The notion of a fifth wave failure is a pretty simple one in the Elliott Waves Theory and this comes from the fact that it is to be found only when in impulsive moves with a third wave extension. This means that only in a five waves structure that moves either to the upside or the downside, the third wave needs to be the longest one between the motive waves (waves that are declining in a bearish move or advancing in a bullish one). If that is happening, then there is definitely the possibility for the 5th wave to be a failure, and this means that it is failing to take the highs/lows of the previous 3rd wave.
As a rule of thumb, whenever there is a 5th wave failure, market participants should look for equality between the 1st and the 5th wave, so all in all we have some clues about when to expect such patterns. For the forex trader this is important as the best place to place SELL order in a rising impulsive move with a third wave extension is to wait for the third wave to extend, then go for the equality rule between the 1st and the 5th and take the option when conditions are met.
An impulsive move has a five wave structure and this is the cornerstone of any Elliott Waves analysis one is making. Impulsive moves are being the ones that every trader hunts as at least one wave in an impulsive move needs to be extended and by definition extension should travel at least 161.8% distance when compared to the previous one. It means that the time frame the analysis is being made plays an extremely important role in setting the expiration date of an option.
Out of those three waves that are moving with the general trend the impulsive move is moving, the fifth wave is offering us many clues regarding future price action based on its structure and where it ends. Most of the times, and by this I mean a percentage that is more than ninety, waves one, three and five make a series of higher highs in a bullish impulsive move and lower lows in a bearish impulsive move, namely three highs and three lows.
Elliott wave 5th wave characteristics
Whenever the fifth wave fails to take the highs in the previous third wave in a bullish impulsive move it is said that market is forming a bearish fifth wave failure, while the opposite is true as well. When the fifth wave fails to take the lows in the previous third wave in a bearish impulsive move, it is said that it is forming a bullish fifth wave failure. The thing is that these failures are always a sign of bottoming or topping to come and it tells a lot about the expiration date to be used as well as about future expectations as they signal the end of a cycle or a trend and the beginning of a new one.
The bigger the time frames the failures are forming, the bigger the implications for the overall market as it offers us clues about other correlated markets as well and the options that can be traded. For example, if we see a fifth wave bullish failure on the EURUSD daily chart it means a bottom is in place and we should BUY. Based on the fact that the EURUSD pair is signalling a bottom it makes sense to go and trade contracts with same direction on AUDUSD or GBPUSD pairs, as they are directly correlated. Therefore, using the information from one currency pair to trade other currency pairs is key.
Like mentioned at the start of this article, fifth wave failures often result in the fifth wave being almost equal with the first one and if in doubt about the counting then this small characteristic is key in interpreting market the right way. It is strongly recommended to skip any possible fifth wave failure interpretation if the fifth wave is different than the first one as if that is the case than the whole analysis is most likely incorrect.
Elliott Waves Theory is subject to many interpretations and it is being said that the whole theory is relative and there is no straight line when taking a trade as it depends very much on the starting point of the count, and so on. I am saying that taking different small clues from one market and extrapolating them to other markets should make the difference between winners and losers, between successful traders and ones that are still struggling.
What is Elliott Waves Theory?
The Elliott Waves Theory is a way to analyze markets and make a forecast based on the result.
Elliott wave theory allows the trader to divide the market into cycles and super-cycles and this allows for counting the waves. Impulsive moves are always being labeled with numbers (1-2-3-4-5) while corrective waves are always being labeled with letters (a-b-c). The most common corrective waves are flats, zigzags and triangles, but on complex corrections market is making combinations of those simple corrections and the result may be a double or triple flat, a double or triple zigzag, triple or double combination, etc.
Trading with Elliott Waves Theory is something that many people know but few master. The reason for such a difficulty when it comes to counting waves comes from the sub-divisions of each and every wave and in the end the trader is at a point in time where it doesn’t know anymore what cycle is there. In order to avoid such difficulties trader should stay disciplined and avoid lower time frames. In other words, the way to go is to do a so called top/down analysis and this one implies all the time that the first time frame to start from is the monthly chart. After that, the weekly, daily, four hours and the hourly charts are mandatory but only starting from the point in time where the analysis on the previous charts ended.
Understanding the Patterns in Elliott Wave Theory
Elliott Waves Theory means looking at patterns that happened on the left side of the chart and trying to project or to forecast the next move on the right side of the chart. Therefore, knowing those patterns is vital key for what to look for on the right side of the chart. Such patterns are most likely to be triangles as they represent the favorite way market is consolidating and triangles can be contracting and expanding. It is difficult to properly identify a triangular formation on the smaller time frames, but can be done on the bigger ones.
For example, complex corrections are almost always ending with a triangle so by the time the triangle is breaking its b-d trend line it means the correction is completed and most likely an impulsive move should follow. If the correction was bullish, then put options should be traded as the move to follow should be a bearish impulsive move, and of course if the correction was bearish, then call options should be traded as the move to follow should be a bullish impulsive move. Moving forward and knowing an impulsive move coming, then the most common impulsive move is the one that has the third wave being the longest so waiting for waves one and two to complete before buying an option to meet the third wave requirements should be key. In this case, because third waves represent fast moves, short-term expiration dates can be traded.
Elliott Wave Alternation
The very notion of alternation comes from the Elliott Waves Theory and it is referring to the corrective waves. In times, Elliott found that corrective waves, namely the 2nd and the 4th waves in any impulsive move, or motive wave, or five waves structure, are alternating in different waves, and this is mandatory for the move to be considered a valid impulsive move.
The alternation can be in multiple ways, but at least one is mandatory: time, structure, construction, distance.
Of course, time is referring to the amount of time it took market to consolidate for the second and the 4ht wave and the time taken should e different. The same is on structure: if the second wave, for example, is a complex corrective wave, like a double combination or a triple combination or a double zigzag, etc, then for the 4th wave the trader should look for a simple corrective wave, like a simple triangle, or flat, or zigzag.
Construction is somehow similar with the structure, only that here one should look at the number of sub-divisions each correction has, while the distance refers to the actual/physical distance price is traveling from the beginning of the corrective wave until the end of it.
It is said that an impulsive move is not channel or at least it is not supposed to channel. This is the very simple definition of alternation for the two corrective waves within the Elliott Waves Theory.
If you are seeing a move, regardless if it is a bullish or a bearish one, that is channeling, then that is not impulsive move. It is most likely a corrective wave, a zigzag or a zigzag family pattern, but not an impulsive move.
