๐ Identifying the 5-Wave Pattern on a Live Chart
Imagine you are looking at a chart (like BTC or DCR) and you see a new uptrend forming. Here is how you verify it using the rules we discussed:
Wave 1 (The Initial Rally): Price makes a small move up from a bottom. At this stage, most traders think it's just a random bounce.
Wave 2 (The First Pullback): Price drops slightly. Crucial Check: It must stop above the start of Wave 1. If it breaks below the starting point, the count is invalid. This is often where "Smart Money" enters.
Wave 3 (The Power Move): This is usually the strongest, longest, and highest-volume wave. It breaks past the top of Wave 1. Most of your profit is made here. Remember, it cannot be the shortest wave.
Wave 4 (The Consolidation): Price dips again as traders take profits. Crucial Check: The bottom of Wave 4 must stay above the peak of Wave 1. They should never overlap.
Wave 5 (The Final Push): Price makes one last high. Sentiment is usually very bullish here (FOMO), but Elliott Wave traders know the trend is exhausted and prepare to exit.
๐ Tools to Use on Your Chart
If you use platforms like TradingView, follow these steps:
Select the Tool: Go to the side panel and select the "Elliott Impulse Wave (1, 2, 3, 4, 5)" tool.
Trace the Trend: Click on the major swing lows and highs to see if the rules fit.
Fibonacci Confirmation: * Wave 2 usually retraces to the 0.5 or 0.618 Fibonacci levels.
Wave 3 often reaches the 1.618 extension of Wave 1.
โ ๏ธ What Happens Next?
Once the 5-wave sequence is complete, the market enters a Correction Phase known as the A-B-C Waves. This is where the price drops significantly to "correct" the massive gains of the 5-wave cycle.
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