Elliott suggested that financial price trends derived from market psychology are the predominant use of investors. He found that fluctuations in crowd psychology always appear in the same repeating fractal patterns or “waves” in financial markets.
Elliott Corrective Waves
Overcoming corrections is a very difficult task. Most Elliott traders make money during the moving pattern and then lose it during the correction phase. The movement pattern consists of 5 waves. A correction pattern consists of three waves and is usually a triangle pattern. The correction pattern is divided into 2 different categories, which include simple correction and combined correction.
In simple correction there is only one pattern. This pattern is called zigzag modification. A zigzag correction pattern consists of a three-wave pattern. that wave B cannot correct more than 75% of wave A. Wave C creates a new low below wave A. Usually wave A of a zigzag correction has a 5-wave pattern. In the other 2 cases, the correction (flat and irregular) of wave A has a 3-wave pattern. So if you can identify five waves in wave A, you can expect the correction to end with a zigzag pattern.
COMBINATIONS (DOUBLE AND TRIPLE THREES)
The combined modification group consists of three parts: 1- Flat 2- Irregular 3- Triangle
In a Flat correction, the wavelengths are the same. After a 5-wave movement pattern, the market reaches wave A. Then the B wave that was formed reaches the High point of the previous A wave. Finally, the market reaches its previous low in wave C in wave A.