Rule of Alternation
In order for the principle of alternation to be respected, traders need first of all to draw the 0-2 trend line, that is, a trend line that is stretching from the beginning of the impulsive move all the way until the end of the second wave.
Of course, it means the end of the second wave is known and this is the very minimum time one should wait for the analysis to be made. The next thing to do is to copy the 0-2 trend line and paste it and projected it forward from the end of wave 1.
This gives a channel that is forming and if you are to have an impulsive move that respects the principle of alternation then the upper side of the channel should be broken and market should travel with the third wave of the impulsive move way above that trend line, if the impulsive move is a bullish one, or below it, if the impulsive move is a bearish-one of course.
The second and the fourth waves should be very different and one should be suspicious if they are not. The things to look for should be anywhere from the structure of the two waves to the distance price is travelling and the sub-segments the two waves have.
Be Mindful of the Buy/Sell Contracts
Time is really important as well as if you are seeing a second wave that is really taking a lot of time to consolidate then it is not the same to be expected for the 4th wave. In this case, it means that the 4th wave would be most likely a simple correction and the way to trade is to take a Fibonacci retracement tool and wait for market to retrace 23.6% or 38.2% as this is giving us the perfect striking price for a simple fourth wave to be followed by the fifth wave.
It is important to remember that that principle of alternation or the alternation rule is to be looked only for the two corrective waves and not for the impulsive moves, so it has nothing to do with waves 1, 3 and 5.
In reality it has much to do as the impulsive move is characterized by one wave that is bigger than the other two and this means it is extended. Depending on which wave extends, different consolidation times are expected for the two corrective waves and the alternation principle is offering us tools for trading in the right direction and from the right trade price.
If there is a first wave extension impulsive move, then the 2nd wave is most of the times the most time consuming so taking the time taken for it (counting the candles) and projecting that time by the moment the 3rd wave ends is giving us the maximum time it should take for the 4th wave to form.
This opens the gates to a strategy called scaling into a position but this time the scaling is not being done price-wise, but time-wise. In a bullish impulsive move, BUY contracts should be traded and in a bearish one SELL contracts of course.
Elliott Wave 5th Wave Extension
An impulsive move as described by Elliott is a five wave structure in which at least one wave is extended. In order for the biggest wave in the structure to be extended, it needs to be more than 161.8% when compared with the next longest wave.The most common arrangement is for the 3rd wave to be bigger than 161.8% when compared with the first wave. However, that is not always the case as the other two waves can also be extended.
What is a Fifth Wave Extension?
In the case of a 5th wave impulsive move, the outcome of such a pattern should be bullish in the case of a bearish impulsive move, and bearish in the case of a bullish move. The reason for that stays with the fact that market is always retracing 61.8% of the 5th wave and usually this comes quite fast. Therefore, upon identifying an impulsive move with a 5th wave extension, one should go LONG (BUY/CALL options) if the impulsive move is to the downside, and SHORT (SELL/PUT options) if the impulsive move is to the upside.
There are multiple ways an impulsive move can extend and the most common one is the third wave extension. By most common I mean really the most common and the very next one is the first wave extension. Before moving forward, it should be mentioned that by extension we are referring to at least one wave that should be bigger than 161.8% when compared with the next one and the 161.8% is only the minimum condition as the extension can go way bigger.
The least common of them all is the fifth wave extension and it means that the fifth wave is by far the longest wave out of all motives waves in the five wave structure and usually by the time market participants are realizing they have a fifth wave extension the extended target is already reached.
What should trader do then, if the extension is difficult to trade?
The answer comes from the price action that follows a fifth wave extension and it depends very much on the wave of the bigger degree. A fifth wave extension can appear as the c wave of a flat pattern and in these cases it is almost always one hundred percent completely retraced so depending on the time frames the extension is forming and the direction of the impulsive move, call or put options can be traded with an appropriate and adjusted expiration date.
There is nothing more tricky though than a fifth wave extension that appears as a fifth wave in an impulsive move and it should be considered that this kind of pattern is always completely retraced as well.
As a rule of thumb, these extensions are really rare and if you think that market is forming one you should be very careful at all the details of an impulsive move as it may very well be nothing but a double extended impulsive move or a running correction for the second wave in a third wave extension impulsive move and either one of these two situation is leading to a fake signal being created and a losing option to be traded.
What I would do in the case of a fifth wave extension is to look at the structure of the second and the fourth waves prior to the fifth one and check if there is overlapping or not. If there is no overlapping between the second and the fourth waves (overlapping means the fourth wave to travel into the territory of the second wave), then the move to follow after the impulsive move is maximum 61.8% retracement, while overlapping basically assures one hundred percent complete the retracement.
The way to trade a fifth wave extension is to look at the whole distance price is traveling from the start of the impulsive move until the end of the third wave and calculate 61.8% out of it. The next step is to project the result on top of the third wave and that is the place to buy put options on a bullish fifth wave extension impulsive move or call options in a bearish fifth wave extension impulsive move. The more price is moving to the upside/downside from that level, the more aggressive the investment should be and the trading as well.
X Wave Elliott Forex Trading
One of the most interesting waves in the Elliott Waves Theory is the “X wave”. It is so tricky and deceiving, that sometimes we can only guess where is it actually starting or when/where it is actually ending. But this makes it so beautiful. The X wave has a major characteristic: it connects two or more corrective waves of the same degree. For example, if you have two zigzags in a complex correction, the whole pattern is called a double zigzag and the two zigzags are connected with another corrective wave: the x wave.
Forex trading using fibonacci and Elliott wave
X waves can be part of corrections with a small x wave or corrections with a strong x wave. The difference between the two patterns is given by Fibonacci retracement. Which one? The all-important 61.8% or the golden ratio as it is also called.
Based on it we can make a difference between different correction types and we can find the right striking price for our option.
The concept of an X wave is one of the most difficult to be understood by market participants as one is not really knowing if market is forming a simple or a complex correction. In a complex correction the X wave is a must, but in a simple one there is no need for one and the market is starting the new wave.
As a rule of thumb, the X wave is always a corrective wave, and based on the correction that comes before it, it can be a simple correction or a complex one on its own. It should be mentioned here that most of the times it is a simple correction, like a triangle, a zigzag or a flat pattern.
The way to trade X waves is to look for them to be confirmed by markets, in the sense that if the X wave is a simple correction then certain conditions need to be met for the price action to come. It all comes to the 61.8% level, yet again, as the golden ratio is once again decisive. When it comes to Elliott Waves and the patterns possible to be formed, the golden ratio is key.
