Elliott Wave Essentials ยท 25 min ยท Beginner
Understanding Impulse Waves
Dive deeper into the 5-wave structure. Learn the rules and guidelines for impulse waves.
The 5-Wave Impulse
Impulse waves move in the direction of the larger trend and consist of 5 sub-waves. Waves 1, 3, and 5 are motive waves, while 2 and 4 are corrective waves.
The Three Golden Rules
๐ Rule 1: Wave 2 may not fall below the starting point of Wave 1
๐ Rule 2: Wave 3 is never the shortest impulse wave
๐ Rule 3: Wave 4 may not enter the price territory of Wave 1
Characteristics of Each Wave
๐ Wave 1: First move โ often driven by few participants, disbelief prevails
๐ Wave 2: Correction โ typically 50-61.8% retracement, doubt
๐ Wave 3: Strongest wave โ FOMO, volume surge, never the shortest
๐ Wave 4: Consolidation โ often 38.2% retracement, profit taking
๐ Wave 5: Final move โ euphoria, often with divergence
Key Takeaways
โ Impulse waves have 5 sub-waves (1-2-3-4-5)
โ The 3 golden rules are inviolable
โ Wave 3 is the most profitable for traders
โ Fibonacci ratios help with identification
Reversibility of structures
Every wave structure shown here can also appear inverted in a different market phase. An impulsive move in an uptrend, for example, appears mirrored in a downtrend.
What matters is always the direction of the higher-degree trend โ the patterns stay the same, only their orientation changes.
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