Elliott Wave Glossary

The most important Fibonacci extension level in Elliott Wave analysis. Wave 3 frequently extends to exactly 161.8% of Wave 1. This level serves as both a target for Wave 3 and a confirmation that an extension is underway.

The shallowest common Fibonacci retracement level. When a correction only reaches the 23.6% level, it indicates extreme strength in the underlying trend. Rarely seen as the sole retracement target for Wave 2 or Wave 4.

A key Fibonacci retracement level and the most common target for Wave 4 corrections. When Wave 4 retraces exactly 38.2% of Wave 3, it suggests a strong trend that is likely to produce a dynamic Wave 5.

The 'golden retracement' level and the most common target for Wave 2 corrections. Derived from the golden ratio (1/1.618 = 0.618). When price reaches this level, it is often the deepest retracement before the next impulse wave begins.

A guideline suggesting that if Wave 2 is a sharp correction, Wave 4 will likely be a sideways correction, and vice versa. This principle helps traders anticipate the type of correction to expect.

In Elliott Wave context, a bear market represents the corrective phase (waves A-B-C) that follows a completed five-wave advance. The entire decline is labeled as a three-wave structure at the larger degree.

A five-wave impulse advance at a large degree. In Elliott Wave terms, the motive phase of the cycle where prices trend upward in five distinct waves before a corrective phase begins.

A technique where parallel trendlines are drawn connecting the ends of waves to project potential reversal zones. A channel drawn from the end of Wave 2 through Wave 4 often projects the terminus of Wave 5.

A corrective pattern consisting of two or three simple corrective patterns joined by connecting waves labeled X. Examples include double zigzags (W-X-Y), double threes, and triple threes (W-X-Y-X-Z).

A five-wave sideways pattern (A-B-C-D-E) where each successive wave is shorter than the previous one, forming converging trendlines. It typically appears in Wave 4 or Wave B position.

A three-wave structure that moves against the trend of the next larger degree. Corrective waves are labeled A-B-C and include patterns like zigzags, flats, and triangles. They appear as Waves 2 and 4 within impulse sequences.

One of the nine degrees of wave patterns identified by Elliott. Cycle degree waves typically span one to several years and are labeled with Roman numerals (I, II, III, IV, V).

The hierarchical classification of wave patterns by their relative size. Elliott identified nine degrees from Grand Supercycle (largest) to Subminuette (smallest). Each wave of one degree subdivides into waves of the next smaller degree.

A motive pattern with overlapping waves that forms a wedge shape. Leading diagonals appear in Wave 1 or Wave A position; ending diagonals appear in Wave 5 or Wave C position. Both subdivide into five waves (3-3-3-3-3).

A complex corrective pattern consisting of two zigzag formations connected by a Wave X. Labeled W-X-Y, where both W and Y are zigzags. Typically produces a steeper correction than a single zigzag.

The theory developed by Ralph Nelson Elliott in the 1930s that financial markets move in recognizable patterns reflecting the natural rhythm of crowd psychology. Markets advance in five waves and correct in three waves at all degrees of trend.

A wedge-shaped pattern appearing in the Wave 5 or Wave C position. It consists of five waves where each sub-wave subdivides into three (3-3-3-3-3). Both trendlines converge, and Wave 4 overlaps Wave 1 territory. It signals exhaustion of the larger trend.

A corrective pattern where Wave B exceeds the start of Wave A, and Wave C extends well beyond the end of Wave A. The most common type of flat correction, often appearing in Wave 4 position. Structured as 3-3-5.

When one of the impulse waves (1, 3, or 5) subdivides into an elongated impulse with exaggerated subdivisions. Wave 3 extensions are most common in stock markets, while Wave 5 extensions are common in commodities. The extended wave is typically 161.8% or more of the next longest wave.

Price projections beyond 100% of a measured wave move. Common extension levels are 127.2%, 161.8%, 200%, and 261.8%. Used to project where Wave 3, Wave 5, or Wave C might terminate.