The tricky part is that this time the retracement level should be calculated taking into account the whole length of the previous corrective wave prior to the start of the X wave and this is tricky if one is considering that we can talk about a flat, zigzag or even a triangle. It depends very much where the previous correction ends in order to correctly find out the 61.8% level.
One more thing to consider is the fact that it is mandatory for the X wave not to end above the golden ratio. However, parts of the X wave can move beyond that area but the end should not.
Market is always moving in impulsive waves, or five wave structures that are being followed by a correction, or a three wave structure. But it is vital to know that also the impulsive wave has two corrective waves of the same degree, namely the second and the fourth wave. If one is simple, the other one must be complex, and the other way around and therefore the presence of an X wave is mandatory.
It is being said that the X wave is a connective wave and I would say that this is definitely very much true. It is connecting two corrective waves or even three. For example, if there is a flat pattern to the downside and a counter move starts and market makes a new low, then it is most likely that a new correction started, a simple one that can be either a flat, a zigzag or a triangle on its own.
Using Fibonacci to Find out the Type of the X Wave
The way to trade the X wave is to look at the first correction and then draw a Fibonacci retracement level to see where the 61.8% retracement comes. Let’s assume the first correction is a flat pattern that moves to the downside. By the time the 38.2% retracement level is reached, a put option can be traded taking into account the time frame the pattern is formed in order to set the right expiration date. However, the investment here should not be big in the sense that the aggresivity in trading should increase by the time market is moving closer and closer to the to the 61.8% level, with the fifty percent being another level to deploy a more aggressive SELL contract.
The Strong X Wave
The strong X wave and the level to watch is the 61.8% when compared with the previous correction.
In other words, what you need to do is to take the Fibonacci retracement tool and effectively measure the length of the first correction (which can be either a zigzag or a flat as triangles are not allowed to form the first corrective wave in a complex correction) and look for the x wave to end ABOVE the 61.8% level. If it does, we should look then for the second correction, usually a contracting triangle, and by the time the contracting triangle is being broken we can effectively engage into trading in the same direction as the triangle broke.
The strong X wave and the level to watch is the 61.8% when compared with the previous correction.
In other words, what you need to do is to take the Fibonacci retracement tool and effectively measure the length of the first correction (which can be either a zigzag or a flat as triangles are not allowed to form the first corrective wave in a complex correction) and look for the x wave to end ABOVE the 61.8% level. If it does, we should look then for the second correction, usually a contracting triangle, and by the time the contracting triangle is being broken we can effectively engage into trading in the same direction as the triangle broke.
That would be the signal that the complex correction, the one with the strong x wave, is completed and the old trend resumes in the direction of the previous impulsive move, or motive wave, prior to the complex correction.
The x waves have two important characteristics:
- are always corrective and
- are connecting two or more simple corrections.
That being said, the complex correction that forms can have minimum one x wave and maximum two, and the type of the correction and its implications are being given by the length of the x wave. If the x wave goes and ends more than 61.8% it is being called a large one, and a trader should look into trading complex corrections with a large x wave as the implications of future market action are different than in the case of corrections with a small x wave.
An x wave is, like mentioned above, a corrective wave and in the case of strong x waves we’re almost always talking about a complex correction and not a simple one and usually this is a double or a triple zigzag. The 61.8% level mentioned earlier it is being viewed as the minimum level to be broken as, if market is reaching that far, most likely will completely retrace that move and will go well beyond 110% retracement. In the case of running corrections, that are really common double or triple zigzags for the strong x wave and these are movements stronger in intensity then a classical impulsive move.
Taking into account the fact that markets are spending most of the time in consolidation areas, forming ranges, complex corrections are really common so a clear understanding of how they form and what the implications of a complex correction are offers a great competitive advantage to any trader. Complex corrections with a large x wave can form as second waves or fourth waves in classical impulsive moves and out of the two possibilities the second wave is most likely to form such a correction.
In order to identify if a complex correction is possible to form, one needs to measure the length of the first wave with a Fibonacci retracement tool and then to look at the retracement level market is making for the move to follow the impulsive move in the first wave. If the retracement goes beyond the 61.8% retracement level, most likely market is forming a complex correction with a strong x wave as it is unlikely that the second wave is ending beyond 61.8% no matter what the classical interpretation is.
The x wave to follow is therefore a stronger move in the opposite direction as if it is a double zigzag than it is formed by four impulsive waves of a lower degree, and a triple zigzag is actually formed out of six different impulsive moves, so imaging the strength of the move.
If the large x wave is travelling well beyond the one hundred percent retracement it is being called that market is forming most likely a running complex correction with a strong x wave and usually this one is followed by a third wave in a bigger degree impulsive move. This means that not only that the market with not retrace anything out of that complex corrective wave, but in reality it will explode with another impulsive move in the same direction as the x wave of the complex correction travelled.
Triple ZigZags in Forex Trading
When it comes to corrective waves and Elliott waves theory, there is nothing more complicated than trading complex corrective waves. Complex corrections mean that price is forming more than a corrective wave (like a flat, a zigzag or a triangle) and knowing when to look for such a corrective wave is key.
In the recordings that are coming with this mini-educational series the notion of a double zigzag is explained and what makes the difference between a double zigzag and a triple one. The answer is: the x wave. A double or a triple zigzag is nothing but a series of two or three different zigzags, connected by an intervening x wave, in the case of a double zigzag, or two x waves, in the case of a triple zigzags.
BUY contracts should be traded if the corrective wave is coming after a bullish trend, and SELL/Short in case the corrective wave is coming after a bearish trend. All of the above represents the simple approach when trading such patterns. In reality, they should be treated with much more attention as a correct understanding is vital in knowing what to look for when trading CFDs and forex. The approach that is needed should be one based on cautious and waiting for some steps to happen.
Triple Zigzag Correction
For example, in any zigzag the first thing to do is to take a regular trend line and draw it from the beginning of the zigzag all the way to the end of wave B. This is also called the 0-b trend line.
Next thing is to copy and paste that trend line and place it at the end of wave A and just like that we’ve created a channel on the right side of the screen, basically making a forecast.
Both, the double and a triple zigzag are channeling really well, so in a rising channel that is formed the way we described it above, by the time market is testing the lower side of the channel, we should go with BUY contracts s and in a bearish channel we should buy of course SELL contracts by the time market is testing the upper side of the channel.
Triple Zigzag Elliott Wave
The move that is testing the opposite side of the channel is being called an intervening wave, or a connective wave, and in Elliott Waves Theory it is labeled with the letter X. It shows it is a corrective wave, as only corrective waves are labeled with letters, and it shows that it is part of a complex correction.
