Elliott Wave Free Forex Signal

ElliottWave Count Rules

While determining waves can be extremely subjective, there are three rules to counting waves that always hold. These rules form the
basic tenets of Elliott Wave Theory.
Rule 1: Wave 2 cannot retrace more than 100% of Wave 1

 Rule 2: Wave 4 cannot overlap Wave 1

Rule 3: Of waves 1, 3, and 5, wave 3 can never be the shortest wave (it is, in fact, often the longest)

The primary reason why Elliott Wave Theory can be difficult to understand is because waves frequently occur at many different levels.
In other words, there are minor waves within larger waves. That is why at many points in time, multiple correct wave interpretations
usually exist. The major waves determine the direction of the trend, while the minor waves help to determine the minor trends. Used
in conjunction, traders can apply Fibonacci ratios to Elliott Wave Theory to help determine when currencies will reach a top or bottom.
It can also be used as a tool to identify points to trade within the trend or to participate in the shorter minor wave cycles. It is important
for Elliott Wave traders to be aware of both the minor and the major waves that may exist.

The following is an example of two minor waves within larger waves:

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Corrective Waves.

These are the waves that, by definition, go against the trend. They connect the impulse waves. Unfortunately, there are four different types of corrective wave. Corrective waves are labeled with letters.

A-B-C Corrective Waves
Wave A: Correction To Rally – Initially Wave A may appear to be a correction to the normal rally. However, if it breaks down into five
subwaves, it indicates that a new market trend may have developed.
Wave B: Bear Market Correction – Wave B tends to give bears an opportunity to sell as others take profit on their short trades or exit
their long positions.
Wave C: Confirms End Of Rally – Wave C is the last wave of the cycle. At this point, Wave 3 typically breaks key support zones and
most technical studies confirm that the rally has ended.

The most simple or straightforward corrective pattern is the zig-zag. The pattern is a simple A-B-C pattern and tends to do more damage to the preceding trend than other corrective waves. Read the rest of this entry »

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