Price levels derived from the Fibonacci sequence where corrective waves are likely to find support or resistance. Key retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. Wave 2 commonly retraces 50%-61.8% of Wave 1.

A three-wave corrective pattern (A-B-C) where Wave A is three waves, Wave B retraces most or all of Wave A, and Wave C is five waves. Flats tend to be more sideways than zigzags. Three types exist: regular, expanded, and running.

The self-similar nature of Elliott Wave patterns — each wave contains smaller versions of the same five-wave and three-wave structures. A Wave 3 on a daily chart, for example, subdivides into a complete five-wave impulse on the 4-hour chart.

The ratio 1.618 (phi), derived from the Fibonacci sequence. It is the mathematical foundation of Elliott Wave relationships. Wave 3 often equals 1.618 times Wave 1, and Wave 2 commonly retraces 61.8% (the inverse of 1.618) of Wave 1.

The largest degree of wave pattern identified by Elliott, spanning several centuries. The current Grand Supercycle bull market is believed to have begun around 1784 in Western financial markets.

A five-wave motive pattern (1-2-3-4-5) that moves in the direction of the trend at the next larger degree. Impulse waves have three strict rules: Wave 2 never retraces 100% of Wave 1, Wave 3 is never the shortest impulse wave, and Wave 4 never enters Wave 1 price territory.

A wave degree typically lasting weeks to months. Labeled with parenthesized numbers (1), (2), (3), (4), (5) for motive waves and (A), (B), (C) for corrective waves.

The price level at which a wave count is proven wrong. For example, if a Wave 4 count is proposed, the invalidation level is the peak of Wave 1 — because Wave 4 cannot overlap Wave 1 in an impulse. Professional analysts always mark invalidation levels on their charts.

A wedge-shaped motive pattern appearing only in the Wave 1 or Wave A position. It consists of five overlapping waves (either 5-3-5-3-5 or 3-3-3-3-3). Leading diagonals signal the beginning of a new trend and are relatively rare.

A wave degree typically lasting days to weeks. Labeled with Arabic numerals (1, 2, 3, 4, 5) and letters (a, b, c) without any additional notation.

A wave degree typically lasting hours to days. Labeled with circled Roman numerals for motive waves and circled lowercase letters for corrective waves.

When price makes a new high (or low) but momentum indicators (RSI, MACD) do not confirm. In Elliott Wave analysis, divergence between Wave 3 and Wave 5 is extremely common and signals that Wave 5 is completing.

Any wave pattern that propels prices in the direction of the next larger degree trend. Motive waves always subdivide into five sub-waves. The two types of motive patterns are impulse waves and diagonal waves.

A wave degree typically lasting months to a few years. Labeled with circled numbers for motive waves and circled letters for corrective waves.

A flat corrective pattern where Wave B retraces approximately 90-100% of Wave A, and Wave C is approximately equal in length to Wave A. The rarest type of flat correction.

A rare flat correction where Wave B exceeds the start of Wave A (like an expanded flat), but Wave C fails to reach the end of Wave A. This indicates extreme strength in the direction of the larger trend.

A triangle where Wave B exceeds the start of Wave A. This is a strong continuation pattern that indicates the trend will resume with force after the triangle completes.

The smallest wave degree commonly tracked, typically lasting minutes to hours. Used primarily in intraday trading analysis.

A wave degree spanning multiple decades (typically 40-70 years). Labeled with parenthesized Roman numerals (I), (II), (III), (IV), (V).

A five-wave sideways corrective pattern labeled A-B-C-D-E. Triangles form converging (contracting), diverging (expanding), or running patterns. They appear exclusively in Wave 4 or Wave B position and always precede the final wave of the larger pattern.

The most complex corrective pattern, consisting of three simple corrections connected by two X waves: W-X-Y-X-Z. Each component (W, Y, Z) can be any corrective pattern except a triangle (only Z can be a triangle). Rare in practice.

