The impulse wave pattern consists of five waves in the direction of the larger trend: three motive waves (1, 3, 5) separated by two corrective waves (2, 4). This is the core structure of Elliott Wave Theory. Wave 3 is typically the longest and most powerful, never the shortest. Wave rules: Wave 2 cannot retrace beyond the start of Wave 1. Wave 4 cannot overlap with Wave 1 territory (except in diagonals).
Five-wave structure: 1-2-3-4-5, Three rules: Wave 2 cannot exceed Wave 1 start. Wave 3 is never the shortest impulse wave. Wave 4 cannot overlap Wave 1 (except diagonals). Guidelines: Wave 3 is often 1.618× Wave 1. Wave 5 = Wave 1 in length (common). Alternantion: if Wave 2 is sharp, Wave 4 is flat (and vice versa).
Enter at the start of Wave 3 (after Wave 2 completion near 0.618 Fibonacci), Enter at the start of Wave 5 (after Wave 4 completion), Buy the Wave 2 pullback: wait for 0.5-0.618 retracement of Wave 1, Enter Wave 3 extension: breakout above Wave 1 high with momentum
Wave 3 target: 1.618× Wave 1 projected from Wave 2 low. Wave 5 target: equal to Wave 1, or 0.618× length of Waves 1-3 measured from Wave 4 low. Invalidation: if Wave 2 exceeds Wave 1 start, recount.
Wave counting: Daily/Weekly. Entries: 4H. Confirmation: 1H.
Elliott Wave counting is subjective — different analysts can have different counts. Use Fibonacci ratios and strict rules (2 cannot retrace beyond 1 start, 3 never shortest, 4 cannot overlap 1) to validate your count. If it breaks a rule, the count is wrong.
Diagonals are wedge-shaped Elliott Wave patterns that occur in specific positions within the wave structure. Leading diagonals appear in wave one or wave A positions and signal the beginning of a new trend. Ending diagonals appear in wave five or wave C positions and signal trend exhaustion. Both types feature overlapping sub-waves contained within converging trendlines.
Elliott Waves are fractal — the same five-wave impulse and three-wave corrective patterns appear at every scale, from monthly charts down to tick charts. Wave degrees label these nested patterns: Grand Supercycle, Supercycle, Cycle, Primary, Intermediate, Minor, Minute, Minuette, Sub-Minuette. Understanding multi-degree analysis allows traders to see how smaller waves fit into larger structures.
Each Elliott Wave position carries a distinct psychological character that reflects the emotions and behaviour of market participants during that phase. Wave one is disbelief, wave three is recognition and momentum, wave five is euphoria, wave A is denial, wave B is false hope, and wave C is capitulation. Understanding these personality traits helps traders identify which wave is currently unfolding.
Fibonacci ratios are central to Elliott Wave — they define where waves are likely to end and project targets for the next wave. Key retracement levels (0.382, 0.5, 0.618, 0.786) identify where pullback waves (2, 4, B) are likely to end. Extension levels (1.272, 1.618, 2.618) project where motive waves (3, 5, C) are likely to reach.