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Basics of Elliott Wave

Rules for Flat Correction - ABC Wave Correction

Next, we will learn what are the various rules and guidelines to identify Flat Correction?

 

Flat correction:

In flat correction, Wave A and Wave B will have an internal structure of 3 waves. Wave C will have an internal structure of 5 waves.

 

Rules for Flat correction 

 

Rule 1: Wave A should be a 3 wave structure. 

Rule 2: Wave B should be greater than 61.8%of Wave A. 

Rule 3: Wave C is greater than 38.2% of Wave A

Rule 4: Rule of alteration: it states that “adjacent or alternate waves of the same degree should be different and non-matching in as many ways as possible”. In flat correction Wave A and Wave B will alternate with respect to following:

 

Price: Alteration will not be seen in price as the Waves A and B are similar in price.

 

Time: If wave A is “n” units of time then: 

 

1. Wave B will be less than or equal to 61.8% of “n” OR
2. Wave B will be greater than or equal to 161.8% of “n” 

 

Subdivision: The number of subdivisions will show alteration in Wave A and Wave B

 

Pattern: The type of pattern will show alteration in Wave A and wave B. Wave A is an impulse and wave B is a correction. 

 

 

The image above shows the Flat pattern formation in Bajaj Finance on a daily time frame.

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Here we can see the pattern adhering to all the rules of  the Flat pattern.

  • Rule 1: Wave A is a 3 wave structure 
  • Rule 2: Wave B is greater than 61.8% of Wave A
  • Rule 3: Wave C is greater than 38.2% of Wave A
  • Rule 4: Wave A and Wave B are obeying the rule of alteration (price, time and pattern alteration)

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Rejo Panicker

This document is curated by Mr Rejo Panicker. He is a passionate student of the market since 2017, pursuing a full-time trading career. He has a keen interest and understanding of the Elliott Wave Theory. Through his learning and experience he aims to create newer highs in the markets and aims to break Mr Dan Zanger's record.