Elliott Wave Rules and Guidelines

Impulse Guidelines:

• Wave 1 can be a Leading Diagonal, but this is rare.
• Wave 2 is usually a Zigzag based pattern.
• Wave 2 usually takes a small amount of time compared to Wave 1. However, Wave 2 is usually takes more than 10% of the time taken by Wave 1.
• Wave 2 generally retraces more than 30% of Wave 1 including internal data points.
• Wave 2 will usually retraces less than 80% of Wave 1 .
• The most likely retracement for Wave 2 is 50% or 61.8% of Wave 1.
• The gross price movement of Wave 2 should be greater than the gross price movement of Waves 2 of 1, 4 of 1, 2 of 3 and 4 of 3.
• If the gross movement of Wave 2 is between 33% and 40.3% retracement of Wave 1, it is most likely complete.
• If the gross movement of Wave 2 has retraced to end of previous Wave 4 of 1, then it is most likely complete.
• It is unlikely that Wave 3 will be shorter than Wave 1 by price.
• The most likely price range for Wave 3 is between 1.5 and 3.5 times the price range of Wave 1.
• Most likely range in time for Wave 3 is between 1 and 4 times the time taken by Wave 1.
• Wave 4 is rarely a Zigzag based correction.
• It is common for both Waves 4 & 2 to have approximately the same price movement.
• Wave 4 will most often retrace more than 20% of Wave 3, including internal points.
• Wave 4 will very often retrace about 38.2% of Wave 3.
• Wave 4 does not often retrace Wave 3 by more than 50%.
• Wave 4 will often retrace into the price territory of previous Wave 4 of Wave 1.
• Wave 4 will most often retrace to the end of the previous Wave 4 of one lesser degree.
• Waves 2 & 4 usually alternate between Zigzag and Flat. The other alternation is between a Triangle and a Flat.
• Leveraged markets may at times overlap by up to 15% of Wave 2 by price.
• The gross price movement of Wave 4 should be greater than the gross price movement of Waves 2 of 3, 4 of 3, 2 of 5 and 4 of 5.
• Expect the time taken by Wave 4 to be between 100% - 270% of the time taken by Wave 2.
• Wave 5 will usually move beyond the end of Wave 3.
• When Wave 5 is extended (more than 161.8% longer than both Waves 1 and 3) a point within Wave 4 will often divide the entire Impulse Wave by 1.618.
• If Wave 5 is extended (more than 161.8% longer than both Waves 1 and 3), it is common for its price length to be about 161.8% of the gross price length between the beginning of Wave 1 to end of Wave 3.
• It is unusual for Wave 5 to travel a greater price or time percentage than Wave 3 traveled in its entirety.
• The most likely price targets for Wave 5 are: 61.8% of Wave 1, 100% of Wave 1, 161.8% of Wave 1, 161.8% of the length from the beginning of Wave 1 to end of Wave 3.
• If Wave 3 is about equal to 161.8% of Wave 1 by price, the most likely time for Wave 5 is about equal to the time taken by Wave 1.
• One of the Impulse Waves (Waves 1, 3 or 5) generally extends (at least 162% times the next longest Impulse Wave).
• The most likely Wave to extend is the 3rd Wave of an Impulse. However, in leveraged funds when the Impulse is rising and the degree is Primary or above, the most likely Wave to extend is Wave 5.
• A non-extended 5th Wave of less than Primary degree usually has a lower peak volume than a third Wave. However, when the 5th Wave extends (less than Primary degree), Wave 5 has usually shows more volume.
• Wave 5, when complete, usually has a lesser slope than Wave 3. However, in leveraged securities when the Impulse is rising and the degree is Primary or above, this is not usually the case.
• Wave 5 is usually less than 4 times length of Wave 3 by time.

ZigZag Rules:

A ZigZag is a three wave structure labeled A-B-C, generally moving counter to the larger trend. It is the most common three wave Elliott pattern. Zigzags are corrective in nature.

