EWA Wave End

In this thread I want to share some of my observations of Elliott Wave Analysis (EWA), in particular endings of waves.

On the provided picture I use such labels of the points to not confuse them with labels of the EWA waves.

When red wave K-L crosses starting point of green wave J-K, in my current opinion it means that wave J-K has for sure ended.
But considering previous price movement, wave J-K can not end alone, unless it was wave B of an irregular correction or triangle.
Assuming that wave J-K is part of some motive wave of larger degree, wave J-K can not end alone, with it has ended that motive wave of larger degree that consisted of some amount (maybe even all) of the purple waves.

So crossing of the starting point of wave J-K by wave K-L signifies ending of a motive wave of larger degree.
In that case, crossing of point M by blue wave that started at point N means that red wave M-N has for sure ended. Since in provided example wave M-N can not end alone (unless wave L-M was a truncated wave 5 of a motive wave), a whole red structure (K-L, L-M, M-N) was A-B-C correction, or J-K-L-M-N was a triangle A-B-C-D-E.

Thus blue wave that started at point N can be:

1. - Wave B (or part of wave B).
2. - Wave X (or part of wave X) if complex correction is developing.
3. - Wave 1 (or part of wave 1) of a motive wave of larger degree.

You are welcome to share your opinion on these observations, especially with examples of detailed trading plans

Here are drawings of impulse wave with three (some with four) degrees deep subwaves, with and without wave markings. These pictures may help with studying EWA and creation of trading plans.

Your analysis is very good for a kid that is learning the alphabet lol

Elliot Wave seems like the key to understanding markets, but I have absolutely no idea how to apply it.

Maybe it works best in hindsight?

Also, if you read the book by Prechter and Frost, there are exceptions to every EW 'rule' which makes applying it a complete nightmare.

For example, the basic thesis of EWP is that there are five waves up and three waves down.

But it turns out that one or more waves can be extended, thus giving in effect nine waves up with one extension. In fact, according to Prechter and Frost, it is possible for two motive waves to be extended and it's even possible for there to be extensions within extensions. So we're talking a lot more than five waves up.

As for corrections, the three basic waves down can have all manner of sub waves within them. Even worse still, there can be complex corrections involving X, Y and Z waves. So there can be any number of corrective waves down, not simply three.

EWP as Prechter and Frost present it is almost totally impossible to understand and apply consistently for trading purposes.

As I know, there are only two rules in EWA:

1. Wave 2 can not go beyond starting point of wave 1
2. In impulse (only in impulse, not in other possible motive waves) wave 4 can not go beyond ending point of wave 1

Everything else are not rules, just guidelines.

A lot of waves of different degrees may be seen on the same timeframe in the extension and in complex correction, as you can see it on the picture I provided above.

In my current opinion, EWA is not an entire trading system, but a good basis for creation of the trading system. EWA is something like analysis of kandlestick patterns or Point and Figure charting, but much more detailed and complex.

I think other methods of analysis should be used to supplement EWA, for example, indicators like fractals of Bill Williams and/or MACD with parameters 5,34,5. Analysis is a half of a trading system, the other half is a trading plan applied to result of that analysis.

There is an example of EWA application to forex, including trading plan, in the book of Robert Balan "Elliott Wave Principle Applied to the Foreign Exchange Markets".

Here I posted my recommendations for learning EWA.

There are a lot of data points that you could glean from waves in general. Try looking at this from a statistical point of view on when and to what degree the waves begin and end. That is as close to a holy grail that I could think of. I haven't been able to find much information on this so I've gathered my own data points and explored this further.

I'm forward testing a couple of swing trading strategies based on my understanding of the above, to supplement my scalping strategies.

I've attached a forward test (M15), and 2 backtests (M15 & H1) here.

This forum typically doesn't generate a lot of quality content, so I'd prefer to engage 1 to 1 with whoever is interested or has looked into this area - Specifically on analyzing the wave-like and fractal tendencies of price movements. Ping me if you're on to something or are keen to talk more on this topic.

I am keen to talk more about waves, fractals and any other topic related to trading, but only openly for everyone, in this or some other Forex Factory public thread.

In this archive 50 screenshots of 25 Conditions on EURUSD H1 and M5 (12 times smaller) timeframes from 02.03.2022 to 10.06.2022 (demo account). By Condition I mean a situation when on H1 chart the price crosses the first Fractal to the left from MACD divergence. The Fractal should be in opposite direction from the divergence (divergence at the bottom - the Fractal should be pointing up).
The Conditions on screenshots are somewhat similar to one of the Fractal Formations that Piramidych talked about in his posts:
As I remember, he was looking for such Formation only when wave of required degree was expected to end, so that this Formation would be Reversal Fractal Formation.

The Conditions on screenshots are based on the reasoning that I explained at the beginning of this thread and are formed by divergence of MACD(5, 34, 5) and fractals of Bill Williams. Any ideas how to use these Conditions to get profit?

Another example of a sign of possible ending of some larger degree wave - price have crossed beginning of the wave that caused MACD divergence.