Rule Number #1: Wave 3 can NEVER be the shortest impulse wave.
Rule Number #2: Wave 2 can NEVER go beyond the start of Wave 1.
Rule Number #3: Wave 4 can NEVER cross in the same price area as Wave 1
Using the Elliot Wave Theory
Using your knowledge of Elliott Wave, you label this move up as Wave 1 and the retracement as Wave 2. To find a good entry point, head back to the School of Pipsology to find out which of the three cardinal rules and guidelines you could apply. Here’s what you found out: Rule Number #2: Wave 2 can NEVER go beyond the start of Wave 1. Waves 2 and 4 frequently bounce off Fibonacci retracement levels.
You begin counting the waves on a downtrend and notice that the ABC corrective waves move sideways. Hmm, is this a flat formation in the works? The price may begin a new impulse wave once Wave C ends. Trusting your Elliott Wave skills, you sell at the market price to catch a new impulse wave. You place your stop just a couple of pips above the start of Wave 4 just in case your wave count is wrong.
Trade Anytime, Anywhere with XM
Take your trading to the next level with a globally trusted forex and CFD broker. Enjoy competitive spreads, fast execution, and reliable customer support while trading securely.
With XM, you get access to powerful trading platforms, real-time charts, flexible account types, and advanced tools to help you analyze the markets and manage your trades efficiently. Start your journey today by opening a trading account for free and join millions of traders worldwide.
✅ Open an Account with XM
Our Editorial Desk – Focuses on forex trading, gold (XAU/USD), and commodities that move the markets. Our editorial desk blends human insight with AI-powered research to produce sharp, actionable content. We aim to help traders make informed decisions with unbiased market coverage.