ELLIOTT WAVE BASICS (Contd)
Fractal Nature
Elliott Wave is fractal. This means that wave structure
for the GrandSuper Cycle is the same as for the minuette. No matter how big or
small the wave degree, impulse waves take on a 5-wave sequence and corrective
waves take on a 3-wave sequence. Any impulse wave subdivides into 5 smaller
waves. Any corrective wave subdivides into three smaller waves. The charts
below show the fractal nature of Elliott Wave in action.
Three Rules
Believe it or not, there are only three rules when it
comes to interpreting Elliott Wave. There are many guidelines, but only three
HARD rules. These are unbreakable. Guidelines, on the other hand, are bendable
and subject to interpretation. Furthermore, these rules only apply to a 5-wave
impulse sequence. Correction, which are much more complicated, are given more
leeway when it comes to interpretation.
Rule 1: Wave 2
cannot retrace more than 100% of Wave 1.
Rule 2: Wave 3 can
never be the shortest of the three impulse waves.
Rule 3: Wave 4 can
never overlap Wave 1
Wave 2 cannot move below the low of Wave 1. A break below this low would call for a re-count. Even though Wave 3 is typically the longest of the three impulse waves, there is a specific rule that it cannot be the shortest. 1 or 5 can be longer than Wave 3, but both cannot be longer than Wave 3. It is probably best to use percentages or log scales when measuring Wave length. Elliott Wave indicates that Wave 3 must exceed the high of Wave 1. Failure to exceed this high would call for a re-count. Impulse moves are all about making progress. Failure to exceed the high of Wave 2 would not be making progress. The third, and final rule, is that Wave 4 cannot overlap Wave 1, which means the low of Wave 4 cannot exceed the high of Wave 1. Such a violation would call for a re-count.
Wave 2 cannot move below the low of Wave 1. A break below this low would call for a re-count. Even though Wave 3 is typically the longest of the three impulse waves, there is a specific rule that it cannot be the shortest. 1 or 5 can be longer than Wave 3, but both cannot be longer than Wave 3. It is probably best to use percentages or log scales when measuring Wave length. Elliott Wave indicates that Wave 3 must exceed the high of Wave 1. Failure to exceed this high would call for a re-count. Impulse moves are all about making progress. Failure to exceed the high of Wave 2 would not be making progress. The third, and final rule, is that Wave 4 cannot overlap Wave 1, which means the low of Wave 4 cannot exceed the high of Wave 1. Such a violation would call for a re-count.
(to be contd)
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