When Wave 5 fails to exceed the end of Wave 3. Truncations occur after an extremely powerful Wave 3. The Wave 5 'truncates' — it subdivides into five waves but falls short of making a new high (or low). This signals exceptional weakness (or strength in a bear market).

The first impulse wave in a five-wave sequence. Wave 1 is often the hardest to identify in real-time because it emerges from the end of a prior correction. It subdivides into five smaller waves and establishes the new trend direction.

The first corrective wave in an impulse sequence. Wave 2 retraces a portion of Wave 1 but never retraces beyond its starting point. Common retracements are 50%-61.8% of Wave 1. Wave 2 corrections tend to be sharp (zigzags).

An absolute rule stating that Wave 2 can never retrace more than 100% of Wave 1. If price moves beyond the starting point of Wave 1, the wave count is invalidated. This is one of the three inviolable rules of Elliott Wave analysis.

Usually the longest and most powerful impulse wave. Wave 3 is never the shortest of waves 1, 3, and 5. It commonly extends to 161.8% of Wave 1 and often features the strongest momentum, highest volume, and widest price bars. This is where professional traders aim to capture the largest moves.

An absolute rule stating that Wave 3 can never be the shortest of the three impulse waves (1, 3, and 5). Note: Wave 3 does not need to be the longest — it simply cannot be the shortest. If it appears shorter than both waves 1 and 5, the count is wrong.

The second corrective wave within an impulse sequence. Wave 4 never overlaps with Wave 1 price territory (strict rule). It commonly retraces 38.2% of Wave 3. Wave 4 corrections tend to be sideways (flats and triangles), alternating with Wave 2.

An absolute rule stating that in an impulse wave, Wave 4 cannot enter the price territory of Wave 1. The low of Wave 4 must remain above the high of Wave 1 in a bull market (and vice versa in a bear market). The only exception is in diagonal patterns.

The final impulse wave in the motive sequence. Wave 5 completes the trend and is often equal in length to Wave 1 or reaches 61.8% of the net distance from Wave 1 through Wave 3. It typically shows momentum divergence and lower volume than Wave 3, signaling trend exhaustion.

The first wave of a corrective sequence (A-B-C). Wave A establishes the corrective trend direction. It can subdivide into either five waves (in a zigzag) or three waves (in a flat). Identifying Wave A correctly is crucial for anticipating the rest of the correction.

The second wave of a corrective sequence. Wave B moves against the corrective trend direction, often trapping traders who mistake it for a trend resumption. In expanded flats, Wave B exceeds the start of Wave A. Wave B always subdivides into three waves.

The final wave of a corrective sequence. Wave C always subdivides into five waves and often equals Wave A in length or extends to 161.8% of Wave A. Wave C completes the correction and typically represents the most dynamically powerful part of the corrective phase.

The labeling of price movements according to Elliott Wave patterns. A wave count identifies which wave the market is currently in and projects future price movements. Professional analysts maintain multiple wave counts ranked by probability.

The fifth and final wave of a triangle pattern. Wave E often falls short of the trendline drawn from waves A and C, creating a 'throw-under.' The completion of Wave E signals an imminent breakout in the direction of the larger trend.

A guideline stating that two of the three impulse waves (1, 3, 5) tend to be equal in price magnitude. When Wave 3 extends, waves 1 and 5 tend toward equality. Useful for projecting the length of Wave 5.

A connecting corrective wave that joins two simple corrections in a complex pattern. Wave X is typically a brief, shallow correction (often a zigzag). In W-X-Y patterns, Wave X connects the first correction (W) to the second (Y).

A sharp three-wave corrective pattern labeled A-B-C where Wave A and Wave C are impulse waves (five sub-waves each) and Wave B is a corrective wave (three sub-waves). Zigzags are structured as 5-3-5 and typically retrace 50%-61.8% of the prior impulse wave.