Lessons Learned
The Three Elliott Wave Rules
These three rules are most relevant to daily closing data. They should be
committed to memory.
1. Wave-2 should not exceed the beginning of Wave-1. In other words,
Wave-2 should not make greater than a 100% retracement of Wave-1.
2. Wave-3 should not be the shortest of the three impulse waves in a fivewave
impulse trend (waves 1, 3 and 5).
3. Wave-4 should not make a daily close into the closing range of the
Wave-1.
The Three Pattern Questions
Whenever considering an Elliott wave pattern, you should ask yourself
these three questions and not consider an Elliott wave count unless you
can answer all three.
1. What is the most probable pattern position? Why? The answer to
this question may only be “impulsive” or “corrective.” The answer
may also be, “don’t know.”
2. What market activity will confirm the assumed pattern position?
What is the pattern guideline that is relevant?
3. What market activity will invalidate the assumed pattern position?
What is the pattern guideline that is relevant?
The Three Important Pattern Considerations
If you are using Elliott wave for practical and logical trading strategies
and decisions, these three considerations will always be in mind.
1. Be quick to admit when there is no discernable or relevant pattern!
Do not force an Elliott Wave count when there is no count that
meets the guidelines or a clearly defined five or three wave
structure.
2. If there is no discernable wave count, does the pattern appear to be
in an impulse or corrective structure?
3. As new data is made, the market will continually confirm or
invalidate the pattern position assumption. Trade the market, not
the forecast. Be quick to change your assumption of the pattern
position if the market activity invalidates the current assumption.
More To Come
Each week, a new tutorial will build on what we have learned. Also, in the
regular report, I will expand on the pattern comments to relate to what is
being taught in the tutorials. The pattern descriptions in the report will help
you to learn how pattern is considered to be part of a trading decision as a
market unfolds.
Over the next few weeks, I believe you will have had the most
comprehensive and practical Elliott wave pattern education available from
any source. You will clearly understand how pattern can be an important
factor of your trading decisions. You will also understand and how to apply
Elliott wave pattern to make the high-probability time and price projections
that are a key to trend targets, reversals, continuations and other trading
strategies.
Read next >>> Practical Elliott Wave Trading Strategies
Part 2
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