In our case, the complex correction is the double or the triple zigzag that make the object of this article.
Moreover, knowing that such patterns are channeling really well, by the time when price is reaching the upper side of a channel in a rising trend, we should go and order BUY contracts with a bigger expiration date than the BUY contracts bought previously. The reason for that is that we don’t have a time constraint and market may form, say, a triangle at the opposite direction of the channel and this means it needs some time until it turns.
Triple Zigzags are Rare, Double ZigZags are More Often
The same is valid on a bearish channel, when market is reaching the lower side of the channel after the x wave was completed, that is a nice place to order BUY contracts. It is worth noting that triple zigzags are really rare and this makes the double zigzag being the most likely pattern to be seen when charting the currency markets.
The sign that the whole pattern is completed or is about to be completed is given by the time the channel is broken and therefore BUY contracts should be bought on a break of a falling channel and SELL contracts on a break of a rising channel.
Elliott Wave Theory Cryptocurrency
Elliott Waves Theory in cryptocurrency is one of the most-simple trading theories that exist but it is exactly this simplicity that makes it extremely complicated. The thing is that its description is pretty straight forward: five waves up should be corrected with three waves down. The problem stays with the fact that each and every one of those waves are being formed out of another five waves up and three waves down, but this time of a lower degree, making for another cycle as were described by Elliott. And then the subdivision continues on and on so the trader needs to be real disciplined in order to know where to start a count.
Impulsive waves are the most sought for waves of them all and this is due to the fact that price is moving fast and making a quick buck is always appealing for all traders, regardless of the product that is traded.
The purpose of this educational series here is to show you how to trade an impulsive move. Even though they are not channeling, as this is a characteristic of corrective waves, they do help to find places for entering the markets.
Extensions with Elliott Waves
It is very important to know which wave is the extended one as channeling applies based on the extended wave and one will have a pretty clear idea about when to expect the fifth wave to end.
By definition, an impulsive move is not channeling and this should be the cornerstone of any analysis one is making using the Elliott Waves theory. That being said, the next thing to do is to identify the extended wave in any impulsive move as depending on which one is extending, specific actions can be taken. Any impulsive wave should be analyzed after the second wave is completed. This means the waves one and two are already completed and market participants are expected the third wave, which is the most common wave to be suitable for an extension.
Using Trend Lines with Elliott Waves
Trend lines are extremely useful in such cases and taking a trend line to connect the beginning of the impulsive wave with the end of the second wave is key. Make sure you are projecting the outcome as much as possible on the right side of the chart as this is vital for the future channel to be.
The next step is to copy/paste the resulting trend line mentioned above and to project from the end of the first wave. In this way a channel is being built and we just said that an impulsive move is not channeling.
Therefore, either the future price action in the third wave is breaking the projected 0-2 trend line or is not able to reach it. In the first case, if the trend line is being broken, then expect the third wave to be extended and to stretch more than 161.8%, into the 261.8% and above. This is a third wave extension and the way to trade in this situation is to apply the 161.8% of wave one by the time the 2nd wave is completed. When and if the upper trend line of the channel is broken but the 161.8% extension is not reached yet, buying call options on a bullish impulsive move and put options in a bearish impulsive move is the way to go.
If price is ending anywhere between the upper side of the channel and the lower one in a bullish trend, it means the impulsive move is completed as long as we have an extension. That being the case, the way to go is to split the channel into two different parts and buy put options by the time the 50% retracement level is reached in a rising channel and call options by the time the 50% retracement level is reached in a falling channel.
Using Fibonacci with Elliott
This 50% retracement level can be used in identifying the possible end of the 5th wave on the back of knowing already what wave extended as by the time the 5th wave is forming we know how the impulsive move looks like.
The place to look for the striking price is the 50% retracement of the channel we discussed earlier, and this means buying SELL contracts by the time the 50% level is reached by the 5th wave in a bullish impulsive move and BUY orders in a bearish impulsive move.
Contracting Triangle Elliott Wave
Triangles are one of the traders’ favorite ways to see a consolidation only by looking at any random chart and time frame. Out of all the type of triangles that exist, the most common one is the contracting triangle.
Few traders know the fact that contracting triangles, very much like head and shoulders, pennants, flags, etc, are coming with a measured move, and this means a move that the market MUST travel in order for the triangle to be validated/confirmed. If the measured move is not traveled, then the market is simply not forming a contracting triangle and the trader should re-analyze the whole pattern.
Any triangle has five different legs, no more, no less, and they should be labeled with letters, in the form of a-b-c-d-e. For more information and details about how to trade a contracting triangle please refer to the linked article.
How to Identify the Triangle
As for the thrust of a triangle, this is the 75% distance taken out of the longest wave of the triangle and projected from the end of the triangle, so basically from the end of the e wave.
This thrust, or the measured move, should come no matter what in order for the market to confirm the pattern. It may not seem as being too much, but consider you identify the pattern on the daily or even on the weekly charts and then you will come to appreciate the beauty of trading the thrust of a triangle.
Thrust of a Triangle
The notion of a thrust is considered to be similar with the one of a measured move in any other given technical analysis pattern, and sometimes this measured move is mandatory to come in a specific amount of time.
In other words, in special types of triangles, the type of triangles that are having a price action to come that is limited, there’s also a time constraint for price to reach a specific target and just like that we have the all-important price and time component, the one that matters for any forex trader.
However, those kind of triangles are pretty rare when it comes to technical analysis but this does not imply they are impossible to form. It is said that if such a triangle is forming on the bigger time frames like daily charts or even higher, they are extremely rewarding as there are some limitations as how to draw the a-c and b-d trend lines as well.
Spotting the End of a Complex Correction
Normally contracting and expanding triangles are forming most of the times at the end of complex corrections and those triangles have the b-d trend line broken and retested before anything. But the retest is not mandatory in such situation, it’s only a confirmation that market is indeed ending a complex correction.
Any triangle we know by now is having a five wave structure, only corrective waves and they are labeled with letters. The thrust of the triangle is always being determined in comparison with the longest leg of the triangle and this is most of the times wave a, but it can be a b wave as well. In the case we’re dealing with a wave a that is the longest, then measuring the length of it and taking 61.8% out of it represents the thrust of the measured move price should travel after the triangle is completed.
It means that this is the safety distance to travel if I may say so but sometimes, depending on the place the triangle is forming, this measured move is not mandatory. For example if you have a triangle that is forming as an X wave (continuation pattern) and the other corrective wave of the same degree is still a triangle, then after the wave a of the last triangle we can consider the thrust of the previous one being completed.
