What is an Elliot Wave and How Does it Work?
A complete Elliot Cycle consists of two major wave patterns: impulse waves (define prevailing trend direction) and corrective waves (move against the trend). Within these two waves, there are smaller wave patterns. The impulse wave consists of five smaller waves, three in trend direction and two counter trend; the corrective wave consists of three price waves, two in the direction of correction and one counter-correction. In the adjacent figure impulse waves and corrective waves with a total of eight waves (five up and three down) labeled 1, 2, 3, 4, 5, a, b, and c presents the mode of Elliot Wave. There are five waves in the direction of the main trend followed by three corrective waves (a “5-3” move). This figure gives a bullish market pattern but the same is applicable for bear markets where the trend is down. The three waves in the direction of the trend are impulses and therefore these waves have five waves. The waves against the trend are corrections and are composed of three wav
