Hello, let’s take a closer look. Introduction to Elliott Wave Principle The wave theory was founded by R.N. Elliott in 1934 when he was 63 years old. The Elliott Wave Theory is one of the most commonly used trend analysis tools. Group psychology is an important basis for this theory, and it is difficult for a thin trading market to play its role. 1. Characteristics (1) This theory consists of three aspects: wave form, ratio, and time, and the importance of the three aspects decreases in order; (2) This theory is applied to the average stock price in the stock market, and is not equally effective in individual stock markets; (3) This theory is applied to widely participated commodity futures markets; (4) This theory is based on Dow Theory and traditional chart analysis. 2. Basic points (1) The futures price or stock price index will rise and fall alternately. The scale of trends ranges from ultra-long periods of 200 years to minute scales of several hours. (2) It is a wave from the peak to the trough or from the trough to the peak. All waves can be divided into two types: pushing (advancing) waves and corrective waves. They are the two most basic forms of price fluctuations: ① Impulsive wave - a wave that is consistent with the general trend, and can be further divided into five small waves, represented by 1, 2, 3, 4, and 5. Among them, waves 1, 3, and 5 are in the same direction of advancement and are lower-level impulse waves; waves 2 and 4 are in the opposite direction of advancement and are lower-level adjustment waves. ② Adjustment wave - the sub-waves in this stage are represented by the letters A, B, and C. (3) After the eight waves (five up and three down) are completed, one cycle is completed and another eight-wave cycle will enter. (4) The length of time will not change the shape of the wave. The wave can be lengthened or narrowed, but the basic shape remains unchanged. (5) The mathematical basis of wave theory is singular numbers (Fibonacci numbers). The strange numbers are the exponential series 1, 1, 2, 3, 5, 8, 13, 21...etc., and their general formula is: An=An-1+An-2 (see the column of Fibonacci's magic numbers for details). (6) An impulse wave is followed by an adjustment wave, and the adjustment ratio is often 0.382 or 0.618 times. The primary goal of an impulsive wave is 3.236 times the length of the first wave from the starting point of the first wave, and the ultimate goal is 3.236 times the length of the first wave from the end of the first wave; the primary goal of a corrective wave is A The ultimate goal is 1.618 times the length of wave A from the starting point of wave A. The ultimate goal is 1.618 times the length of wave A from the end of wave A. Detailed description of three and eight waves (1) The first wave is the beginning of the cycle and is part of creating a bottom form. The increase is usually the shortest among the five waves. At this time, the buyer's power is not strong, and the market continues to have selling pressure. (2) The retracement range of the second wave is often very deep, almost eating up the gains of the first wave. People mistakenly believe that the bear market is not over yet. When this wave is near the bottom, the market is reluctant to sell, the selling pressure gradually fades, and the trading volume gradually decreases, which is the end. Wave 2 can stop above the bottom of wave 1, often forming chart patterns such as triple bottom, double bottom, and inverted head and shoulders bottom. The retracement of wave 2 is always less than 100% of the amplitude of wave 1. (3) Wave 3 This wave tends to have the largest rise and longest duration, and is never the shortest among the 5-wave structure. At this time, investor confidence is restored, trading volume increases significantly, and breakthrough signals often appear. The movement of wave 3 will always exceed the end point of wave 1. (4) The 4th wave is a corrective wave with a more complex shape and a different structure from the 2nd wave. It often shows an inclined triangle trend, but its bottom will not be lower than the top of the first wave. This is one of the central tenets of the Elliott Wave Theory. Wave 4 will play a significant supporting role in the future bear market. Usually this round of bear market will not fall below the fourth wave formed in the previous bull market, which is one level below it, and can be used to measure the farthest target of price decline. But there are exceptions. Wave 4 in the stock market cannot overlap with wave 1. This is an iron rule; but it is not so strict in the futures market. (5) The 5th wave. In the stock market, the rise is usually smaller than the 3rd wave, and failure often occurs; in the futures market, the 5th wave is often the longest, and there may be an extension wave. In Wave 5, many confirmatory indicators, such as OBV, etc., begin to lag behind price changes. (6) Wave A is only a temporary retracement phenomenon. In fact, there are warning signals in the fifth wave. Most people think that the rising market has not yet reversed, and they only realize that it is coming when wave A appears with a 5-wave structure. (7) Wave B: The trading volume is not large. It is generally an escape line for old bulls and a second opportunity to establish new short positions. Because it is an upward trend, it can easily be mistaken for another upward trend and become a bull trap, in which many people are trapped. This wave may test the old high and form a double top, or even cross the old high before going down. (8) C wave is a very destructive downward wave, with a strong decline, a large decline, a long duration, and a comprehensive decline. The emergence of wave C declares the true end of the upward trend. Wave C falls below the bottom of wave A, forming a sell signal. Connecting the bottoms of wave 4 and wave A in a straight line sometimes forms a head and shoulders pattern. The wave sequence of waves obeys the Fibonacci sequence. 4. Whether the wave structure should be divided into 5-wave structure or 3-wave structure depends on the direction of the wave at the previous level: (1) When the direction of movement is consistent with the direction of the wave at the previous level, it is subdivided into 5 waves. Structure; (2) When the direction of movement is opposite to the direction of the wave at the previous level, it is subdivided into a 3-wave structure. This is of decisive significance for the correct application of wave theory.

5. Characteristics of rising waves (1) The extension of the main wave in an upward trend is not uncommon: ① The extension of the first wave - the least common; ② The extension of the third wave - common in the stock market; ③ The extension of the fifth wave - futures Common in the market; ④ Unclear extension - a nine-wave structure with five main waves appears, characterized by the fact that the lengths of the five main waves are equal. ⑤ Among the three rising waves 1, 2, and 3, there can only be one extended wave, and the other two unextended waves are equal in time and amplitude. (2) Multiply wave 1 by 1.618 and add it to the bottom of wave 2 to get the minimum target of wave 3. (3) Multiply wave 1 by 3.236 and add it to the top and bottom of wave 1 respectively, which is roughly the maximum and minimum target of wave 5. (4) If waves 1 and 3 are approximately equal, then wave 5 is expected to be extended. The target value is the length from the bottom of wave 1 to the top of wave 3, multiplied by 1.618, and added to the bottom of wave 4. 6. Characteristics of Corrective Waves (1) Corrective waves will never appear in five waves, but in a three-wave structure. (2) There are four types of corrective waves: ① Zigzag (5-3-5 type), sub-waves appear in a 5-3-5 sequence. Including: single sawtooth, double sawtooth, triple sawtooth. Each of the double or triple saw teeth is separated by one or two inserted "triple waves". ② Platform shape (3-3-5 type), sub-waves appear in the 3-3-5 sequence. Including: ordinary platform shape, diffusion platform shape, and homeopathic platform shape. ③ Triangle (3-3-3-3-3 type), sub-waves appear in the 3-3-3-3-3 sequence. Triangles include: ascending triangle, descending triangle, symmetrical triangle and diffuse triangle. Often appears in wave 4 and always before the last wave; can also appear in wave B. ④ Combined type. Including: double three-wave structure, triple three-wave structure. In most cases, combined corrections are horizontal. (3) If it is a usual 5-3-5 zigzag adjustment, then wave C is often equal to wave A. (4) Multiply the length of wave A by 0.618 and subtract the product from the bottom point of A to estimate the length of wave C. (5) In the case of a 3-3-5 platform adjustment, wave B may reach or exceed the peak of wave A; at this time, the length of wave C is equal to 1.618 times the length of wave A. (6) In a symmetrical triangle adjustment, each subsequent wave is approximately equal to 0.618 times the previous wave.

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