Elliott Wave Theory Basics (3)

Rules for Wave Count

Based on the market pattern, we can identify ' where we are' in term of wave count. Nevertheless, as the market pattern is relatively simplistic, there are several rules for valid counts:

1. Wave 2 should not break below the beginning of Wave 1;
2. Wave 3 should not be the shortest wave among Wave 1, 3 and 5;
3. Wave 4 should not overlap with Wave 1, except for wave 1, 5, a or c of a higher degree.
4. Rule of Alternation : Wave 2 and 4 should unfold in two different wave forms.