An important characteristic of the Eliot wave is its fractal structure. Fractal is a structure that can be subdivided into smaller parts, and each smaller part is very similar to its entire structure. Mathematicians call this property “self-similarity”;
• Eliot believes that the market fluctuates in a 5-3 wave pattern;
• The first 5 waves are called driving waves;
• Of the rising waves (1, 3, 5 waves), there is always a certain extended wave, and the third wave is generally considered to be an extended wave;
• The last 3 waves are called adjustment waves, usually expressed in letters;
• The 1st, 3rd and 5th waves are all composed of a smaller level of 5 wave propulsion waves, while the 2nd and 4th waves are composed of a smaller 3 wave retracement wave pattern;
• Adjusting the wave shape from simple to complex, up to 21 kinds, but they are only composed of three very easy to master forms;
• The three basic adjustment wave patterns are: zigzag, platform and triangle;
• The Eliot Wave Theory has three important rules:
Rule 1: The third wave is never the shortest
Rule 2: The second wave can never exceed the starting point of the first wave
Rule 3: The fourth wave will never enter the price range of the first wave
• If you observe enough of the graphics, you will see that the market is indeed in a wave motion;
• Since the market will never show the movement described in the textbooks, we need to do a lot of practice and analysis before we can master the Eliot theory to trade.
Remember, keep a diligent learning attitude and never give up the spirit!