A corrective wave is a three-wave structure. Elliott found that corrective waves form more often than impulsive ones. For this reason, there are more types of corrective waves than types of impulsive moves.
Corrective waves are everywhere in the Forex market. Considering the fact that the market spends a lot of time in consolidation, it is no wonder corrective waves are everywhere. Imagine also the most common trading pattern: a contracting triangle. All the legs of a contracting triangle are corrective. As a matter of fact, all the legs of expanding triangles are corrective as well.
Having said that, Elliott made a clear distinction between corrective and impulsive waves. Corrective waves are called “threes”, because of the a-b-c structure, and impulsive waves are called five-wave structures. As a rule of thumb, all corrective waves are labeled with letters.
Not all corrective waves have strictly three waves, as the name suggests. Triangles, for examples, have five legs (a-b-c-d-e) and all these legs are corrective. Because they are corrective, or “threes” the whole triangle is called a corrective wave, or a “three”, even though, in reality, it has five waves.
According to Elliott, the market forms simple or complex corrections. Simple corrections are flats, zigzags, and triangles. Complex corrections are variations of this simple one, connected by one or two intervening waves. The intervening waves are also known as connecting waves or x-waves.
Flats are of multiple types and the type of a flat is given by the b-wave. Depending on the retracement level, the flat can be irregular, normal, common, have a strong or a weak b-wave, etc. Elliott found that every type of flat belongs to a specific structure. It is not possible, for example, to have a common flat that has the b-wave retracing less than 80% of the previous wave as. This is just to give an example about the limitations Elliott Waves theory imposes.
Zigzags are powerful patterns. It is said that zigzags are even more powerful than impulsive move, and there is a reason for that: a zigzag has two impulsive waves of a lower degree. The structure of a zigzag is the same as the structure of a flat: a-b-c. If, in a flat pattern, only the c-wave is impulsive and waves a and b corrective, things are different in a zigzag.
Both waves a and c in a zigzag are impulsive waves. This makes the zigzag a powerful pattern. Moreover, Elliott found that the market can form double and triple zigzags too. Respecting the same rules for the waves a and c, a triple zigzag has no less than six impulsive waves of a lower degree.
Because zigzags have little or no retracement levels for the b-waves, the triple zigzag is the most powerful trending pattern of them all. If you end up on the wrong side of the market when a triple zigzag forms, you have no chances to get out in time.
The forex market is a tricky one for multiple reasons. One of the reason is that it is heavily influenced by algorithmic trading. This is trading done by super-computers that buy or sell thousands of trades per second. These robots or machines are instructed to buy or sell when an economic news is released, based on how the actual data is when compared with the forecasted one.
The good part is that even these machines or robots are programmed by humans, so the human element is still there. It makes Elliott Waves working on the Forex market too, no matter the fact that the human traders are following robots these days.
Besides flats and zigzags, there are various other types of corrective waves, like triangles (expanding or contracting), double and triple flats, double and triple combinations, and so on. The complexity of the theory comes from the fact that each corrective or impulsive wave, no matter its type, is part of a wave of a bigger degree.
Corrective waves are everywhere in the Forex market. Considering the fact that the market spends a lot of time in consolidation, it is no wonder corrective waves are everywhere. Imagine also the most common trading pattern: a contracting triangle. All the legs of a contracting triangle are corrective. As a matter of fact, all the legs of expanding triangles are corrective as well.
Having said that, Elliott made a clear distinction between corrective and impulsive waves. Corrective waves are called “threes”, because of the a-b-c structure, and impulsive waves are called five-wave structures. As a rule of thumb, all corrective waves are labeled with letters.
Not all corrective waves have strictly three waves, as the name suggests. Triangles, for examples, have five legs (a-b-c-d-e) and all these legs are corrective. Because they are corrective, or “threes” the whole triangle is called a corrective wave, or a “three”, even though, in reality, it has five waves.
According to Elliott, the market forms simple or complex corrections. Simple corrections are flats, zigzags, and triangles. Complex corrections are variations of this simple one, connected by one or two intervening waves. The intervening waves are also known as connecting waves or x-waves.
Flats are of multiple types and the type of a flat is given by the b-wave. Depending on the retracement level, the flat can be irregular, normal, common, have a strong or a weak b-wave, etc. Elliott found that every type of flat belongs to a specific structure. It is not possible, for example, to have a common flat that has the b-wave retracing less than 80% of the previous wave as. This is just to give an example about the limitations Elliott Waves theory imposes.
Zigzags are powerful patterns. It is said that zigzags are even more powerful than impulsive move, and there is a reason for that: a zigzag has two impulsive waves of a lower degree. The structure of a zigzag is the same as the structure of a flat: a-b-c. If, in a flat pattern, only the c-wave is impulsive and waves a and b corrective, things are different in a zigzag.
Both waves a and c in a zigzag are impulsive waves. This makes the zigzag a powerful pattern. Moreover, Elliott found that the market can form double and triple zigzags too. Respecting the same rules for the waves a and c, a triple zigzag has no less than six impulsive waves of a lower degree.
Because zigzags have little or no retracement levels for the b-waves, the triple zigzag is the most powerful trending pattern of them all. If you end up on the wrong side of the market when a triple zigzag forms, you have no chances to get out in time.
The forex market is a tricky one for multiple reasons. One of the reason is that it is heavily influenced by algorithmic trading. This is trading done by super-computers that buy or sell thousands of trades per second. These robots or machines are instructed to buy or sell when an economic news is released, based on how the actual data is when compared with the forecasted one.
The good part is that even these machines or robots are programmed by humans, so the human element is still there. It makes Elliott Waves working on the Forex market too, no matter the fact that the human traders are following robots these days.
Besides flats and zigzags, there are various other types of corrective waves, like triangles (expanding or contracting), double and triple flats, double and triple combinations, and so on. The complexity of the theory comes from the fact that each corrective or impulsive wave, no matter its type, is part of a wave of a bigger degree.
Last edited by a moderator:
