Elliott Wave Corrections are a hell of a thing!

During an Elliott Wave correction pattern the price takes a hell of a long time to do absolutely nothing!

The market simply stalls!

Elliott Wave Correction patterns are hard to track, and even harder to trade!

BUT,

If you follow Elliott wave correction rules and guidelines of corrective patterns,
You will be able to figure out when, and where the market could turn back into trend again.

And I'm going to show you exactly how to do that in this guide!


Elliott Wave Correction Rules.

 

Rule 1: Wave 2 correction must not retrace more than 100% of wave 1.

Rule 2: Wave 4 must not cross into the price territory of wave 1.

Rule 3: Wave alteration - If wave 2 is a deep correction - then wave 4 will be shallow.

Rule 4: Wave 2 will bottom in the price territory of the previous 4th wave of one lower degree.

Rule 5: Corrections are always fully retraced by the resuming impulsive trend.


Elliott wave correction rules


Here's a short video on Elliott Wave correction patterns.



Four types of Elliott Wave Corrective Patterns.

  • Pattern 1: ABC correction wave - 5,3,5 internal wave form.
  • Pattern 2: FLAT corrections - 3,3,5 internal wave form.
  • Pattern 3: TRIANGLE corrections - 3,3,3,3,3 internal wave form.
  • Pattern 4: COMBINATION corrections - additive structure made from multiple simple corrections.

ABC Correction Rules: 'ZIGZAG' (5-3-5)

A simple three-wave correction pattern labeled A-B-C, also called a ZIGZAG correction.

The ABC correction wave is the simplest of all Elliott wave correction patterns.

  • The ABC correction pattern subdivides into 5-3-5 internal wave pattern.
  • Waves A and C tend towards equality in length.
  • The ABC correction wave usually appears in the position of wave '2'.
  • An ABC correction wave will usually target the 61.8% retracement of the trend move.

Using these guidelines, you can estimate a possible ending point to wave C using the length of wave A.

When the structure is complete and wave C has come to an end, A trader can place an order at the end of wave B, expecting the price to turn back into trend again.

Simple ZIGZAG

 

Elliott wave ABC correction pattern

Double ZIGZAG

This is a more complex version of the simple zigzag, the double zigzag forms when two separate simple zigzags come together to form the larger structure.

The notation is changed to differentiate the complex version from the simple form.

To take advantage of this pattern a trader will use the same approach as the simple zigzag, by placing an order at the end of wave (x), and when the price turns back into the trend again you will catch the resuming trend.

 

FLATS (3-3-5)

A flat correction differs from a zigzag in that the wave form traces out a 3-3-5 wave form, in general flat corrections retrace less than zigzags.
The more powerful the underlying trend, the shorter the flat correction tends to be.

Again, the trader can use the end of wave 'b' to enter the market and catch the resumption of the trend move.

Simple flat

 

Expanded flat.

The expanded flat takes the same internal form, the only difference being that the end of wave 'b' will travel past the beginning of wave 'a', and the end of wave 'c', will travel past the end of wave 'c'.

This 'expands' the distance traveled by the structure.

A trader can use the starting point of wave 'a' to enter a trade, with the aim of catching the market as it re-enters the trend move again.

 


HORIZONTAL TRIANGLES, A,B,C,D,E patterns.

Here are the guidelines for triangle waves:

  • Triangles are overlapping five wave corrections labeled A,B,C,D,E.
  • Triangle waves usually contract the range of price action from beginning to end.
  • Each internal wave takes a three wave form, and the triangle subdivides into a 3-3-3-3-3 pattern.
  • An A,B,C,D,E pattern causes a sideways movement that is usually associated with decreasing volume and volatility.
  • Triangle waves usually occur in the position of wave B or wave 4 of the larger pattern.
  • A triangle wave is usually the penultimate move in the larger pattern and leads to an explosive move back into the larger pattern.

 

Contracting triangle

The contracting triangle is a horizontal contraction in range of the price.

  • A triangle traces out five internal moves each of three waves.
  • The distance traveled by each subsequent wave reduces in length.
  • This has the effect of contracting the range of the wave, hence the name!

A low risk trade can be placed at the end of wave 'e' with  the idea of catching the market as it turns back into the trend.

 

Elliott wave Triangle wave ABCDE pattern

Descending triangle

A descending triangle usually appears in a downtrend.

The lower bound of the triangle pattern holds in a flat line while the top trend line drops as usual, and the overall range of prices contracts.

A low risk trade can be placed at the end of wave 'e' with  the idea of catching the market as it turns back into the trend.

 

descending triangle ABCDE pattern

Ascending triangle

The ascending triangle usually appears in an uptrend.

The upper bounding trend line of the triangle pattern holds in a flat line and the lower trend line rises, and the overall range of prices contracts into wave 'e'.

Again, the same strategy applies, a low risk trade can be placed at the end of wave 'e' with  the idea of catching the market as it turns back into the trend.

 

ascending triangle ABCDE pattern

Expanding triangle

A expanding triangle appears in both downtrends and uptrends.

The top trend line rises and the bottom trend line falls, and the overall range of prices expands into wave 'e'.

This time the end of wave 'b' of the triangle is used to place a trend trade.

 

expanding triangle ABCDE pattern

 


COMBINATION CORRECTIONS (double and triple 3's)

A double or triple three combination, is a corrective wave.

It happens when simpler wave forms stick together to form a larger structure.

For the most part, double threes and triple threes are horizontal in character.

 

There is never more than one zigzag in a combination wave, also there is never more than one triangle.

All of the patterns shown above take the same form whether the trend is rising or falling, in a falling trend, the image is simply inverted.

The best way to enter a trade off a combination structure is to place an order at the end of wave 'x' and if the market crosses this point, it is likely that the trend has resumed and you can ride that trend until its completion.

Remember;

Correction patterns are simply a pause within the larger operating trend.

When corrections come to an end, prices usually explode back in the direct of the larger trend.

Knowing how to tell a corrective phase in the market from a trend phase will help you hold a position open for longer when you are riding a trend,

And it will help you enter the market with low, and defined risk levels.

If you master Elliott wave correction patterns, you will be able to get in at the ground floor and ride the trend until the end!

I know what your thinking!

" How do the rules of Elliott wave corrections help my trading? "

Here's one recent example,

of how a completed correction led to a MASSIVE price move.

And how a good knowledge of Elliott wave correction rules helped us catch a 1200 point move!


CRUDE oil: Elliott wave analysis 10/26/17 


 

On OCT 26th,

I saw a complete contracting triangle wave 'B' in CRUDE oil,

A completed correction suggested a larger rally dead ahead in CRUDE!

HERE IS the analysis, BLOW BY BLOW!

In my daily update on CRUDE oil,

The wave count was clear, and the potential for a huge rally was large.

Here's what I said!

"The current wave count sits at a very pivotal point 'in the price structure.
With a possible third of a third wave up, on the cards over the next few weeks."

Heres the chart from that day:

The wave count was calling for wave (C) to rally higher, out of a completed triangle wave (B).

The price stood at 52.42 at the close that day,

And the initial target for wave (C) was set at 63.00,

which is an expected rally of 1100 points on offer,

and the pattern was clear!

"Watch for a short decline to complete wave (ii) grey.
At that point look for a bullish break of the wave (i) high to confirm wave (iii)."

Here's What happened next:

 

Over the following 10 weeks,

A textbook five wave rally in wave (C) carried the market 1200 points higher,

to three year highs!

As this example shows,

Knowing when a corrective wave is complete,

can increase your chances of catching the next trend move by a huge margin.

 

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