Intricacy (the number of sub-waves and monowaves present in a pattern), Time (time taken to form the wave, which Neely thinks a very important factor), In the NeoWave theory, the rule of equality states that “when adjacent or alternate waves of the same degree are compared, they should be distinctive and unique in as many ways as possible.” Unlike the theories offered by Williams and Prechter, which consider time and price coverage and the wave complexity, the NeoWave analyzes much more factors, in particular: I have already covered this rule in the educational series devoted to the Elliot Wave Principle interpreted by Prechter (see here). As you see, the fifth wave is almost 100% of the first wave, so the rule of equality works there. In the above chart, I compared waves (1) and (5), as the third wave is likely to be an extension. The rule may not work when a pattern contains a 1st wave extension or is a terminal impulse. That is the two unextended waves should tend toward equality in price and/or time, or relate by a Fibonacci ratio (usually 61.8%) under either parameter or both. The opposite rule of equality refers to the other two waves. Rule of EqualityĪccording to the Extension rule discussed above, one of the waves must be significantly longer than the two other waves among waves 1,2, and 3. Therefore, according to the exception of the extension rule, there is a remote possibility that a rare third-extension terminal impulse pattern is forming. The third wave is the longest, but it is a little less than 161.8% of wave (1). The chart displays a five-wave impulse pattern, whose waves are marked with numbers from (1) to (5). When the first wave in a pattern is the longest, it might be slightly shorter than 161.8% of the third wave, but the third one will not end higher than 61.8% beyond the end of the first one, there is still a remote chance of an impulse pattern variation. When the third wave is the longest, but less than 161.8% of the first, and the fifth segment is shorter than the third, there is a small chance that the market is forming an extremely rare third-extension terminal impulse pattern variation. If this rule is not observed, note two important but rare exceptions: Differently put, the presence (or absence) of an extension allows one to distinguish real impulse patterns from imitations that are corrections.Ī wave is an extension if it is the longest wave is a sequence, and it should be at least 161.8% of the next longest wave. Extension RuleĪn extension (the longest wave in a wave sequence), which I already described in the articles devoted to Williams ( here) and Prechter ( here), is an essential element of impulse price patterns. If at least one of the rules is not met, a potential impulsion is more likely to be a correction. If its length is from 38.2% to 100% (not including) of the fourth wave, the fifth wave is called failed. The fifth segment is almost always longer than the fourth wave and must be at least 38.2% of the fourth. The third segment (wave) should be longer than the second wave and can’t be the shortest among waves 1,3 and 5. The second segment (wave) is progressing in the opposite direction relative to the first, but it doesn’t reach the starting point of the first wave. Three of these segments must be unfolding in the same direction. I will cover these concepts in greater detail in the section devoted to the rules of overlapping. The terminal pattern is a wave pattern, where the projections of waves 2 and 4 overlap. A trending pattern is a pattern whose projections of waves 2 and 4 don’t overlap. Impulsive patterns are usually comprised of five individual segments that are labeled with numbers from 1 to 5 and meet the conditions of trending or terminal patterns. Remember, Impulsions are the patterns that obey the following rules: I have briefly covered impulsive patterns in the second part of the NeoWave series. I will also cover the principles of how wave patterns are composed of monowaves and conditional construction rules. This article, as well as a few next ones, will deal with the Elliott wave patterns, their variations, and essential construction rules. Rules of extension, equality, alternation, overlap rule. ![]() Basic information on Polywaves and Structure Labels. ![]() If you are not familiar with the NeoWave theory, I strongly recommend reading all the articles in the NeoWave series to learn about the most modern interpretation of the Elliott Wave theory, based on Glenn Neely’s book Mastering Elliott Wave, starting from the first one: ![]() In the previous article, I have finished covering the rules of retracement (relations of waves), which help you identify the positions of monowaves and complex wave formations in the Elliot wave patterns.
0 Comments
Leave a Reply. |