Contracting Triangles Depend on the Break of the B-D Line
As always, when it comes to contracting triangles, it all depends on the breaking of the b-d trend line. It cannot be a fake break as by the time the b-d trend line is gone we can say for sure the triangle is completed.
The trick is with the a-c trend line which is basically giving us the type of the triangle the market is forming and this means that we know where the triangle is forming and if it has a measured move (thrust) or not.
Using the B-D Trend Line for Triangle Confirmation
A triangle for example is confirmed by looking at the way the b-d trend line is broken. Any triangle is formed out of five different waves (a-b-c-d-e) and these waves are all corrective. By connecting the a-c and b-d trend lines, the triangle is formed. It can be a contracting one, if the trend lines are meeting somewhere in the future, or it can be an expanding one is the trend lines are moving in different directions.
For the confirmation of the triangle, regardless if it is a contracting or an expanding one, we should look for the b-d trend line to be broken in less than the time taken for the e wave to form. This means that taking a shape and counting the candles for the e wave will give us the estimated maximum time the b-d trend line should be broken.
If it is broken in due time, it means the triangle is completed and confirmed and a new wave is starting or already started. If the triangle is a reversal pattern and the trend is changing, look for bigger expiration dates for your options while if the triangle is a continuation pattern then look for a limited price action.
Triangles without Thrust
As a rule of thumb, if the triangle is forming at the end of a complex correction, it is said that the a-c trend line should not be clean, meaning it should be pierced by parts of other legs of the triangle. In this case, the triangle it is said that it has no measured move or thrust.
On the other hand, if the triangle is forming as the b wave in a zigzag or the fourth wave in an impulsive move, it is said that the a-c trend line should be clean and the b-d trend line should not be retested after the triangle is completed.
For the forex traders, triangles represent a very rich source of opportunities as market is basically consolidating in triangular formations most of the times so knowing the place the market is forming a triangle and what to expect after it is vital in successful trading.
Confirmation Stages For Corrective Elliott Waves
The two recordings that are in this article shows you the confirmation stages for corrective waves, in the sense that contracting triangles, x waves, flats and zigzags, wave some tips and tricks that can make the difference between a winning and a losing option. A corrective wave is nothing but a range and depending on the time frame one is doing the technical analysis, the range can be bigger or smaller, take more or less time than another.
Elliott Wave Complex Correction
Complex corrections are the patterns that make people doubting Elliott Waves analysis really works as the possibilities in this field are really numerous. Complex corrective waves have one thing in common: the x wave. We already have an article regarding the x wave so feel free to take all the information needed from there.
This x wave represents actually a corrective wave in the sense that it connects two waves of the same degree. Because of that, it can be called an intervening x wave (as it intervenes between two corrective waves) or a connecting x wave ( as it connects two waves of a lower degree).
If the x wave connects two corrections of the same degree, it is being said that the market is forming a double combination. On the other hand, if the x wave is connecting three simple corrections (so basically we have two x waves of the same degree) it is being said that the market is forming a triple combination.
Complex Correction in Forex trading
If the x wave is retracing more than 61.8% from the previous correction, it is very much possible than market is forming a complex correction that falls into the category of double or triple threes.
If the x wave is moving above/below the beginning of the first correction, then market is forming a running complex correction.
Like mentioned above, corrections can be either complex and simple and complex one are happening almost every time when you see price going nowhere for a bigger period. Complex corrections always involve at least two simple corrective waves and an intervening x wave, and almost always the are containing a triangle: either at the end of the correction, or the x wave itself is a triangle.
It is important to know what to expect when counting waves with the Elliott Waves theory as market is forming different patterns that are being characterized as impulsive or corrective. This is the very first thing to ask when looking at a chart: is this move impulsive or corrective? If it is corrective, then the next question should be to the nature of this correction: either a simple or a complex one.
Because of the principle of alternation that states that the second and fourth waves need to be different, one of the differences is most of the times the complexity. In other words, market will talk to us and if the second wave in an impulsive move turns out to be a simple correction, then almost always the fourth wave is a simple one, so we should look for either a triangle, or a flat or a zigzag for the fourth wave and from the moment the simple correction ended we can say the fourth wave ended as well and we can move on with the fifth wave.
Degrees of Complexity
There are different degrees of complexity a market may have and I am talking about the different cycles that are formed when trading with Elliott Waves and this may be the most difficult thing to grasp in this theory.
There is a strong possibility that a move to the downside on the monthly chart to be corrective, and if it is a complex correction, then we should look for the end of the x wave to give us the possibility to SELL. Based on the nature of wave a (can be either a zigzag or a flat), we know if x wave is simple or not, as x waves are always corrective waves, and this offers a clue regarding how to move forward.
Knowing if a correction is simple or complex allows traders to set up the right expiration date as in a simple correction we should look for a shorter expiration date while if market is forming a complex one we should look for as much as possible for a bigger expiration date. The thing is that after the x wave we don’t really know if market is forming a double or a triple correction and this tells much about the power of corrective waves.
Most of the times complex corrections appear as second waves in an impulsive move and this implies that the fourth wave will automatically be a simple one. Also a favorite place to find a complex correction is the leg of a contracting triangle. The idea is to try to identify a triangle on the bigger time frames and by the time you go on the lower time frames to trade one specific leg, bear in mind that complex corrections are to be found there. It is not a rule of thumb, but rarely out of five different waves that form a triangle, one is a simple correction.
Elliott Wave Running Correction Pattern
Before even starting to talk about running corrections, we should settle what the word running means. It is pretty much simple to explain it: in a bullish trend, so in an upside move, it means that the 2nd wave of an impulsive move will actually end above the end of the previous first wave. The opposite is true as well: in a downward move, so a bearish move, the end of the 2nd wave will have to be below the end of the previous first wave.
What are the implications for such a pattern? Well, they are sever, in the sense that a running correction is always being followed by a strong move in the same direction, leaving behind nothing but traders scratching their heads about what just happened. There is also the strong tendency of market participants to believe such patterns are coming rarely, which is not really the case. Actually, they are quite common and failing to understand this leads only to painful mistakes.
Running corrections should be understood as being something really normal especially when trading the forex markets with CFDs based on a currency pairs analysis.
According to the Elliott Waves Theory, in a five wave structure there is at least one wave that is extended and this means that its length it is minimum 161.8% when compared with the previous one in the sense that this is the minimum distance to be traveled. All good so far, but where is the extension being calculated from?
