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What are Motives and Corrective Waves?
1. Motive Waves:-
Motive waves move in the direction of the main trend
They consist of 5 smaller waves
Waves 1, 2, and 3 move in the trend direction
Waves 2 and 4 move in the opposite direction
There are 2 types of Motive Waves: Impulse and Diagonal Waves
They provide insight into market trends and price movements.
Corrective Wave:-
Corrective waves counter the main trend
They consist of three waves labeled A, B, and C
Corrective waves are more complex and time-consuming
There are three main types: Zig-Zag, Diagonal, and Triangle Waves
They provide insights into the market for informed trading decisions.
Below are the 5 main types of Elliott Wave Patterns:-
1. Impulse:
Impulse waves are the most common motive wave in Elliott Wave Theory
They consist of five sub-waves with specific formation rules
Formation rules include:
Wave 2 cannot retrace more than 100% of Wave 1
Wave 3 can never be the shortest among waves 1, 3, and 5
Wave 4 can never overlap Wave 1
The primary objective of impulse waves is to move the market
Understanding impulse waves provides valuable insights for informed trading decisions.
2. Diagonal:-
Diagonal waves in Elliott Wave Theory have 5 sub-waves and move in the trend direction.
They look like a wedge and can expand or contract.
Diagonals can be ending or leading.
Ending diagonals are found in Wave 5 of an impulse wave or the last wave of corrective waves.
Leading diagonals are found in Wave 1 of an impulse wave or Wave A of a zigzag correction.
Each sub-wave does not fully retrace the previous one, and sub-wave 3 is not the shortest.
3. Zig-Zag:-
The Zig-Zag is a corrective wave in Elliott Wave Theory, consisting of three waves labeled A, B, and C.
The A and C waves are motive waves, while the B wave is corrective.
Zigzags correct price levels in bull or bear markets.
Zigzags may form a double or triple zigzag.
It helps traders identify potential trading opportunities based on market trends and price movements.
4. Flat:-
The flat is a three-wave correction pattern in Elliott Wave Theory.
It is identified by a 3-3-5 sub-wave structure labeled as A-B-C.
The pattern moves sideways and is commonly observed in the fourth wave of an impulse wave.
Wave A and B are corrective while Wave C is motive with 5 sub-waves.
The expanded flat is a variation where wave B terminates beyond the start of the A wave and the C wave extends beyond the start of the B wave.
Traders use the flat pattern to identify potential trading opportunities based on market trends and price movements.
5. Triangle:
The triangle is a corrective pattern in Elliott Wave Theory.
It consists of five sub-waves in a 3-3-3-3-3 structure labeled as A-B-C-D-E.
The pattern demonstrates a balance of forces and travels sideways.
Triangles can be either expanding or contracting.
They can be classified as symmetrical, descending, or ascending based on their shape.
Identifying triangles on the technical charts can be challenging.
Traders need to practice identifying them to recognize potential trading opportunities based on market trends and price movements.
Summary:-
Traders should exercise caution when identifying Elliott wave patterns due to variations in interpretation.
A combination of techniques, such as price action analysis and technical indicators, can help confirm the presence of a pattern.
Patterns may not always conform precisely to the expected structure.
The ability to identify patterns accurately is valuable for traders.
Traders should exercise discipline and patience in the process and avoid relying too heavily on any single indicator or technique.
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