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Elliott Wave
Rules&Guidelines

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elliot wave rules
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Elliott Wave ~ Rules and Guidelines
Motive Waves
Impulse (5-3-5-3-5)

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Rules
- An impulsive wave always subdivides into five waves (1-2-3-4-5).
- Wave 1 usually subdivides into an impulse or seldom into a leading diagonal.
- Wave 3 subidivides into an impulse.
- Wave 3 always moves beyond t@e end of wave 1.
- Wave 3 is never the shortest wave.
- Wave 5 subidivides into an impulse or an ending diagonal.
- Wave 2 subidivides into a !ig!ag" flat or #ombination.
- Wave 2 never moves @e!ond the start o" wave #.
Is this- Wave
content inappropriate?
4 subidivides into a !ig!ag"Report thisorDocument
flat" triangle #ombination.
- Wave $ never moves into the territor! o" wave #.

Guidelines
- Wave 1" 3 or 5 is usually e$tended" w@ile wave 1 is t@e least #ommonly e$tended
wave.
- %f wave 3 is e$tended" it&s #ommon for subwave 3 of 3 to e$tend as well (t@e same
applies for wave 1 and 5).
- 'ubwave 3 of 3 almost always @as t@e steepest slope wit@in t@e parent impulse.
- Wave 5 often ends w@en @itting a line drawn from t@e end of wave 1 or 3 t@at is
parallel to a line drawn between t@e ends of waves 2 and 4.
- Wave 5 normally ends beyond t@e end of wave 3" if not it&s #alled a trun#ation.
- %f wave 2 was a s@arp #orre#tion" wave 4 will almost always be a sideways

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#orre#tion and vi#e versa (Alternation).

- Wave 2 is usually a !ig!ag or !ig!ag #ombination.
- Wave 4 is ususally a flat" triangle or #ombination t@ereof.
- Wave 4 usually ends wit@in t@e pri#e territory of t@e fourt@ wave of wave 3.

%ia&onal (3-3-3-3-3 or 5-3-5-3-5)

Rules
- A diagonal always subdivides into five waves (1-2-3-4-5).
- Wave 4 never moves beyond t@e end of wave 2.
- Wave 4 always moves into t@e pri#e territory of wave 1.
- %n t@e #ontra#ting form" wave 5 is s@orter t@an wave 3" wave 3 t@an wave 1 and
wave 4 t@an wave 2.
- A line drawn between t@e ends of waves 2 and 4 #onverges towards (in t@e
#ontra#ting form) or diverges from (in t@e e$panding form) a line drawn between t@e
ends of waves 1 and 3.
Guidelines
- Waves 2 and 4 usually retra#e H2 to I* + of t@e previous wave.

Ending Diagonal (3-3-3-3-3)

Rules
- An ending diagonal is always a wave 5 of an impulse or a wave , of a !ig!ag or flat.
- All waves subdivide into !ig!ags.
Guidelines
- Wave 5 usually end beyond t@e end of wave 3 (if not it&s #alled trun#ation).

Leading Diagonal (3-3-3-3-3 or 5-3-5-3-5)

Rules
- A leading diagonal is always a wave 1 of an impulse or a wave A of a !ig!ag.
- Waves 2 and 4 subdivide into !ig!ags.
- Wave 5 ends beyond t@e end of wave 3.
Guidelines
- Waves 1" 3 and 5 are usually !ig!ags but #an also be impulses.
'orreHtive Waves
Ii&*a& (5-3-5)

Rules
- A !ig!ag #omprises t@ree waves (A-M-,).

- Wave A is an impulse or leading diagonal.

- Wave M #an be any #orre#tive pattern.
- Wave M never goes beyond t@e start of Wave A.
- Wave , is an impulse or ending diagonal.
Guidelines
- Waves A and , are usually impulses.
- Wave , often eNuals wave A and t@erefore ends almost always beyond t@e end of
Wave A.
- Wave M usually retra#es between 3I and 5* + of wave A
- A line drawn between t@e ends of waves A and , is often parallel to a line drawn
between t@e starts of wave A and ,.
+lat (3-3-5)

Rules
- A flat #omprises t@ree waves (A-M-,).
- Wave M retra#es at least /* + of wave A.
- Wave , is an impulse or ending diagonal.
Guidelines
- Wave M usually retra#es between 1** and 13I + of wave A.
- Wave , is usually 1** to 1H2 + as long as wave A.
- Wave , usually ends beyond t@e end of wave A.

,rian&le (3-3-3-3-3)
Rules
- A triangle subdivides into five waves (A-M-,-0-Q)" w@ereof at least four of t@em
are !ig!ags.

Contracting Triangle

Rules
- Waves ," 0 and Q never move beyond t@e end of t@e pre#eding same-dire#tional
wave.
- A line drawn between t@e ends of waves M and 0 #onverges wit@ a line drawn
between t@e ends of waves A and ,.
Guidelines
- W@en wave M ends beyond t@e start of wave A it&s #alled a running triangle (about
4* + of all triangles).
Barrier Triangle

Rules
- Waves M and 0 end at t@e same level.

Expanding Triangle

Rules
- Waves ," 0 and Q move beyond t@e end of t@e previous same-dire#tional wave.
- A line #onne#ting t@e ends of waves M and 0 diverges from a line drawn between
t@e ends of waves A and ,.
Guidelines
- Waves M" , and 0 usually retra#e between 1** and 125 + of t@e previous wave.

'om@inations
Rules
- ,ombinations subdivide into two or t@ree #orre#tive patterns (labeled W" R and S)
t@at are separated by one or two #orre#tive patterns in t@e opposite dire#tion (labeled
T).
Guidelines
- W@en a !ig!ag or flat seems to be too small to be t@e entire #orre#tion" it&s liUely to
get a #ombination.

