Elliott Wave Cheat Sheet 2: Wave Labels

May 16, 2009: 12:26 PM CST

Here is the second installment in my “Elliott Wave Cheat Sheet” mini-series.  This post will discuss proper fractal wave labeling within a developing Wave Structure on all timeframes.

First, we understand that the principle is fractal, meaning a complete five-wave impulse up might just simply be part of Wave 1 or Wave 3 (or Wave 5) of a larger complete wave structure, which itself might be part of an even larger wave structure.

This image of the Sierpinski Triangle should give a visual image of how to visualize Elliott Waves as smaller and larger fractals making up a full picture:

This image from Flickr (via Meister Schlauch) shows how the complete, singular triangle is actually comprised of four identical triangles (look very closely – three filled in triangles are pointing up while a clear/hollow triangle is pointing down).  And if you look at one of the filled triangles, you’ll see the exact same repetition, just on a smaller scale.  And if you look inside one of the filled triangles of that fractal, you see the exact same pattern that comprises the whole, singular triangle one degree higher.

This is how to understand Elliott Wave Fractal ‘waves within waves.’

Refer back to my original “Cheat Sheet” to see a full Elliott Wave structure and the mini-waves that build up the larger waves.

Here is how to label most waves you’ll encounter if you’re not a deep-level Elliottician:

Most likely, you won’t go above the Primary Trend or below the Minute trend on a singular chart, so this simple guide should be sufficient.

The largest wave would be circled, one degree lower would be placed in parenthesis, one degree lower would be a normal number (or letter), and then one degree below that (usually intraday) would use the Roman Numerals.

It goes without saying that, while this is the proper and accepted guideline, it’s common to see various counts depending on the analyst, but Elliott purists would consistently use this methodology.

This way, if you’re trying to read an Elliott Wave forecast, you’ll know the logic behind why the analyst used the labeling system he or she chose.

Here is an example of proper fractal wave structure labeling on the S&P 500:


(Click for larger image – for educational purposes only – not a market forecast)

As mentioned earlier, the 3rd wave will subdivide into its own 5-wave structure.  However, each wave of the 3rd wave subdivides into its own 5-wave affair.  I’m only labeling the 3rd wave of each respective fractal down to four degrees of a fractal count to show you how waves subdivide within waves, and to show how to label (or interpret) different degrees properly.

Play with it until you understand the concept.  If anything, this will give you a leg-up on others when you start looking at all those numbers and letters on your next Elliott Wave chart!

Additionally, via special agreement, you may view 10 Free Lessons on the Elliott Wave Principle as taught by Robert Prechter by joining Club Elliott Wave International.

Keep checking back for more quick Elliott cheat sheets.

Corey Rosenbloom, CMT

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

11 Comments

11 Responses to “Elliott Wave Cheat Sheet 2: Wave Labels”

  1. j0sh1ngU Says:

    great post. now when you use EW and are putting out ABC, whats the wave within those waves. Is it the 1, 2,3,4,5 or the 1,2,3 or an ABC pattern? thanks

  2. Corey Rosenbloom, CMT Says:

    Josh,

    Good question – and very pertinent to the present discussion of the larger picture.

    Generally, the fractals subdivide with the following labels:

    A would subdivide in a triangle, flat, and expanded flat as “abc”
    A would subdivide 1,2,3,4,5 in a Zig-Zag

    B would always subdivide abc
    C would always subdivide 1,2,3,4,5 except in the case of a triangle when it also becomes abc fractal.

    I hope this wasn't too confusing an explanation.

  3. j0sh1ngU Says:

    makes perfect sense thanks for the response

  4. chris Says:

    I've read from various sources (I think Adam Hewison supports this view) that the next 'super bull' market is going to be in the 2017-2018 timeframe. Does anyone know the basis of this predcition? Is it an extrapolation of an primary Elliot wave count into the future?

  5. samir ghadiali Says:

    Indian Market Hit Upper Circuit. Trading halted for the Day.

  6. samir ghadiali Says:

    Indian Market Hit Upper Circuit. Trading halted for the Day.Can I book my profit?
    Please guide.

  7. samir ghadiali Says:

    Indian Market Hit Upper Circuit. Trading halted for the Day.

  8. samir ghadiali Says:

    Indian Market Hit Upper Circuit. Trading halted for the Day.Can I book my profit?
    Please guide.

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