Elliot Wave Cycle

Elliot Wave Cycle – Wave 2

Elliot Wave Cycle - RULES

Retracement for Wave 2

  • Wave (2) retraces wave (1) by 38%-61% in most of the cases and 61% retracement
  • also called as Golden Ratio. But there is no minimum limit of retracement for wave (2),
  • it can be less than 38% also in some case.
  • But there is Maximum limit for retracement for.

Retracement for Wave 4

    • Wave (4) retraces wave (3) normally by 23%-38%. Means wave (4) is 23%-38% of wave (3) most of the time. And we normally expect wave (4) to retrace
      23%-38%.
    • There is no lower limit of retracement of wave (3), it can be lower than 23% and can even be as low as 10%.
    • Wave (4) can retrace more than 38% also in some cases and maximum limit
      of retracement for wave (4) is till the end of wave (1). Means wave (4) can
      never break below the end of wave (1) or wave (4) can never overlap wave
      (1) within Impulse
    • Elliott observed that every financial market, stocks or financial instrument moves in
    • zigzag formation and called it wave’s cycles. And that zigzag formation consists of a set of 5 waves in the direction of Primary/Main/Bigger trend followed by a set of 3 waves opposite to direction of main trend.
    • Note: – If we see the history of market from start, the main/primary trend is always
    • up as the market cannot go below zero. In this book, most of the examples I covered
    • with uptrend (bullish trend) as main trend and down trend (bearish trend) and as corrections. But the rules are applicable same on both bullish and bearish market.
    • The set of 5 waves in the direction of main trend he called “Impulsive” or
      “Impulse”.
    • And the set of 3 waves opposite to the direction of main trend he called
      “Corrective” of “Correction”