The key is to know where to start and this depends very much on the extended wave. Most of the extended waves are third waves and that makes the second wave to be a complex correction. When the x wave, or the intervening X wave is a big one (namely it is bigger than 61.8% when compared with the whole previous correction of the same degree), then chances for the second wave to form a running correction are quite strong.
Running corrections appear most of the times as second waves in an impulsive move and therefore it goes without saying that the third wave is going to be the extended wave. If the impulsive move is a bullish one, or rising, then BUY contracts/call options are to be traded. On the other hand, if the impulsive move is a bearish one, or falling, then SELL orders /put options are recommended.
In both of the situations above, the fact that we’re talking about an impulsive move that starts the third wave it means that there is when the wave is going to extend and this says much above the speed and velocity the market is traveling with. Expiration dates in these case can be a bit shorter than otherwise recommended.
Elliott Wave Running Flat
Second most common place for a running correction to form is as a b wave in a zigzag and this kind of pattern is extremely rewarding. We are talking about an aggressive b wave as because it is a zigzag it should not retrace more than 61.8% when compared with the previous wave a and because the correction is a running one, it should end above the end of wave a. After that comes the extension but being a zigzag, we have one more important clue: it should not channel.
Importance of a Running Correction
Last but not least, a running correction can appear as a fourth wave in a five wave structure but this kind of particular situation is a bit tricky in the sense that it is forming really rare and it is being followed by a super powerful fifth wave in an impulsive move that is called a fifth wave extension.
Running corrections are failed to be properly understood by traders as the very concept of a corrective wave to end above the previous first wave highs (in the case of a bullish impulsive move) or lows (in the case of a bearish impulsive move) is difficult to understand. One clue may come from the fact that, despite the general belief, the second wave in an impulsive move is rarely ending beyond the 61.8% retracement of the previous first wave. Whenever this is happening, the way to interpret and label the market is to look at that retracement to be part of a running correction, namely only wave a of a running correction and the b wave and the x wave to follow to exceed the highs.
All in all, running corrections are pretty important in trading and analyzing markets with the Elliott Waves Theory as traders are interested to find out when market is traveling the fastest and quickest as the very concept of quick and easy money is appealing to each and every investor. We all know that is not how trading goes but money management and discipline together with understanding how markets are moving pave the way for successful forex trading.
Zigzag Fibo Indicator
Fibonacci numbers are very important in trading financial markets since trading without technical analysis is useless. One should consider fundamental analysis as well, but technical analysis is vital when no news are being release. Fibonacci comes with retracement, expansion, and time levels, but knowing how to apply the levels in taking a trading decision is key. In our case, it will offer the best striking price possible if integrated correctly in the Elliott Waves Theory. Elliott Waves and Fibonacci numbers and levels are a must in any trading decision so a correct understanding of both of them brings a competitive advantage to trader.
This educational project is designed to show the advantages of trading an Elliott Waves pattern, namely a zigzag, using Fibonacci numbers, as we’re going to discuss the structure of a zigzag, the structure of each wave part of the zigzag, and what makes it a zigzag.
When it comes to trading forex, the time element is one of the most important, if not the most important factor. It is one to say that a market is going to a specific level and an entirely different story to say when it is going to move there. This is what forex trading is after all: saying where price is going and when it will be at a specific moment of time.
Zigzags are corrective waves, or three waves structures and the key here stays with the b wave in the sense that it should not retrace more than 61.8% when compared with the previous wave a. There is a whole debate regarding this retracement level, whether it is referring to the end of wave b or are parts of wave b allowed to enter the territory beyond the 61.8%. I would say it is not that important and what a trader needs to know is that if there is a retracement that goes that much into wave’s a territory, than that retracement is most likely not part of a zigzag, so any possible trade should be scrapped.
There is a strong tendency among traders to look for an impulsive move when looking for a quick move to come as everyone is attracted by strong and powerful moves market makes. It should be noted though that these kind of moves are quite rare and what is most likely to occur is a zigzag and not an impulsive move.
Zigzags are even more powerful and fast-moving when compared with an impulsive move, for the simple reason that they are being formed out of two impulsive waves of a lower degree and the correction in the b wave is most of the times insignificant. In other words, if you’re wrong in interpreting a zigzag, then chances for the market to turn are quite small.
Zigzag Elliott Wave Pattern
When compared with the flat pattern, the zigzag is not classified by the way the b wave is retracing, but rather by the length of the c wave that follows. If that c wave is way more than wave a, then it is most likely that the whole zigzag pattern is part of a leg of a triangle or the entire leg of a triangle.
A zigzag is even more powerful when is followed by another one, as in this case market is forming a so-called double zigzag pattern and you can imagine the velocity on this one as basically it is formed out of four different impulsive waves of a lower degree and its main characteristic is that it is channeling really well, so corrections in the opposite direction are not bigger than the opposite side of the channel. This offers the perfect place for any strike price as in a bearish double zigzag one should look to SELL / PUT options on the upper side of the channel, while in a bullish double zigzag BUY/ CALL options are recommended by the time market is retesting the lower side of a rising channel.
The maximum one can have is a triple zigzag and it must be mentioned that these are really rare. However, when they do happen to form, it is worth mentioning that the three zigzags in the sequence are different and do not resemble.
A zigzag can be part of a complex correction or it can be a corrective wave of its own. If it is part of a complex correction, then the counter move to follow should not go more than 61.8% in the opposite direction, while if it is a simple correction, it must be confirmed.
Trading the 2-4 Trend Line Break
How to Draw the 2-4 Trend Line?
The ability to draw the 2-4 trend line implies the trader knows where the second and fourth waves are ending and this is possible to know only if after the 4th wave is completed. It is strongly recommended to look at the alternation principle to be respected – the alternation between the two corrective waves, they should differ in at least one of the following:
- complexity (meaning one should be a simple correction and the other one a complex one),
- distance traveled by price (in the first case from the end of the first wave until the end of the second one, and in the second case from the end of the third wave until the end of the fourth one) and, last but not least,
- structure (composition of the two corrective waves should be different).
That being said, the next thing to take into account is that corrective waves are not always ending at the highs or at the lows as they can end, for example, with a triangle or with a flat that has a failure (it means wave c is failing to break the lows/highs in the previous wave a). In both cases, the correction is not going to end at the high/low of the whole wave but for drawing the 2-4 trend line we must know exactly where the waves are ending.
Implications on the Third Wave
As a rule of thumb, it is not acceptable that the third wave is breaking the 2-4 trend line and if this is happening than the move you are seeing and analyzing is not an impulsive move. Impulsive moves should be as clean as possible and the 2-4 trend line as well.
