EW queries

Discussion in 'Technical Analysis' started by buglepong, Aug 4, 2006.

  1. buglepong


    I am studying EW theory but I see inconsistencies in the logic.

    How do corrections fall into a 3-3-5 or 3-3-3-3-3 pattern when hypothetically a correction should follow an impulse? Sometimes this would result in two impulses in succession of different waves one degree larger. However, two corrections of same degree should never occur consecutively (it would destroy the Fib sequence).

    I am also curious as to the methodology Elliot used to produce his principle. What did he base some of the rules on (like wave 4 doesn't pass wave 1 etc)?

    Anyone that has come across good material (technical) that elaborates on his process please share.

    Any help would be appreciated.
  2. A 3-3-5 is what may also be called a "flat" ABC correction. You can have a 3-3-5 followed by an "X" and then another 3-3-5 OR 5-3-5 but never 3-3-3-3-3. It's simple yet complicated. Hindsight makes it perfect, usually.

  3. buglepong


    In Elliot Wave Principle expanded ed. by A J Frost and R Prechter it calls a 3-3-3-3-3 correction a horizontal triangle.

    I know what the book says. I just wanna know how it's supposed to fit into a fib sequence.
  4. colion


    EW evolved empirically based on observation by Elliott of market action. In "Dynamic Trading" by Miner, the path taken by Elliott is outlined with reference to various publications by Elliott's from "day one." If you are looking for an underlying hypothesis for EW, Plummer took a stab at it in "Forecasting Financial Markets."
  5. (1) Impulses have 5 waves. Corrections have 3 waves. (2) Prechter says that corrections should "alternate" when looking at the "2" and "4" waves in the 5-wave sequence, i.e. "2" can be a 3-3-5(flat-correction) while you would expect "4" to be a 5-3-5(zig-zag) or a 3-3-3-3-3, something different that the previous 3-3-5. (3) When a 5-wave impulse comes to an end, the next corrective sequence will generally be 5 waves. The logic is still good. One is impulsive while the next one is corrective.
  6. buglepong


    Unfortunately this does not answer my question.

    The Fibonacci sequence goes 3,5,8,13,21,34 etc. If the market follows a fibonacci pattern according to Elliot Wave (as it says in various Elliot wave material) it should display this characteristic. That is, the ratio of corrective waves to impulsive waves should be more or less constant.

    However, as one might notice, a 3-3-3-3-3 or 3-3-5 wave will put too many corrective waves into the sequence.

    Explain to me, trading gurus of the internet, how it all works out.
  7. nkhoi

    nkhoi Moderator

    it doesn't work, that is why, one practical way to trade ew is trying to id w3 then put in a plan to trade w4, w5.
  8. Tyren


    Agree 100%.

    You could try wave 2 also if it is a AB=CD, but there are better patterns in wave 4 area.