• Wave A must be an Impulse or a Leading Diagonal.
• Wave B can only be a corrective pattern.
• Wave B must be shorter than Wave A by price. All internal points are considered.
• Wave B must be at least 20% of A by price.
• Although there is no minimum time constraint for Wave B, it must not exceed 10 times the time taken by Wave A.
• Wave C must be an Impulse or an Ending Diagonal.
• If Wave A is a Leading Diagonal, then Wave C must not be an Ending Diagonal.
• Wave C must be longer than 90% of Wave B by price.
• Wave C must be less than 5 times Wave B by price.
• It is not allowable to have both Wave 5 of A a failure (Wave 5 is shorter then Wave 4) and Wave 5 of C a failure.
• Wave C must be no more than 10 times either Wave A or B in price or time.

ZigZag Guidelines:

• It is unusual for a Wave within Wave A to have a greater gross price movement than Wave A.
• Wave B should end nowhere near beginning of Wave A
• Wave B should retrace at least 30% of Wave A.
• Wave B is most likely to retrace Wave A by about 38.2%.
• Wave B is next most likely to retrace Wave A by about 50%.
• Wave B is next most likely to retrace Wave A by about 61.8%.
• The largest Wave in B is usually less than the gross price movement of Wave A.
• The time taken by Wave B is usually between 61.8% and 161.8% of the time taken by Wave A.
• Wave C is most likely to have a similar price length to Wave A.
• The next most likely price lengths for Wave C are 61.8% and 161% of Wave A
• The next most likely price length for Wave C is 61.8% of Wave A beyond the end of Wave A.
• If Wave C is much longer than 161.8% of A, then the pattern is more probably the beginning of an Impulse than a Zigzag.
• If Wave C is complete, and has a greater slope than Wave A, expect the Zigzag to extend to an Impulse.
• Although Wave C should always be greater in price to Wave B, in rare cases Wave C can be up to 10% shorter than Wave B.
• The largest Wave within C by price is usually less than the gross price movement of Wave A.
• The time taken by Wave C is usually between 61.8% of Wave A and 161.8% of the shortest Wave of A and B.

Flat Rules:

A Flat is a three wave pattern labeled A-B-C that moves generally sideways. It is corrective and counter-trend and is a very common Elliott pattern.

• Wave A can be any corrective pattern except a Triangle.
• Wave B can be any corrective pattern except a Triangle.
• Wave B must retrace more than 70% of Wave A.
• Wave B is less than twice the price movement of Wave A, including internal points of Wave B.
• Although there is no minimum time constraint for Wave B, it must be less than 10 times Wave A.
• Wave C must be an Impulse or Ending Diagonal.
• Wave C must share some common price territory with Wave A.
• Wave C must be less than twice the longest of Waves A and B, including internal points of Wave C.
• Wave C must be less the three times the price distance of Wave A.
• Disallow back to back failures.
• Wave C must be no more than 10 times either Waves A or B in price and time.
• There is no minimum time constrains for Wave A.

Flat Guidelines:

• Wave A is usually a Zigzag family pattern.
• Wave A is rarely an Expanding Triangle.
• The largest Wave within Wave A is usually less than Wave A by price.
• Wave B is usually a Zigzag family pattern.
• Wave B is rarely a Flat.
• Wave B is usually greater than 95% of Wave A by price.
• Wave B is usually less than 140% of Wave A by price.
• The largest Wave within B is usually less than Wave A by price.
• The time taken by Wave B is generally between 61.8% and 161.8% of Wave A.
• Wave C is rarely an Ending Diagonal.
• Wave C is often about the same length as both Wave A and B.
• Wave C often ends at point which is a percent of Wave A beyond end of Wave A equal to the same percentage away from the start of Wave A.
• Wave C usually retraces a minimum of 100% of Wave B.
• Wave C normally reaches to the end of Wave A
• Wave C is not often more than 140% of the longer of Wave A or B.
• If Wave C is longer than Wave B, then Wave C is often about 61.8% of A beyond end of A.
• If Wave C is longer than Wave B, then Wave C is often about 161.8% of Wave A from end of Wave B by price.
• The time taken by Wave C is generally between 61.8% of Wave 1 to 161.8% of the shortest of Waves A and B.

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