Directional action, it should travel from the bottom left to the top right or top left
to the bottom right corner of a perfect square. In other words, the price should be advancing at an angle of about 45 degrees. There can
be minor deviations (no more than 25% of the length of one side of the square).
When the action is non-directional, Neely recommends constructing the chart in the way that the up and down periods cover
approximately half of a perfect square.
q=75&s=91431ec5318f6dd19507abe050cdb3d5)
The BTCUSD (https://my.liteforex.com/trading/chart?symbol=BTCUSD) chart above displays proper proportions of directional and non-
directional actions. Directional monowaves are located in green perfect squares. Except for insigni cant deviations, the rule of proportion
is ful lled (it travels from the top left to bottom right).
The non-directional action is in the red square. Note that all monowaves are in the upper half of the square.
Complex monowaves Live Chat (https://my.liteforex.com/?openPm=2)

As you can see from the previous examples, I represented the monowaves, which could be combined into a single wave, with one wave.
But it is not always convenient to do, as some information about the price movement is lost.
Glenn Neely o ered an alternative way to label monowaves. He suggests putting dots at the end of the monowave being studied and,
accordingly, at the beginning of the next one. At the points where the monowaves are linked together as an element of complex
formation, such dots will be absent, indicating that this sequence has been combined into one monowave.
Rule of Neutrality
Most of the monowaves travel at a diagonal to the price/time axis. Occasionally, there can be monowaves progressing more horizontally
than vertically. To identify such a wave, you should frame into a perfect square and draw a diagonal line from the origin point at an angle
of 45 degrees. The rule of neutrality is considered if the price action travels below this diagonal line (in an up movement) or above it (in a
down movement), otherwise, the rule of neutrality is not considered. Therefore, if the monowaves forms at an angle that is less than 45
degrees, the wave can be considered horizontal.
q=75&s=a0e72c0bd5940f597318f7d9774335ae)
Let us see the sequence of three monowaves that I mentioned earlier (marked with pink lines). The central monowave looks like a
horizontal action. To verify whether it a true horizontal action, I drew a perfect green square and drew a diagonal line from the origin of
the monowave being studied. As you see the angle of the price action is less than 45 degrees, and so the rule of neutrality should be
considered. In practice, you won’t have to always draw those complex charts to identify the type of each monowave, as, most commonly,
you can visually assess it.
Horizontal price action can separate two waves moving in the same or opposite directions
When a horizontal action separates the monowaves moving in the opposite direction, we refer to the Aspect-1 of the rule of neutrality. The
Aspect-1 states that the rst monowave terminates at the nal point of the horizontal period that is above the local low or below the local
high. That is we kind of move the idealized top of the rst monowave to the termination point of the second wave that represents a
horizontal action. Besides, it must be remembered that the horizontal action shouldn’t be greater than 38.2% of the previous monowave
(the rst one on the left). Besides, the retracement following the horizontal action (the third monowave in the pattern) should be at least
61.8% of the rst monowave.

q=75&s=09d6c592eb1b634186754a8263c36c40)
The expected horizontal action is within the pink square in the above chart. As it runs above the pink diagonal of the perfect square, its
angle is less than 45 degrees and it a truly horizontal action. The next condition, saying that retracement following the horizontal activity
should be at least 61.8% of the rst monowave, is also ful lled in this example. There is also met the condition that reads that the
horizontal action should be less than the prior monowave. Accordingly, we can state that the Aspect-1 of the neutrality rule is observed
here.
The Aspect-2 of the Rule of Neutrality, according to Neely, says that when horizontal (or near horizontal) price action is separating two
waves moving in the same direction, the horizontal action can be ignored, leaving just larger monowave to deal with. If it will be more
convenient to analyze the pattern is the formation is divided into three smaller monowaves, this interpretation is also acceptable.
q=75&s=69579fa6ca8065597c4a7ea273c89b8a)
Going back to the previous example, we can analyze the structure, marked with the pink lines, as the single large monowave, which is
evident from the red dots in the chart, or as a combination of the three smaller waves.
However, the Aspect-2 of the neutrality rule shouldn’t be applied, as the horizontal action is directed in the opposite direction to the
preceding and the following waves.
The Rule of Relative Position of Waves (Identi cation Rule) Live Chat (https://my.liteforex.com/?openPm=2)
Like Prechter and Williams, Neely o ers to label monowave with numbers, starting with 1 according to their chronology; he also divides
the price movements into Impulsive and Corrective. You can read more about impulse and corrective waves in my previous articles.
If the wave doesn’t have distinctive features, its structure is de ned based on the preceding and the proceeding structures. In the course
of analysis, the current wave is labeled m1, the preceding one is m0, and the next one is m2.
The position rule states that the preceding and proceeding waves have a structure similar to the current wave. Let's see the examples.
q=75&s=4330dc542d145cdef06d6de70bea05c6)
The wave m1, which we now analyze, is marked by the green wave in the chart. Blue lines mark the prior and the following waves. The pink
horizontal lines mark the high and the low of the monowave m1. After the price breaks through the m1high (the green circle in the chart),
the m2 nished at the lowest point, which has been con rmed. The opposite situation is also correct when the m2 termination point is
con rmed when the price breaks through the low of m1.
q=75&s=7262dae409660795 9fdfdf34f4a704)
If m2 breaks through the low of m1, and it is not a compacted wave group (the concept will be covered in detail in me next articles), the
rst price action reversal after the break of m1’s low (the green circle) is the endpoint of the wave m2. The opposite thesis is also correct
when the m2 wave breaks the m1’s high. Besides, these rules can be used in the same wave to analyze wave m0 and the earlier waves.

