On our previous example we saw that wave 2 contained additional waves a, b and c.
You must remember that theses waves can be a few days of movement caused by economic data or various events and not necessarily a change in trend.

Now let’s dive into the real market and see a few examples:


 
Like we mentioned before Elliot waves can be used on all different time scales!
The following example is a Gold chart showing monthly movement according to Elliot wave patterns. 
 


While it is might seem a little hard plotting the numbers on the charts, with a little practice you will see the wave patterns and will be able to plot the waves as simply as plotting support and resistance lines on any chart.

Basic Elliot Rules:

• According to the Elliot theory the market moves in waves
• The first 5 waves are called “motive waves” while the last 3 waves are called “corrective waves”
• Wave 4 cannot exceed wave 1
• Wave 3 and 5 are normally stronger waves than wave 1
• Wave 3 cannot be the shortest motive wave
• Wave 2 cannot exceed the start of wave 1

Dodjit’s comments:

• Elliot waves are a complex way of analyzing the markets. Any trader using Elliot waves should have some experience in the markets.
• Waves are often misinterpreted due to market fluctuation.
• Identifying waves are easier on larger times scales
• The wave pattern explained in this tutorial covers only the basic pattern, further patterns that are not explained in this tutorial derive from the basic pattern.
• Day trading or short term trading according to Elliot waves is far more complicated and is not explained in this tutorial.
  
  To find out more about Elliott waves feel free to visit elliottwave.com
  

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