The 3-4-5 waves of the Elliott Wave principle: useful habits to know

Characteristics of the Three Waves

It is composed of five waves.

In the motive waves of advancement and decline (waves 1, 3, and 5), wave 1 has the largest price range, and the target values for ascent and descent are 1.382 times, 1.5 times, 1.618 times, 2 times, 2.618 times, and so on of the amplitude of wave 1. (It is good to also consider the E-value in the Ichimoku Kinko Hyo Range Observation Theory.)

The most common pattern is that the amplitude is often greater than 1.618 times that of wave 1.

Wave 3 has the highest likelihood of extending.

Extension (elongation)

Wave 3 of the impulse waves always exceeds the channel line.

Characteristics of Wave 4

It is composed of three waves: internal waves A-B-C.

Do not return to the top of wave 1. It is good to draw a horizontal line at the high of wave 1.

There is often a retracement around 38.6% or 50% (half retracement) against wave 3.

Alternation Rule = Alternation

• If wave 2 is a simple price move, wave 4 tends to be complex.
• If wave 4 is a simple price move, wave 2 tends to be complex.

Simple … Zigzag (5-3-5)

Complex … Flat or triangle consolidation (3-3-5, 3-3-3-3-3)

Practical Points

Retracements beyond half (50%) make wave 4 unlikely, though up to 50% is okay.

If it pushes beyond this 50% or more,the impulsive phase may be switching.

Or there may be consolidation on a larger time frame than the chart you are watching.

Wave 4 is larger than Wave 2(Wave 2 is a retracement against Wave 1, but Wave 4 is a retracement against Wave 3, so Wave 4 is larger in both time and amplitude.)

If Wave 2 is smaller in size, there is a greater likelihood of a lower-level adjustment.. This part is important.

If it differs in shape from Wave 2 but matches Wave 4, it is an internal wave. Alternation rule. It may be difficult until you become accustomed.

If the retracement is Wave 3, it is a triangle consolidation or a flat (complex).

If the retracement is Wave 5, it is a zigzag (simple).

Wave 4“Time Adjustment”is performed.

Characteristics of Wave 5

It is composed of five waves.

When Wave 3 is about three times Wave 1, failure or diagonals tend to appear.

When Wave 3 is about twice Wave 1, Wave 4 retraces to rise again.

Wave 5 tends to be the same length as Wave 1.

If Wave 5 extends, it can reach 1.618 times from the start of Wave 1 to the top of Wave 3.

It may be an ending diagonal rather than a regular impulse wave.

Practical Points

Prices continue to make new highs (lows), but oscillators show divergence in technical indicators.