Elliott Wave Quick Cheat Sheet
Updated
Elliott Wave Quick Cheat Sheet
Note that I post a quick guide for beginners. I was struggled as a beginner but thanks to my mentor. (I post a quick guide here as sometimes I need to peek as for my cheat sheet)
By now we all have learned patterns like Head and Shoulders, Wedge, Triangle, Double top, Double bottom, Pennant (literally a triangle or diagonal), bear/bull flag.
Until I discovered Elliott Wave, it answered why we have these patterns but there are 5 core patterns of EW: Impulse, Flat, Diagonal, Zigzag and Triangle. I think Elliott Wave patterns are more advanced because you can see the whole picture even 200 years old chart of SPX.
What is Elliott Wave Theory? Found by Ralph Nelson Elliott in the 1930s.
"is a form of technical analysis that finance traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology and price levels, such as highs and lows, by looking for patterns in prices." - Wikipedia
[When analyzing the market, we need to understand what direction of the market is going. This is what we called the TREND. In Elliott Wave, if you see a 5 wave move, you are looking at the market wants to go. And if you see a 3 wave move, you are looking at it wanting an correction. This is all about Elliott Wave. Just 3 and 5. If you can see 3 and 5, you already mastered Elliott Wave. I have seen many, many people count 3 waves as an impulse wave. Dead wrong.]
If the trend is impulsive, it must have 5 waves. We have impulsive patterns like impulse and diagonal.
The counter trend we have 3 waves patterns like flat, zigzag, and except triangle (5 waves) for a correction.
1) Impulse (53535)
Must have 5 waves. Wave 4 never touch wave 1. Invalid if wave 4 touch wave 1.
Inside 5 waves, subwave 1, 3, 5 MUST be an impulse wave; subwave 2 and 4 MUST be corrective.
If you can't see subwave 1, 3, 5 are impulse, chance is invalid.
1, 3, 5 tend to equal size. When an impulse wave has an extension, wave 3 is usually extended
When wave 3 extended, we will have a double RSI divergence to complete a wave 3.
If wave 3 is over extended, typically wave 5 is truncated.
Important note: wave 2 and 4 have usually different pattern. If wave 2 flat, wave 4 must be zigzag and vice versa. Wave 4 sometimes can be a triangle.
Diagonal must have 5 waves.
Can be 53535 or 33333 sub-waves. Hybrid
2 types: Leading and Ending
Leading Diagonal is the beginning of a trend (wave A or 1). Ending Diagonal is the end of a trend (wave C or 5).
2) Leading Diagonal (only wave A or 1)
It can be overlapped but not required.
Has 2 entries points (unspoken rules) right at wave 2 and 4.
Wave 3 cannot be shortest even if expanding diagonal.
3) Ending Diagonal (only wave C or 5)
Usually goes back to starting point. Then it would either direction.
Or the starting point can be wave 4 or wave B.
The reason I say it would either direction because it depends on where the main wave is. For example we have an extented wave 3. It can happen on wave 5 inside of wave 3. That's why it goes either direction.
Leading Diagonal is the beginning of a trend. Ending Diagonal is the end of a trend. Unspoken rule that if wave 1 is a leading diagonal, expect to have an over extended wave structure.
When the end of a trend, we expect to have a new 5 wave move for a trend reversal. If we see a new 3 wave move, we expect the correction continues. It's all 3 and 5 that matters.
Corrective patterns we have zigzag, flat and triangle.
4) Zigzag has 535 sub-waves. (wave 2, 4, and B)
It looks like impulsive but has only 3 waves.
Only label it as (ABC)
5) Flat has 335 subs-waves. (wave 2, 4, and B)
3 type: regular, running, expanding
Only label it as (ABC)
Regular: all size of ABC is equal
Running: size AC is equal but B is biggest.
Expanding: B is 1 or 1.382 max of size A. C is Fib 1.236, 1.618, 2.236 Fib extension of size AB.
For example of an expanding flat, sometimes we call it a double top pattern. Usually C wave can extend to 1.618.
6) Triangle has 33333 sub-waves. (only wave 4 or wave B)
Label is as (ABCDE)
When you see it, prepare for a reversal or short term reversal.
7) Combination (aka complex pattern) (wave 333)
Only label it as (WXY)
It's a combination of zigzag or flat or triangle.
Fibonacci retracement:
When you spot a wave 1 and wave 2 is a pull back wave, look for entry for wave 3 at 0.50, 0.618 or 0.768. Stop loss at starting point at wave 1. In bull market, it only pull back to 0.382.The timing of wave 2 is 1/4 or 1/3 of wave 1.
Entry for wave C, the wave B is usually at 0.5, 0.618, 0.786, 1.0 or 1.236 (below starting point of wave A). The timing of wave B is 1/4 or 1/3 of wave A, or it can be equal or twice size of wave A.
Fibonacci extension:
Wave 1 and 3 and 5 tend to have equal size but when wave 3 extends, it usually extends to 1.618, 2.236 from wave 0,1,2.