Moreover, by the time we can draw the 2-4 trend line it means that the impulsive move is almost completed and the 5th wave is most likely in place or about to end. Judging by how market is moving after the 2-4 trend line is broken we can assume the next step and have an educated guess if the impulsive move was part of a bigger degree five wave structure or it was wave c of a flat pattern.
Depending on which one is the extended wave in the original five wave structure, we know what to expect for price action after the 2-4 trend line is broken.
In a first wave extension, by the time the 2-4 trend line is broken (in this case market will have the shape of a wedge) we should look for 50% retracement of the whole wedge. If the wedge has overlapped between the second and the fourth waves, it means the whole wedge eventually will be completely retraced.
It is worth mentioning that in the above situation it is common for price to retest the 2-4 trend line after the break but that is not mandatory. If market is forming a third wave extension, then the 2-4 trend line offers the possibility to find dynamic support or resistance and, depending if the move is bullish or bearish, trades should be placed accordingly.
The way to go is to copy the 2-4 trend line and paste it over the end of the third wave. The resulting channel should see the price action to come finding resistance in a bullish impulsive move, so SELL CFDs can be traded, or support in a bearish impulsive move, when BUY orders are placed.
Elliott Wave Double Top Forex
This is one of the most popular reversal patterns and like the name suggests a double top is a reversal pattern that comes at the end of a bullish trend and double bottoms are reversal patterns at the end of bearish trends. They are so popular that sometimes they seem to appear all over the place as M or W shapes seem to be so common. For all the reasons listed below, they are not.
Double tops and bottoms are coming with a measured move and this measured move should be considered only after price is breaking the all-important trend line: the line that defines the M or the W shape these patterns are making. More details to be found out on the recordings above.
In other words, we’re looking at a reversal pattern with a measured move and in this way it resembles with the head and shoulders and inversed head and shoulders pattern as those are having a measured move as well and it should be quantified in the same way: taking a line from the highs/lows in the double top/bottom to the line that defines the M/W shape and project that line at the moment the trend line is broken and that is the minimum distance price should travel.
What Would Indicate a Double Bottom or Top?
According to the Elliott Waves Theory, such a pattern is most likely a flat pattern and this means it should have the b wave almost similar with wave a. In plain English, the b wave should retrace more than 80% of wave a and this is the detail that makes the whole flat to look like a double bottom or top. The c wave to follow such a pattern is an impulsive move or a five waves structure and these kind of impulsive moves are quite aggressive, hence creating the impression that the market is actually rejected from a double bottom/top.
In reality, it is only a pattern that may or may not reach the measured move like indicated at the beginning of this article as the measured move does not need to happen.
Flat – Pattern with a Wave C
If the flat pattern is a pattern with a wave c that is stretching way higher when compared with the length of wave a, then chances are we will see the measured move coming. If not, I would not try to go in the same direction as by the time the flat is completed market will either consolidate in that area or will reverse the other way around.
Such pattern must be accompanied by an indicator of some sort, ideally an oscillator. The way to go is to look for the oscillator and price to diverge at the moment the double top/bottom is forming as that is a signal market is looking to reverse.
Identifying the Divergence Pattern
Of course, the case of a double bottom BUY CFDs are recommended, while a double top should always be followed by SELL contracts. The usual caveat applies here as well as the bigger the time frame, the bigger the expiration date needed and also the smaller the risk. However, if the pattern or divergence is identified on the lower time frames, like, say, the 5 min chart, then hourly expiration date for binary options might be traded as well. Such patterns appear in complex corrective waves when market simply needs more time to consolidate, if the corrective wave is a continuation pattern, and a clear understanding offers a great competitive advantage to any trader.
Elliott Wave Fibonacci Retracement
There is not possible to talk about Elliott Waves theory without talking about Fibonacci numbers and these numbers are the center of Elliott Waves Theory. The point of this article is familiarizing readers with the most important retracement levels when trading one of the most popular patterns with Elliott Waves: a flat pattern. Based on the retracement level that is made by the b wave, we can know pretty much what is the value to come for the c wave and if the move is going to be completely retraced or not.
As always, the 61.8% is key to the whole discussion as the three categories of flat have the minimum retracement being 61.8% of the previous wave a. A flat pattern has three waves labeled a-b-c, with the first two being corrective and the last one, the c wave, impulsive.
Corrective waves can be either simple or complex and a flat can be a simple correction or it can be part of a complex correction. Regardless the bigger picture they are forming, they are always corrective waves and should be labeled with letters.
What is a Flat?
The first move in a flat is always the tricky one as no-one knows what the market is going to form for wave a, so the first question one should ask is weather the wave a is impulsive or corrective. If it is impulsive, then the flat pattern is out of the question as the move it is either an impulsive move in the opposite direction or the beginning of a zigzag.
In other words, wave’s a structure is decisive in interpreting if the market is forming a flat pattern or not. Actually, if wave a is clearly a corrective one (if it is split into equal parts, or if it is channeling), then the only two possibilities market has for the entire move is either a flat or a triangle, as only in a flat or a triangle wave a is a corrective one.
That being said, the next thing to do is to look for the retracement level for the b wave. This one needs to be more than 61.8% in a flat but it can go well beyond that level, even more than 261.8% or more.
Based on the length of the b wave one can forecast the move to follow after the flat pattern is completed. For example, the bigger the b wave, the most likely waves c and a will resemble in both price and time and trading call options after a bearish flat, or call options after a bullish one is a must.
One thing is tricky though as the flat should always be interpreted in relation to where exactly the b wave is ending as that is the most important thing of them all. If the b wave ends with a contracting triangle that acts as a reversal pattern then the spike in wave a is not the end of the triangle (hence not the end of the b wave), so one should be very careful in understanding exactly where the b wave ends.
Types of Flats given by Fibonacci Retracement?
The type of the flat says much about the next move to come as well as if the flat is one that ends with a failure (wave c is smaller than wave a) then the implications are really bullish if the flat corrected to the downside as failures are appearing before a massive move in the opposite direction takes place.
A flat has for the c wave an impulsive move and this can be a classical one, meaning it will have at least one extended wave, but it can also be formed out of corrective waves of a lower degree and in this case it will basically not have an extended wave as it is not mandatory. The thing to look for in a c wave of a flat is a rising or a falling wedge as if that is forming as wave c it means that the flat was a continuation pattern and a powerful and strong move in the opposite direction is about to follow.
Flats can be part of complex corrections as well. If market is forming two flat patterns connected with an x wave, it is being said that a double flat pattern takes place, while a triple flat is forming if three different simple flats are being connecting with two x waves of the same degree. However, note here that the x waves should not retrace more than 61.8% when compared with the flat that formed before.
