Constructing Elliott wave counts with triangles and Fibonacci

Labels that can later be disproved

Elliott wave analysis is a labeling system that sorts price movement into impulse and corrective structures of nested degree so a chart count can be stated and later disproved. An impulse wave is a with-trend leg, conventionally numbered 1, 3, or 5, that itself subdivides into five smaller waves. A corrective wave is a countertrend unit, conventionally numbered 2, 4, a, b, or c, that typically subdivides into three smaller waves and may take several internal shapes.

The historical workflow below stays inside that construction grammar. TradersWeek editorial reading of the workflow is labelled as such and is not part of the construction rules themselves.

The five-three skeleton

A with-trend move is classified as five waves. After that impulse, a three-wave countertrend completes one full cycle of the next higher degree. Waves 1, 3, and 5 are impulse structures. Waves 2 and 4 are corrective structures that move against the preceding impulse.

Impulse waves of one degree subdivide into five smaller waves, and corrective waves of that degree subdivide into three. The same count can therefore be expanded or contracted by degree.

Impulse legs, extensions, and alternation

An extension is an impulse that stretches well beyond the length of its sibling impulses. That elongated form may appear in wave 1, 3, or 5. When waves 1 and 3 are similar in length, wave 5 is the more likely candidate to extend.

Waves 2 and 4 are expected to differ in complexity. The rule of alternation is that construction habit: those two corrections should not repeat the same internal shape. Wave 4 often returns near the price area of the fourth wave of one smaller degree.

The four corrective families

Corrective construction is grouped into four families: zigzag, flat, triangle, and a double or triple three joined by an X wave. A zigzag is built as five-three-five internal waves. A flat is built as three-three-five.

Where a triangle may sit

A triangle is a five-leg sideways construction, each leg itself a three-wave unit of smaller degree. It appears only in wave 4, wave b, or an X-wave slot. It takes one of four shapes: ascending, descending, contracting, or expanding. Those shapes are distinguished by how the boundary lines tilt.

Editorial test: a five-leg sideways pattern sitting anywhere else is a reason to reject the current labels, not a reason to widen the slot list.

The diagonal triangle

A diagonal triangle is a five-wave ending form whose internals are all threes and whose two boundary lines slope and converge. It occurs only as wave 5 or wave c. It is reserved for those ending slots.

Ratio checks on completed legs

Fibonacci retracement, in this workflow, is a ratio check anchored on completed legs. It asks whether later waves land near 0.618-family proportions rather than assuming any length is acceptable.

After the early terms, adjacent Fibonacci numbers converge on 0.618. Two of the three impulse waves tend toward equal time and size or else a 0.618 multiple. Wave 5 often finishes in the Fibonacci region of wave 1 measured from the end of wave 3. Wave c often measures 1.618 times wave a. Triangle legs are also related by that ratio.

Editorial use: apply the ratio check only after the legs exist. If later waves do not land near those 0.618-family proportions, the labels can be invalidated before any forecast is allowed.