Rules for Triangle Correction
Lastly, we will discuss what are the various rules and guidelines to identify Triangle Correction?
In triangle correction, all the waves from Wave A to Wave E have an internal structure of 3 waves.
Rules for triangle correction
Rule1: Wave B should be between 38.2% and 261.8% of Wave A and Wave B should not be equal to Wave A.
Rule 2: Out of Wave B to Wave E, 3 waves should retrace at least 50% of the previous wave
Rule 3: Wave A can be or will not be the largest wave.
Rule 4: False Breach of 0-B trend line indicated the possibility of a triangle in progress.
The image above shows the Triangle pattern formation in Tata Motors.
Here we can see the pattern adhering to all the rules of Flat pattern:
- Rule 1: Wave B is between 38.2% and 261.8% of Wave A and Wave B is not equal to Wave A.
- Rule 2: Out of Wave B to Wave E, 3 waves are retracing a minimum of 50% of the previous wave.
- Rule 3: Wave A is the largest wave.
- Rule 4: There is a False Breach of 0-B trend line indicating the possibility of a triangle in progress.
These are just the basics of Elliott wave theory. Elliott Wave theory is more subjective. Different chartists may have different views on the plotting the waves, but the larger trend will remain the same for everyone. As we study further, we can find more complex corrections, more types of zigzag, flat and Triangle corrections.