🎓 Advanced · Wave theory
Elliott Wave Theory
Price moves in five impulse waves + three corrective waves. Identify the current wave count; enter in the direction of impulses (waves 3 and 5), exit before corrections.
Setup
- Identify a complete 5-wave impulse: waves 1, 3, 5 in the trend direction; waves 2 and 4 are corrections
- Wave 3 is typically the longest and strongest — the "money wave"
- A corrective ABC (3-wave) pattern follows the completed impulse
- Wave counts must obey Elliott's rules: wave 2 does not retrace more than 100% of wave 1; wave 3 is never the shortest; wave 4 does not overlap wave 1
Entry
Wave 3 entry: after wave 2 completes at a Fib 50-61.8% retracement of wave 1, enter on the impulse resumption. Wave 5 entry: after wave 4 completes with a smaller correction than wave 2, enter for the final push.
Exit
Wave 3 exit: at 1.618 or 2.618 Fib extension of wave 1 (typical wave-3 targets). Wave 5 exit: at 0.618 or 1× extension of waves 1-3. Fully exit before the ABC correction begins.
Stop-loss
Below the start of the wave being traded — if broken, the count is invalidated.
When it works
- Clean impulsive structure — clearly visible 5-wave count
- Fibonacci ratios line up cleanly at wave completions
- Higher timeframe supports the count (daily count nested inside weekly count)
When it fails
- Ambiguous structure — multiple valid counts, all wrong
- Wave rules break (wave 3 shorter than 1 and 5) — count is invalid
- Choppy overlapping waves — market is corrective, not impulsive
General trading rules that apply
Regardless of the specific setup, these apply to every strategy on this site:
- Never risk more than 2% of your account on a single trade
- Place a hard stop-loss before entering — no exceptions
- Journal every trade: setup, reason, outcome, one lesson
- After two consecutive losses, stop for the session
- Backtest and paper-trade for a month before deploying real capital
Every strategy here is part of our in-house catalogue, written and calibrated for Indian markets. Past behavior does not guarantee future results. Charts run against 2-year Nifty data — actual results in your account will vary. Backtest, paper-trade, and size responsibly before risking real capital.