How do you label waves in Elliott Wave analysis?

 

 

 Labeling waves in Elliott Wave analysis is crucial for accurately identifying and interpreting market cycles. Here’s a comprehensive guide on how to label waves in Elliott Wave analysis, including the standard notations for different wave degrees:

 

Basic Principles

1. **Five-Wave Pattern:**
   - An impulse wave consists of five waves (1, 2, 3, 4, 5) moving in the direction of the main trend.
   - Waves 1, 3, and 5 are impulse waves, and Waves 2 and 4 are corrective waves.

2. **Three-Wave Pattern:**
   - A corrective wave consists of three waves (A, B, C) moving against the direction of the main trend.

 

Labeling Conventions

Elliott Wave theory uses different notations to distinguish between various degrees of waves. Here’s how waves are typically labeled for different degrees:

 

Impulse Waves (Motive Waves)

- **Grand Supercycle:** (I), (II), (III), (IV), (V)
- **Supercycle:** I, II, III, IV, V
- **Cycle:** ①, ②, ③, ④, ⑤
- **Primary:** 1, 2, 3, 4, 5
- **Intermediate:** (1), (2), (3), (4), (5)
- **Minor:** 1, 2, 3, 4, 5
- **Minute:** i, ii, iii, iv, v
- **Minuette:** (i), (ii), (iii), (iv), (v)
- **Subminuette:** i, ii, iii, iv, v

 

Corrective Waves

- **Grand Supercycle:** (A), (B), (C)
- **Supercycle:** A, B, C
- **Cycle:** (A), (B), (C)
- **Primary:** A, B, C
- **Intermediate:** (A), (B), (C)
- **Minor:** A, B, C
- **Minute:** a, b, c
- **Minuette:** (a), (b), (c)
- **Subminuette:** a, b, c

 

Steps to Label Waves

1. **Identify the Trend:**
   - Determine the direction of the main trend (uptrend or downtrend).
   - Identify where the current wave is within the larger trend cycle.

2. **Label the Impulse Waves:**
   - Start labeling the five-wave pattern in the direction of the trend.
   - Use the appropriate notation based on the wave degree you are analyzing (e.g., 1, 2, 3, 4, 5 for primary degree).

3. **Label the Corrective Waves:**
   - After the five-wave impulse pattern, identify and label the three-wave corrective pattern.
   - Use the appropriate notation for the corrective waves (e.g., A, B, C for primary degree).

4. **Subdivide Waves:**
   - Each wave can be further subdivided into smaller waves of a lower degree.
   - Label these subdivisions according to the wave degree hierarchy.

5. **Check Wave Rules:**
   - Ensure that the wave count adheres to the basic rules of Elliott Wave Theory (e.g., Wave 2 cannot retrace more than 100% of Wave 1, Wave 3 cannot be the shortest impulse wave, etc.).
 

Example of Labeling Waves

Primary Degree (Uptrend Example)

1. **Impulse Waves:**
   - 1: The initial upward wave.
   - 2: A downward corrective wave.
   - 3: A strong upward wave (usually the longest).
   - 4: Another downward corrective wave.
   - 5: The final upward wave completing the impulse sequence.

2. **Corrective Waves:**
   - A: The first wave down in the correction.
   - B: An upward wave that corrects Wave A.
   - C: The final downward wave, completing the correction.

 

Minute Degree within Primary Degree

Within each primary wave, you can label the smaller waves:

1. **Impulse Wave 1 (Minute Degree):**
   - i: The first sub-wave up.
   - ii: The first sub-wave down.
   - iii: The strong sub-wave up.
   - iv: The sub-wave down.
   - v: The final sub-wave up.

2. **Corrective Wave 2 (Minute Degree):**
   - a: The first sub-wave down.
   - b: The sub-wave up.
   - c: The final sub-wave down.


 

Summary

Labeling waves in Elliott Wave Theory involves identifying and marking the sequence of five impulse waves and three corrective waves using specific notations for different degrees. The process requires adherence to the rules and guidelines of Elliott Wave Theory, ensuring accurate analysis and prediction of market movements.

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