ELLIOTT WAVE THEORY - THE REVISED RULES

Rule of Law The following are the revised Elliott Wave Theory rules. They have never been published, but I have encountered them frequently enough in my own research to adapt them.

The "Original Elliott Wave Rules" were publicized in the "Elliott Wave Principle: Key To Market Behavior" book by A. J. Frost and Robert Prechter about 43 years ago.

In real trading situations, Elliotticians are best advised to refer to the original rules first and apply the new ones only when there is no better option.

THE ORIGINAL ELLIOTT WAVE RULES

THE NEW ELLIOTT WAVE RULES

[MOTIVE WAVES]

IMPULSE WAVES

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DIAGONALS

I. In a contracting diagonal, wave 1 should be the longest of waves 1 through 5.

II. In an expanding diagonal, wave 1 should be shorter than wave 3 and wave 3 should be shorter than wave 5.

III. In a leading diagonal, waves 1, 3, and 5 may either be ALL motive waves or ALL zigzags / combinations.

IV. Wave 2 of a diagonal cannot be a flat correction.

V. Wave 4 of a diagonal cannot be a triangle or a flat.

VI. No truncation is allowed in an expanding diagonal.

I. In a contracting diagonal, either wave 1 or wave 3 should be the longest. (*)

II. In an expanding diagonal, wave 3 should never be the shortest of waves 1 through 5.

III. In a leading diagonal, waves 1, 3, and 5 may be a motive wave or a zigzag / combination.

IV. Wave 2 of a diagonal can be a flat correction.

V. Wave 4 of a diagonal can be a triangle or a flat.

VI. Truncations in expanding diagonals may rarely happen.

[CORRECTIVE WAVES]

ZIGZAGS

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FLATS

I. Wave B of a flat cannot be a triangle.

II. Wave B of a flat should retrace at least 90% of wave A.

I. Wave B of a flat can be a triangle.

II. Wave B of a flat should retrace at least 80% of wave A. (**)

TRIANGLES

I. Wave A or wave B of a triangle cannot be a flat correction.

II. In an expanding triangle, wave A should be shorter than wave B.

I. Wave A or wave B of a triangle can be a flat correction.

II. In an expanding triangle, either wave A or wave B should be the shortest.

WXY / WXYZ COMBINATIONS

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(*) - On a linear vs a logarithmic scale, the height of the same waves may differ. It may happen that wave 1 of a contracting diagonal is longer than wave 3 on a linear scale, but shorter on a log scale. As a result, the original rule may be confusing and quite often incorrect.

(**) - When wave B of a flat correction is a contracting triangle, it's acceptable to use wave A of the triangle, as opposed to the end of the correction (ie. wave E), to measure the 80% retracement.