How to trade corrective waves — identifying the A, B, and C waves and positioning for the C wave move.
Description
Corrective waves (zigzags, flats, triangles) offer trading opportunities, particularly in the C wave. The key is identifying the corrective pattern early enough to position for the C wave, which moves in the same direction as the A wave.
Key Points
- A wave: often looks like a simple 3-wave correction in the prior trend — early sign of a corrective phase
- B wave: counter-trend rally (in a downward correction) or pullback — offers entry for C wave trade
- C wave: moves in the same direction as A wave; subdivides into 5 waves; the primary trading target
- Zigzag C wave target: 0.618×, 1.0×, or 1.618× the A wave from the B wave end
- Flat C wave target: 1.0×, 1.236×, or 1.618× the A wave from the B wave end
- Stop-loss for C wave trade: beyond the B wave extreme