Wave C can extend to 1, 1.236, 1.382, 1.618, 2.236 max. If extend beyond 2.236, you may not count wave correctly.
RSI:
Wave 3 and 5 will have bearish divergence. Double divergence if wave 3 is extended.
RSI above 40 in bull market. Below 40 in bearish market.
But wave 4 will below 70 and complete when have continuation hidden divergence between wave 2 and 4.
My observation is between wave 1 and 2, or wave A and B should not have a divergence.
My opinion on EWT and how I think to master it:
Elliot Wave is a double sword tool because not everybody counts waves correctly and it can hurt you financially. You MUST MUST take some mentorships until you understand why each pattern runs like the way it is in real life.
It's a forecast tool so it can be wrong. It hurts. Stop loss is a must. Or better don't trade until you can see a trend.
To master it, all you need is check if it's 3 waves or 5 waves. If wave 4 is overlapped wave 1, so the 5 wave move is invalid unless diagonal.
Must also master Fibonacci because I think Fibonacci and Elliott wave are husband and wife. Understand both so you can count correctly.
Master RSI.
If you are struggled to find a trend of your stock, you need to check the index like SPY or Nasdaq or sector, Bitcoin. Because the stock maybe a follower, it can look ugly. The leader has better details of trend.
A stock can go ahead before the trend of the index or can be a bit lag behind. If it goes before the trend of index, it will wait.
Understand bond yield and dollar index.
If you see waves overlap 2 3 times, maybe you should check if it's a diagonal or triangle. Big opportunity if you found one.
The sizes of wave 2 and 4 are smaller or bigger a bit but can't be too small or too big. Need to be obvious. Don't try to make it wave 2 or wave 4 because chance is a 3 wave move.
I know Elliott Wave is complicated so that's why we MUST memorize the rules and guidance.
I wish you the best on trading.
Note that I post a quick guide for beginners. I was struggled as a beginner but thanks to my mentor. (I post a quick guide here as sometimes I need to peek as for my cheat sheet)
By now we all have learned patterns like Head and Shoulders, Wedge, Triangle, Double top, Double bottom, Pennant (literally a triangle or diagonal), bear/bull flag.
Until I discovered Elliott Wave, it answered why we have these patterns but there are 5 core patterns of EW: Impulse, Flat, Diagonal, Zigzag and Triangle. I think Elliott Wave patterns are more advanced because you can see the whole picture even 200 years old chart of SPX.
What is Elliott Wave Theory? Found by Ralph Nelson Elliott in the 1930s.
"is a form of technical analysis that finance traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology and price levels, such as highs and lows, by looking for patterns in prices." - Wikipedia
[When analyzing the market, we need to understand what direction of the market is going. This is what we called the TREND. In Elliott Wave, if you see a 5 wave move, you are looking at the market wants to go. And if you see a 3 wave move, you are looking at it wanting an correction. This is all about Elliott Wave. Just 3 and 5. If you can see 3 and 5, you already mastered Elliott Wave. I have seen many, many people count 3 waves as an impulse wave. Dead wrong.]
If the trend is impulsive, it must have 5 waves. We have impulsive patterns like impulse and diagonal.
The counter trend we have 3 waves patterns like flat, zigzag, and except triangle (5 waves) for a correction.
1) Impulse (53535)
Must have 5 waves. Wave 4 never touch wave 1. Invalid if wave 4 touch wave 1.
Inside 5 waves, subwave 1, 3, 5 MUST be an impulse wave; subwave 2 and 4 MUST be corrective.
If you can't see subwave 1, 3, 5 are impulse, chance is invalid.
1, 3, 5 tend to equal size. When an impulse wave has an extension, wave 3 is usually extended
When wave 3 extended, we will have a double RSI divergence to complete a wave 3.
If wave 3 is over extended, typically wave 5 is truncated.
Important note: wave 2 and 4 have usually different pattern. If wave 2 flat, wave 4 must be zigzag and vice versa. Wave 4 sometimes can be a triangle.
Diagonal must have 5 waves.
Can be 53535 or 33333 sub-waves. Hybrid
2 types: Leading and Ending
Leading Diagonal is the beginning of a trend (wave A or 1). Ending Diagonal is the end of a trend (wave C or 5).
2) Leading Diagonal (only wave A or 1)
It can be overlapped but not required.
Has 2 entries points (unspoken rules) right at wave 2 and 4.
Wave 3 cannot be shortest even if expanding diagonal.
3) Ending Diagonal (only wave C or 5)
Usually goes back to starting point. Then it would either direction.
Or the starting point can be wave 4 or wave B.
The reason I say it would either direction because it depends on where the main wave is. For example we have an extented wave 3. It can happen on wave 5 inside of wave 3. That's why it goes either direction.
Leading Diagonal is the beginning of a trend. Ending Diagonal is the end of a trend. Unspoken rule that if wave 1 is a leading diagonal, expect to have an over extended wave structure.