Elliott Wave 3rd Wave Extension
Looking at a five waves structure, or expecting one, should be made with extreme caution as depending on which wave is the biggest and applying the 161.8% Fibonacci extension is key. The most common setup for a wave to be extended is for the third one to be more than 161.8% when compared with the first one. Therefore, what a trader should do is to take a Fibonacci Extension tool and to look for the level. Once the level is reached, look for a fourth wave that should correct the third wave, but this fourth wave should be a simple correction if the 2nd wave was complex, or a complex correction if the 2nd wave was simply.
This is due to the principle of alternation that needs to be respected by the two corrective waves, namely the second and the fourth one and the lack of it leads to a move that is channeling really well. This channeling is the first clue we have market is not trending in an impulsive move but it is in a corrective phase.
The next thing to be done is to measure the length of the first wave and projected to the upside in the case of a bullish impulsive move, from the end of the 4th wave. That is the place we should look for the 5th wave to end and, depending on the time frame the impulsive move appears, we should buy call or put options.
One important thing to keep in mind is the fact that in such an impulsive move, by the time the 5th wave is completed, it is mandatory for price to come back at the end of the previous 3rd wave.
Like mentioned above, these extensions represent the most common setup in an impulsive move and almost all impulsive waves have a third wave extension. Most of the times this third wave extension follows after a long and time consuming second wave, making everyone wondering when the real break is coming. It is not unusual for the second wave here to be the most time consuming out of all impulsive moves and judging by its structure we have an idea about what’s to follow after the third wave is completed.
What is a Third Wave Extension?
The third wave in any impulsive move should be impulsive on its own and this offers us the most important clue of them all. What a trader should do is to go on the lower time frames and count of a lower degree and see if what is believed to be the third wave extension of a bigger degree is indeed one and if all the rules are respected. If everything is respected and the 0-2 trend line is confirming the setup, then we can say for sure we have a third wave extension.
The fourth wave to follow after a third wave extension is a short one is the second wave was a lengthy and complex one and in this case rarely it retrace more than 38.2% when compared with the length of the whole third wave. If that is the case, on the 38.2% we should trade BUY contracts in an impulsive move, respectively SELL contracts in a bearish one.
Taking into account that fifth wave failures are really rare, like we already mentioned in the article dedicated to fifth wave failures, it means by default that the fifth wave to follow must take the highs of the previous third wave in a bullish impulsive move or the lows in a bearish impulsive move.
If that is happening, it is time to look for a striking price for a reversing option. In order to find the perfect entry price, the way to go is to measure the whole length of the first wave and take 61.8% out of it as most of the times this is the length of the fifth wave and a SELL contract is to be traded in a bullish move and a BUY contract in a bearish move.
In the case the fifth wave still advances after that level is being reached, it means market is heading towards the 161.8% length out of wave one and that is the place to be even more aggressive in your trading.
Another thing to look for when interpreting five wave structure is to make sure the third wave is never the shortest one as this is virtually impossible and invalidates all scenarios no matter how well the other things are fitting in.
Trading with Elliot Waves theory can be a tricky and relative thing but taking into account only the things that matter and using Fibonacci in relation to the Elliott tips and tricks can result in a rewarding trading system/setup any trader is interested to master.
Elliott Triple Combo Wave Strategy
One of the most difficult patterns to be traded regardless of the financial product involved (forex, binary options, equities, etc), is the triple combination. Like the name suggests, we are talking about one of the most complex, if not the most complex structure to be find out when trading with Elliott Waves patterns.
The name of the pattern comes from the fact that we have three different corrective waves that are going into the same direction (upward or downward) and in between them, there are two intervening waves, called x waves, that are still corrective in nature. All in all, we are talking here about 5 different corrective waves, 3 of them going against the previous trend before the triple combination to start and 2 of them going in the same direction as the previous trend prior to the triple combination.
Elliott Triple Combo Wave in Forex
I would say the most common triple combinations, like in the case of double combinations as well, are the ones ending with a contracting triangle that acts as a reversal pattern. However, it is not mandatory for the third correction to be a triangle as it can be simply a flat or a zigzag. More details to be found out on the two videos we added to the article. The types of corrective waves to look for here are the ones we already talked about:
These kind of patterns are tricky as usually they are being formed as the entire leg of a contracting triangle and even of an expanding triangle. In order to properly identify such a construction one needs to remember that they are ending almost always with a contracting triangle so the way to go is to look on different time frames for identifying a triangle and then analyze the move prior to the triangular formation.
If there are multiple corrective waves until the triangle is forming, then chances are we are having a triple combination.
Trading with Tripple Combinations
It is important as by the time the b-d trend line of the triangle is broken it means that the triple combination ended and options can be traded. If the triple combination is in a bullish trend, then SELL CFDs / PUT options should be traded by the time the b-d trend line is broken. The opposite is true as well, as BUY orders / CALL options should be traded if the b-d trend line is broken after a bearish triple combination.
Price action that follows a triple combination is most of the time related to the golden ratio, the famous now 61.8%level. In this case, the thing to do is to take a Fibonacci retracement tool and drag it from the beginning of the pattern until its very end (careful here as the end of the pattern is with a triangle so the Fibonacci should be placed at the end of the triangle, namely at the end of wave e) and look for the level to be reach.
BUY/SELL CFDs with Tripple Combinations
A triple combination it is rarely completely retraced and if it is appearing as a leg of a triangle then by the time the 61.8% level is retraced options can be traded. If the retracement is bullish, then SELL contracts should be traded, while on a bearish retracement BUY Contracts should be traded by the time the 61.8% level is reached.
Elliott Waves theory goes hand in hand with Fibonacci and without a proper understanding of the Fibonacci levels trading these patterns will make no sense. In a triple combination, depending on the retracement level in the simple corrections, we know what to look for and anticipate the next move. For example, let’s assume the first correction in a triple combination is a flat, then we have the x wave and the second correction is a zigzag. Already from that moment a trader should now that a triple combination is in progress and should follow as double combinations are almost always ending with a triangle as well.
That is the clue that one needs that a triangle is coming and, if the pattern is forming on the bigger time frames, then trading that triangle at the end of the triple combination is possible too.
All in all, trading with Elliott Waves theory allows one to project future price movements based on the ones on the left of the chart and by the time a wave is completed, a new one begins. If a trader has an idea about a specific characteristic of the new wave to follow, a trade can be issued and triple combinations are offering this kind of possibility. Find out more in the two video recordings that are coming with this project.