ELLIOTT WAVE THEORY - THE REVISED RULES

Rule of Law The following are some of the revised Elliott Wave Theory rules I have discovered. 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.

THE ORIGINAL ELLIOTT WAVE RULES

THE NEW ELLIOTT WAVE RULES

[MOTIVE WAVES]

IMPULSE WAVES

I. Wave 3 cannot be a diagonal.

I. Wave 3 can be a diagonal.

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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- no change -

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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- no change -

(*) - 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.