Novice Traders' Notebook  |  JUL 2002

Working Money: Recognizing Elliott Wave Patterns by Rudy Teseo

Working Money: Recognizing Elliott Wave Patterns by Rudy Teseo Part I discussed the basic wave patterns: impulse and corrective. Part II will describe the patterns that must be recognized in order to do a thorough job of Elliott wave (EW) analysis. The following examples by no means include all the patterns you will encounter in your Elliott wave analysis, but represent those that appear most often. You need to know not only to what price levels the market will rise, but also what patterns to expect in your bar (candle) chart. The two main Elliott waves are motive and corrective. The motive wave is a five-wave configuration with waves 1, 3, and 5 in the direction of the trend. In a bull market you will expect each wave to be higher than the preceding one. Think of these as higher highs. In a bear market these waves will be descending; think of them as lower lows. The corrective waves, 2 and 4, will move in the opposite direction to the major trend.

by Rudy Teseo