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A Foolproof Guide to Trading Corrective Patterns

The 5 wave motive patterns are corrected and reversed by the 3 wave corrective patterns in Elliott wave theory.

In comparison to impulse waves, corrective waves have a lot more variation and are less easily recognizable.

It might be difficult to see corrective patterns until they have been finished.

However, as previously said, both trend and counter-trend can manifest themselves in a corrective pattern in today’s market.

These counter-trend moves are generally smaller and less aggressive than the impulsive waves, and they indicate a period of consolidation.

Waves that move in threes, but never in fives, are perhaps more accurately described as corrective waves.

Take a look at this simple 3-wave corrective pattern!

Types of Corrective Patterns

There are 21 corrective patterns (ABC Patterns), according to Elliott, ranging from basic to complex.

However, we will only cover five different types of corrective patterns in this article.

  1. Zigzag (5-3-5)
  2. Flat (3-3-5)
  3. Triangle (3-3-3-3-3)
  4. Double Three
  5. Triple Three

1. Zigzag Corrective Pattern

Zigzag Correction

Rules

  • Three waves make up zigzags (A, B and C).
  • Wave A must be a leading diagonal or impulse.
  • Wave C must be either an impulse or ending diagonal wave.
  • Each zigzag, only one diagonal (A or C) is permitted, i.e. it should have at least one impulse (A or C).
  • Any corrective pattern can be used as Wave B. (zigzag, flat, triangle, complex combination).
  • Wave B must not exceed a 100% retracement of Wave A.
  • Zigzag is a 5-3-5 structure.

Relationship with Fibonacci Numbers

• Wave B is equal to 50%, 61.8 percent, 76.4 percent, or 85.4 percent of wave A.
• Wave C is equal to 61.8 percent, 100%, or 123.6 percent of wave A.
• Wave C can be the third wave of a five-wave impulse if it equals 161.8 percent of wave A. 

One method to distinguish between correction and impulse is whether or not the third swing has extension.

2. Flat Corrective Patterns

A flat correction is a three-wave ABC corrective motion.

Flat varies from zigzag in the subdivision of wave A, despite the similar labelling.

Flat is a 3-3-5 structure, whereas Zigzag is a 5-3-5 structure.

Flats are divided into three categories: Regular, Irregular / Expanded, and Running Flats.

A. Regular Flat Pattern

Regular Flat Corrective Pattern

Rules

• Regular flat is a three-wave corrective pattern.

• Wave A and B are divided into three waves.

• Wave C is divided into 5 waves (impulse or diagonal)

• Wave A and B can be divided in any corrective three-wave form, such as zigzag, flat, double three, or triple three.

• Wave B comes to an end at the beginning of wave A.

• Wave C usually ends a little beyond the end of wave A.

• There must be momentum divergence in Wave C.

Relationship with Fibonacci Numbers

• Wave B equals 90% of wave A.

• Wave C is equal to 61.8 percent, 100%, or 123.6 percent of wave AB.

B. Expanded Flat Pattern

Expanded Flat Corrective Pattern

Rules

• Expanded flat is a three-wave corrective pattern.

• Wave A and B are divided into three waves.

• Wave C is divided into 5 waves (impulse or diagonal).

• Wave A and B can be divided in any corrective three-wave form, such as zigzag, flat, double three, or triple three.

• The 3-3-5 pattern’s Wave B ends above the beginning level of Wave A.

• The end of Wave C is significantly higher than the end of Wave A.

• There must be momentum divergence in Wave C.

Relationship with Fibonacci Numbers

• Wave B is equivalent to 123.6 percent of wave A.
• Wave C is equal to 123.6 percent of wave AB and 161.8 percent of wave AB.

C. Running Flat Pattern

Running Flat Corrective Pattern

Rules

• Running flat is a three-wave corrective movement.

• Wave A and B are divided into three waves.

• Wave C is divided into 5 waves (impulse or diagonal).

• Wave A and B can be divided in any corrective three-wave form, such as zigzag, flat, double three, or triple three.

• In an expanded flat, Wave B of the 3-3-5 pattern ends significantly beyond the beginning level of Wave A.

• Wave C does not complete its journey, stopping short of the level where wave A terminated.

• There must be momentum divergence in Wave C.

Relationship with Fibonacci Numbers

• Wave B is equivalent to 123.6 percent of wave A.

• Wave C is 61.8 percent to 100% of wave AB.

3. Triangle Corrective Patterns

A triangle is a sideways movement characterized by low volume and low volatility.

Triangles contain five swings, each of which is split into three waves, resulting in a 3-3-3-3-3 structure.

In Elliott Wave Theory, there are four sorts of triangles: ascending, descending, contracting, and expanding.

Triangle Corrective Patterns

Rules

• Triangle can be labelled with the letters ABCDE.

• Triangle corrective pattern usually occurs during wave B or wave 4.

• This corrective pattern can be separated into three sections (3-3-3-3-3).

• ABCDE can be divided into ABC, WXY, or Flat sub-divisions.

Triangle Corrective Patterns

4. Double Three Corrective Pattern

A sideways combination of two corrective patterns is known as a double three.

We get a double three when two of these corrective patterns are joined together. 

Double Three Corrective Pattern

Rules

• WXY stands for a combination of two corrective structures.

• The subdivision of waves W and Y might be zigzag, flat, double three of lesser degrees, or triple three of smaller degrees.

• Any corrective structure can be Wave X.

• WXY is a corrective structure with seven swings.

Relationship with Fibonacci Numbers

• Wave X equals 50% of wave W, 61.8 percent of wave W, 76.4 percent of wave W, or 85.4 percent of wave W.

• Wave Y is equal to 61.8 percent, 100%, or 123.6 percent of wave W.

• Wave Y is not capable of passing 161.8 percent of wave W.

5. Triple Three Corrective Pattern

A triple three is a sideways correction with three corrective patterns.

Triple Three Corrective Pattern

Rules

• WXYXZ stands for a combination of three corrective structures.

• Subdivisions for waves W, Y, and Z might be zigzag, flat, double three of smaller degrees, or triple three of smaller degrees.

• Any corrective structure can be Wave X.

• WXYZ is a corrective structure with 11 swings.

Relationship with Fibonacci Numbers

• Wave X equals 50% of wave W, 61.8 percent of wave W, 76.4 percent of wave W, or 85.4 percent of wave W.

• Wave Z is equal to 61.8 percent, 100%, or 123.6 percent of wave W.

• Wave Y must not exceed 161.8 percent of wave W to avoid becoming an impulsive wave 3.

References :

  1. https://elliottwave-forecast.com/elliott-wave-theory/
  2. https://elitecurrensea.com/education/elliott-wave-patterns-fibonacci-relationships-core-reference-guide/