WAVES

ELLIOTT

// Elliott Wave Theory

 1
INDEX OF CONTENTS

• Fibonacci applications within Impulses

• Fibonacci in corrective waves – Zigzags, Flats and Triangles

• Complex correctives

// Elliott Wave Theory

• Application
 IMPULSES
FIBONACCI IN

// Elliott Wave Theory

 2
MOTIVE WAVES
• Motive waves are of two types – Impulses and Diagonals

• Impulse subdivides into 5 waves where as diagonals typically

subdivide into 3-3-3-3-3

• Wave 3 is always an Impulse

// Elliott Wave Theory

• Wave 1 can either be an Impulse or a Leading Diagonal

• Wave 5 can either be an Impulse or an Ending Diagonal

• Wave 3 is typically 1.618 x Wave 1

• Other relationships can be 2 / 2.236 / 2.618 / 3.24 / 4.24 x Wave 1

• When Wave 3 is extended, W1 & W5 tend to equality

 3
MOTIVE WAVES
• When Wave 5 extends beyond 100% of Wave 1, it is often 0.618 of
the entire Wave 1 to Wave 3 length added to the end point of Wave 4

• Where Wave 5 has an extension, a target for the end of Wave 5 is

often 1.618 x (wave 1 to wave 3 length) + end point of Wave 4

• When Wave 1 is extended (rare), the length of Wave 5 is often 0.618

// Elliott Wave Theory

of Wave 1 added to the Wave 4 endpoint

• When Wave 3 is extended, Wave 4 divides the entire Impulse into the
Golden Ratio (if the entire impulse is X, then Wave 5 = 0.382X and
Wave 1 – Wave 4 = 0.618X)

• When Wave 5 is extended and the entire impulse is X, then Wave 5 =

0.618X while Wave 1 – Wave 4 = 0.382X
 4
W3 EXTENSION
3 5
(v)
0.382X
(iii)
X 4

// Elliott Wave Theory

(i) (iv)
0.618X 1

(ii)
2
0
 5
W5 EXTENSION
5
(v)
(iii)
(i)
3 (iv) 0.618X

// Elliott Wave Theory

(ii)
1 4 X
0.382X

2
0
FIBONACCI IN
CORRECTIONS

// Elliott Wave Theory

 6
ZIGZAG A-B-C
Wave C = Wave A (typical)

Wave C = 1.618 of Wave A (next typical)

B
Wave C = 0.618 of Wave A (next typical)

// Elliott Wave Theory

A

C
***Remember, these are the more common multiples
*** One common trait is when AB = 61.8% of A, C = 1.618 of AB @ A=C
 7
DOUBLE ZIGZAG W-X-Y

B
(X)
A B

// Elliott Wave Theory

C A
(W)

Wave Y = Wave W (typical)

C
(Y)
Wave Y = 1.618 of Wave W (next typical)

Wave Y = 0.618 of Wave W (next typical)

 8
REGULAR FLAT A-B-C
B
A,B & C have a similar length

To qualify as a Flat, Wave B

should retrace atleast 90% of
Wave A

// Elliott Wave Theory

A C
 9
EXPANDED FLAT A-B-C
B
Wave C = 1.27 of Wave A (equal odds)

Wave C = 1.618 of Wave A (equal odds)

Wave C = 0.618 of A beyond A

// Elliott Wave Theory

Wave C = 2.618 of A (occasional)

Wave B = Either 1.13 / 1.27 / 1.32 of A

A
C
 10
CONTRACTING A-B-C-D-E

B
D

// Elliott Wave Theory

E
C
A
Atleast two of the alternate waves related by 0.618
Wave C = 0.618 A; Wave E = 0.618 of Wave C ;
Wave D = 0.618 B
 COMPLEX
CORRECTIONS

// Elliott Wave Theory

 ZIGZAG VARIANTS
11

// Elliott Wave Theory

 FLAT VARIANTS
12

// Elliott Wave Theory

 13
DOUBLE THREE

B
(X)
A B

// Elliott Wave Theory

C A
(W)
C

Double 3 is two corrections connected by an X wave

 14
TRIPLE THREE

B (XX)
(X) B
A
(Z)

// Elliott Wave Theory

C A
(W) C
(Y)

Triple 3 is three corrections connected by two X waves

 COMPLEX WAVES
15

// Elliott Wave Theory

 PRACTICAL
APPLICATIONS

// Elliott Wave Theory

 17
TRADING WAVE 1
1 The only sign that Wave 1 is beginning is
the clear completion of a prior 5 wave move
(v)
(iii) First possible entry is during the Wave (ii)
correction, with limit orders set between
61.8 – 78.6% of Wave 1
(i)
Stop for such entry will be 1 tick under the

// Elliott Wave Theory

(iv) Wave (i) low

Remember to exit at the end of Wave (v) of

1, as wave 2 could produce a significant
(ii) correction

0 Also, if wave (iii) extends beyond 113% of

wave (i), it means we are in a 5 wave move
and not an A-B-C correction
 18
TRADING WAVE 2
1
(v) Wave 2 is not to be traded
(iii)
What’s important to know are
its possible termination points
(i)
As we already know, Wave 2

// Elliott Wave Theory

(iv) typically retraces upto 61.8% of
Wave 1
2
Another set of retracements
(ii) are 70.7, 78.6 and 88.6%

0 Wave 2s commonly sport

zigzags
 19
TRADING WAVE 3
5
3
(v) In Wave 3, the 3rd of the 3rd is
the most powerful part of the
(iii) motive wave

The red horizontal lines

// Elliott Wave Theory

represent a trailing stop loss
4 based on the previous low
(i) (iv)
1

(ii)
2
0
 20
TRADING WAVE 4
Wave 4s commonly sport
B Flats and Triangles

Limit orders are often at C =

(3) 1.62 times A deducted from
the B high

Wave 4s are the best waves

(i) to trade since the stop loss is

// Elliott Wave Theory

the price territory of Wave 1

When the C of (4) is

completing also look for
equality between waves (i)
A and (v)

(v)
C
(4)
 21
TRADING WAVE 4
In a contracting triangle, the
length of each wave is less
B than that of the previous
wave
D
Therefore, the extreme of the
prior wave is the stop (red
horizontal lines)

// Elliott Wave Theory

Remember the Principle of
Alternation between
corrective waves – if Wave 2

C E is sharp, Wave 4 will be

shallow both in terms of price
and time
A
 22
TRADING WAVE 5 (1)
Wave 5 = Wave 1 when
5 Wave is extended
3 Always look for RSI or
(v) oscillator divergence
between Wave 5 and
Wave 3
(iii)
When Wave 3 is extended,
the first target area for a
move post Wave 5 is

// Elliott Wave Theory

4 Wave 4 of one lesser

(i) (iv) degree

When Wave 5 is extended,

1 the first target area post
the termination of Wave 5
is wave (ii) of wave 5

(ii)
2
0
 23
W(2) POST W3 EXTN
(1)
5
3 B
(v)
(iii) A

// Elliott Wave Theory

(iv) 4 C
(i) (2)
1
After the end of (1) which had a 3rd wave
extension, the first major support is wave 4 of
(ii) (1) with minor support at wave (iv) of 3 of (1)
 24
W(2) POST W5 EXTN (1)
5
(v)
(iii)
B

3 (i) A
(iv)

// Elliott Wave Theory

(ii) C
4 (2)
1
After the end of (1) which had a 5th wave
extension, the first major support is wave (ii) of
5 of (1) with minor support at wave 4 of (1)

2
 THANK YOU

// Elliott Wave Theory