Trading Chaos Part 5 | Corrections

Hello, everyone!
Last time we considered the Elliott waves 1-2-3-4-5 cycle. Today we are going to talk about correction types. Corrections contains of 3 waves A-B-C. Bill Williams recommends to trade only Simple Zigzag corrections, but we also should be able to distinguish other types of corrections. Let's go!

Simple Zigzag Correction

If you find that the corrective Wave A consists of 5 waves there is a high probability that current correction type is simple zigzag. If you decided to trade this correction, you should wait the Wave B end and execute the short trade. How to spot it's end? Find the target zone, usually it is between 50% and 62%, one of the three bars on the top should be the squat bar. Also you should find the fractal on the top.

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Flat and Wrong Corrections
If you find that the corrective Wave A consists of 3 waves, there is a high probability that this is flat or wrong correction. Distinctive features of these corrections are the top of Wave B, which is located at the level of Wave 5 top(flat) or above(wrong).

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Triangle Corrections
Triangle corrections consists of 5 waves A-B-C-D-E. We can see them in Wave 4 and Wave B. In the first case this triangle have the breakout in the direction of Wave 3, in the second case in the direction of Wave A.
Next time we will consider the advanced techniques of waves end definition.
DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions at the real market.