The step-by-step process for applying Elliott Wave analysis to a price chart. Start from the largest degree, identify clear turning points, then label waves top-down.
Description
Counting Elliott Waves requires a systematic approach. Beginning at the highest degree visible on long-term charts, identify the dominant trend and major turning points, then progressively label sub-waves at lower degrees. Maintaining multiple alternative counts is essential until one count can be confirmed or eliminated.
Steps
- STEP 1: Start at the Cycle degree (~10 years). Examine the longest available price chart to identify prominent highs and lows.
- STEP 2: Identify the dominant trend direction (bull or bear). Determine whether the current move is part of a 5-wave impulse or a 3-wave correction.
- STEP 3: Label the five primary waves of the impulse (or three waves of the correction) at the largest degree.
- STEP 4: Drill down to sub-waves. Label each sub-wave, verifying that impulse subdivisions are 5-wave and corrective subdivisions are 3-wave structures.
- STEP 5: Verify all three impulse rules (no overlap of 1 and 4; wave 2 does not exceed wave 1 start; wave 3 is not the shortest). If rules are violated, revise the count.
- STEP 6: Maintain 2–3 alternative counts ranked by probability. Use Fibonacci ratios, volume, and channeling to refine.
Key Points
- Always start from the highest degree available — never begin counting from the smallest time frame
- Prioritize the count that best satisfies all rules and the most guidelines
- A count that requires many guideline violations is likely incorrect
- Never force a count — if the wave structure does not fit, look for an alternative