When the end of a trend, we expect to have a new 5 wave move for a trend reversal. If we see a new 3 wave move, we expect the correction continues. It's all 3 and 5 that matters.
Corrective patterns we have zigzag, flat and triangle.
4) Zigzag has 535 sub-waves. (wave 2, 4, and B)
It looks like impulsive but has only 3 waves.
Only label it as (ABC)
5) Flat has 335 subs-waves. (wave 2, 4, and B)
3 type: regular, running, expanding
Only label it as (ABC)
Regular: all size of ABC is equal
Running: size AC is equal but B is biggest.
Expanding: B is 1 or 1.382 max of size A. C is Fib 1.236, 1.618, 2.236 Fib extension of size AB.
For example of an expanding flat, sometimes we call it a double top pattern. Usually C wave can extend to 1.618.
6) Triangle has 33333 sub-waves. (only wave 4 or wave B)
Label is as (ABCDE)
When you see it, prepare for a reversal or short term reversal.
7) Combination (aka complex pattern) (wave 333)
Only label it as (WXY)
It's a combination of zigzag or flat or triangle.
Fibonacci retracement:
When you spot a wave 1 and wave 2 is a pull back wave, look for entry for wave 3 at 0.50, 0.618 or 0.768. Stop loss at starting point at wave 1. In bull market, it only pull back to 0.382.The timing of wave 2 is 1/4 or 1/3 of wave 1.
Entry for wave C, the wave B is usually at 0.5, 0.618, 0.786, 1.0 or 1.236 (below starting point of wave A). The timing of wave B is 1/4 or 1/3 of wave A, or it can be equal or twice size of wave A.
Fibonacci extension:
Wave 1 and 3 and 5 tend to have equal size but when wave 3 extends, it usually extends to 1.618, 2.236 from wave 0,1,2.
Wave C can extend to 1, 1.236, 1.382, 1.618, 2.236 max. If extend beyond 2.236, you may not count wave correctly.
RSI:
Wave 3 and 5 will have bearish divergence. Double divergence if wave 3 is extended.
RSI above 40 in bull market. Below 40 in bearish market.
But wave 4 will below 70 and complete when have continuation hidden divergence between wave 2 and 4.
My observation is between wave 1 and 2, or wave A and B should not have a divergence.
My opinion on EWT and how I think to master it:
Elliot Wave is a double sword tool because not everybody counts waves correctly and it can hurt you financially. You MUST MUST take some mentorships until you understand why each pattern runs like the way it is in real life.
It's a forecast tool so it can be wrong. It hurts. Stop loss is a must. Or better don't trade until you can see a trend.
To master it, all you need is check if it's 3 waves or 5 waves. If wave 4 is overlapped wave 1, so the 5 wave move is invalid unless diagonal.
Must also master Fibonacci because I think Fibonacci and Elliott wave are husband and wife. Understand both so you can count correctly.
Master RSI.
If you are struggled to find a trend of your stock, you need to check the index like SPY or Nasdaq or sector, Bitcoin. Because the stock maybe a follower, it can look ugly. The leader has better details of trend.
A stock can go ahead before the trend of the index or can be a bit lag behind. If it goes before the trend of index, it will wait.
Understand bond yield and dollar index.
If you see waves overlap 2 3 times, maybe you should check if it's a diagonal or triangle. Big opportunity if you found one.
The sizes of wave 2 and 4 are smaller or bigger a bit but can't be too small or too big. Need to be obvious. Don't try to make it wave 2 or wave 4 because chance is a 3 wave move.
I know Elliott Wave is complicated so that's why we MUST memorize the rules and guidance.
I wish you the best on trading.
Note
Error on RSI:But wave 4 will below 70 and complete when have continuation hidden divergence between wave 2 and 4.
Fixed:
But wave 4 will be close to 40 and will have continuation hidden divergence between wave 2 and 4, in bull market.
In bear market, wave 4 likely not break RSI 70 and have continuation hidden divergence between wave 2 and 4.
Note
Here is the pdf file is anyone wants to print. drive.google.com/file/d/1xp60Dk9Tvg2e4dK5ysy-hgzaK7CShF8-/view?usp=sharingNote
Comment: Kennedy channels:[\b]Elliott Wave is a powerful tool; however, we also need indictors like Fibonacci, RSI and lastly Kenny channels to get more accuracy. How to use it: use wave 0,2 for lower channel and pull it up to wave 2 for upper channel.
Note
To find wave 4 in diagonal, in my observation, it can hit the median of the channel.To find wave 5, use starting point 0 and 4 and drag to wave 1.
Note
Add some update:drive.google.com/file/d/1r-I0uKhxTJhphdClUXYNurvPj4lIVRHe/view?usp=sharing
Note
Extra:[\b]RSI Channel:[\b]
requires divergence and every time it hits the ceiling we need to be caution that could be short term top or the top.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.