If, before the price breaks through one of the M1’s extreme level, there have formed more than one monowave, then, the m0 and m2 can
be considered a group of monowaves, they will be labeled, in this case, mg0 and mg2. Most commonly, the mentioned wave groups
(https://www.liteforex.com/company/detail/news/77798/)
consist of more than ve simple monowaves, and the number of constituent waves in di erent groups is the same. If just one wave has
☰
formed before the price breaks out the high or the low of m1, the waves m0and m2 can be interpreted only as simple monowaves.
q=75&s=a38badf0a0c5ad664e6edd2832c26 f)
The above chart displays an example when there is one monowave completes before the price breaks out the low of m1. The meeting
points in both cases are marked with green circles.
As a result, the rules of the wave position can be brought to a single thesis: to con rm the completion of the wave on the right of m1
(future waves), the price should break through the high or the low of the previous wave; to identify the endpoints of the waves on the left,
we need to identify in the past the moment when the price crossed the extreme level of the following monowave.
This rule applies not only to the monowaves m0 and m2 but also to the wave groups mg0 and mg2, it is also relevant for the preceding
and proceeding waves. In the analysis, you need to refer to the closest highs and lows.
q=75&s=cb3b3761a5e41af02d58e37e0b088084)
Let us study the example in the above chart. The green diagonal line marks the monowave m1, green horizontal lines mark its high and
low. After the following monowave m2 breaks the high rst upside (green circle), next, downside, it signals the termination of wave m2.
The next wave m3 breaks through the low and also hits a fresh low marked with the pink horizontal line. When m4 is close to the previous
low, m3 is completed. When analyzing the next monowave, m5, we will look for a lower low (pink line). When the low is updated (pink
circle), m4 is con rmed to have completed.
☰
Here, I am nishing the rst article devoted to the NeoWave theory. In the next articles (https://www.liteforex.com/blog/for-
professionals/neo-wave-theory-part-2-basic-information-on-polywaves-and-structure-labels/), I will cover more interesting concepts of the
theory, namely, the Retracement rules, and the relationships between the lengths of waves.
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Price chart of BTCUSD in real time mode

Periods M1 M5 M15 M30 H1 H4 D1 W1
Zoom 1D 1W 1M 3M 6M 1Y ALL
40k
35k
30k
25k
20k
15k
30. Nov 14. Dec 28. Dec 11. Jan 25. Jan
Dec '20 Jan '21 F…

(https://cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.03.09/BTCUSD_hyipov_logo.jpg?q=75&w=1000&s=410f2f0cdfe25443f7aa73fd3114e771)
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published on this page is provided for informational purposes only and should not be considered as the provision of investment
advice for the purposes of Directive 2004/39/EC.
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Noel McCarthy • 5 months ago

Thanks for this article. I was having trouble understanding Glenn's explanation in his book on how to plot monowaves as
he didn't actually show it on a chart. This article solved that problem. Is the NeoWave V0 indicator still available on
tradingview? Is it still the same name/description?
Thanks
Noel
△ ▽ • Reply • Share ›
Becoming an Elliottician • 7 months ago

can i use neo wave for day trading if i can then which time frame is best for best wave formation ?
mohammad ramezani • 9 months ago

dear author
thanks for covering the hidden corner of neowave analysis. I realy appreciate that. I started to learn this method of EW
theory recently but I have a couple of questions about the early stages:
1- As Neely said, degree of a wave is based on the time/price relationship. so Rule of Proportion is applied to study this
relation. But I can't realy understand that. does it say we could have a unit chart with different time scale when investigating
directional and non-directional actions?
2- Are there any other application for this rule(Rule of Proportion) except prepare a chart for studying the Rule of
Neutrality?
and at last I ask you to illustrate an example of improper termination of a non-directional action.
Михаил Хайпов > mohammad ramezani • 9 months ago

1. We can use any timeframe when analyzing directional and non-directional market action.
2. The rules of proportion and neutrality are only used to determine monowaves correctly in the chart. There are no
other applications of these rules. Here is an example of a wrong representation of a non-directional action. Waves
here break through the middle line of a perfect square.
1△ ▽ • Reply • Share ›
mohammad ramezani > Михаил Хайпов • 9 months ago

Thank you very much Mr. Hypov for your support. and your sentence about wrong representation of a non-
directional action:(Waves here break through the middle line of a perfect square.) was really helpful.
Михаил Хайпов > mohammad ramezani • 9 months ago

You are very welcome!
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05 Mar. 2020 16:07
Part 2. Elliott wave trading strategy based on books by Williams and Prechter (continuation)
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19 Mar. 2020 17:00
Neo Wave theory. Part 2. Basic information on Polywaves and Structure labels
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Neo Wave theory. Part 1. Rules of creating charts

What are waves, monowaves and complex waves?

An idealized monowave is a straight line, but it rarely occurs in practice.

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Rules of chart construction

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Identi cation of zero (starting) point and scaling

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We shall nd the arithmetic mean of two values.

(17215 + 3204)/2 = 10209

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