These guidelines can be used with classic and modern Elliott Wave analysis and also with the
Elliott Oscillator in a bar chart of from 100 - 150 bars from Point Zero@

WAVE CONDITIONS IMPLICATIONS FIBONACCI

A coincidence of Pattern,
POINT Price and Time has come
Z together to mark a major
pivot that we have
E
identified as the 5th of a 5th
R
wave. The Elliott Wave
O pattern may not always be
the one that we were
e@pecting. When a fractal
occ!rs it means that a
wave has ended, ready or
not.
The s!spected high or low The most common
tick at a major pivot point %ibonacci
is the ideal entry point. relationships between
This entry has the least Elliott waves of the
capital risk beca!se it is same degree.
closest to the initial stop
loss point " the pivot. The
trade off is that there will
be a higher percentage of
losses. The market does
not always reverse where
we want it to# The pivot
point is Point $ero.

Will follow either a three -ew W.( of the same PRICE

W.1 wave A"&"' or a five degree sho!ld Nse internal swings
wave imp!lse pattern. overbalance the of lesser degree to
W.( that follows an A"&"' immediately prior project termination of
is an imp!lse wave. W.( corrective pattern in price W.(
that follows a five wave range b!t not necessarily
pattern is W.A of an A"&" in time. TIME
' pattern. /mp!lse W.( !s!ally
overbalances in time
)odern Elliott Wave the prior co!nter
analysis allows for five trend swing.
wave triangle patterns in
the W.( position of lesser
degree waves. That
means that W.*+( can
overlap W.(+( witho!t
invalidating the pattern as
an imp!lse wave. The
internal str!ct!re is L"L"L"
L"L.

W.( triangles are never

allowed as lesser degree
waves within a larger
degree W.L.

$ig"$ag 0A&'1 most W.2 most likely to be more PRICE

W.2 common. than 534 in time of W.(. 6 534 7 89.:4 W.(
Avoid premat!re entry.
Triangles least likely in Patience reU!ired. TIME
W.2 position and most 6 534 W.( minim!m
likely in W.*. Wait for ' wave 6 :24 7 (:24 of
completion. The first W.( most likely
co!nterswing is likely j!st
the A leg of an A&'
pattern.

)!st not penetrate Point

$ero or s!spected change
in trend from Point $ero is
probably wrong.

Ns!ally the longest and W.L confirmed when the PRICE

W.3 strongest trending wave of price e@treme of W.( is W.L (:24 " 2:24 of
the seU!ence. e@ceeded. Price sho!ld W.(
not come back and trade
W.L cannot be the beyond the beginning of W.L (:24 " 2:24 of
shortest wave of a five W.2. W.2
wave seU!ence. W.L does
not have to be longest /f s!spected W.L TIME
wave b!t it can never be completes five waves of W.L almost always
the shortest. This is one of lesser degree and is less longer in time than
the very few ;!les of than (334 of W.( W.(
Elliott Wave analysis. considers that the
s!spected W.L is W.' of a W.L often eU!al in
W.L always synchroni<es corrective pattern and not time to complete W.3
with an =scillator an imp!lse wave. thro!gh W.2
e@treme. The =scillator seU!ence.
e@treme !s!ally occ!rs =nce W.L e@ceeds (334
before the price e@treme. of W.( look for price to
reach and probably
e@ceed (:24 of W.(

>ook for termination

conditions when W.L
e@ceeds 2:24 e@pansion
of W.( or *2*4
retracement of W.2

/f W.2 was an A&' then Price e@treme often PRICE

W.4 W.* will probably be occ!rs before the 7 534 of W.L
comple@ and vica versa. termination of the W.* W.* 38% W.L
This is the principle of pattern. /n comple@ waves common
alternation. Time factors sho!ld be the W.*+W.L 7 W.2+W(
primary consideration. on percentage basis
>ook for minim!m of three W.* :24 100%
fractals in lower time /f Wave * has e@ceed (:24 W.2
frame and minim!m price 6534 of Wave L, the W.* 6 2L.:4 7 534
relationship of :24 to W.2 possibility of a 5 th wave W.3 " W.L
fail!re is increased.
W.* sho!ld not penetrate TIME
W.(. A W.* close into W.( The =scillator will cross W.* most often
invalidates the W.5 set!p. the <ero line two times related to W.L or W.3
This is a ;!le. d!ring W.*. %irst against " W.L
the direction of W.L and =ften longer in time
then in the direction of than W.L ? W.3 " W.L
W.L to signal that W.* has W.* (L94 " (:24 of
f!lfilled minim!m Parallel Projection of
reU!irements for ends of W.( " W.L
completion. meas!red from
beginning of W.2

>ook for termination when When the e@treme of PRICE

W.5 W.5 has completed at Wave L is e@ceeded the W.5 @ :24 100%
least five fractals in lower
ma@im!m stop loss sho!ld (:24 W.(
time frame and is in a be raised to Wave *. /f W.L e@tended W.5@
coincidence of Price and :24 or L94 of W. 3"
Time. When fo!r fractals are in L
place for Wave 5 trailing W.5@(284, 162%,
W.5 has made new price stops sho!ld be moved 2334, 2:24 W.*
e@treme and price and the very close to the market.
=scillator are diverged. TIME
/f Wave * has e@ceed W.5 6 W.* if W.* is a
6534 of Wave L, the simple A&'
possibility of a 5 th wave W.5 7 W.* if W.* is
fail!re is increased. comple@

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