A step-by-step decision process for identifying the type of corrective wave from a price chart. Use when a correction is in progress but the pattern is unclear.
Description
This flowchart provides a systematic approach to identifying corrective wave types when the pattern is not immediately obvious.
Steps
- STEP 1: Count the sub-waves of the corrective move. Does it have 3 waves (A-B-C) or 5 waves (A-B-C-D-E)?
- STEP 2: If 3 waves: examine wave A. Does wave A subdivide into 5 smaller waves or 3 smaller waves?
- STEP 3: Wave A = 5 sub-waves → zigzag family. Check wave B: does it retrace less than 100% of A? If yes → zigzag. Does it retrace more than 100% of A (W overlap)? → may be the start of a compound correction (double zigzag or combination).
- STEP 4: Wave A = 3 sub-waves → flat family. Check wave B: does B retrace ~90–100% of A → regular flat. Does B exceed A start → expanded or running flat (check where C ends).
- STEP 5: If 5 waves (A through E): confirm triangle. Are all sub-waves 3-wave structures? Do boundary lines converge (contracting) or diverge (expanding)?
Key Points
- The most important first step: count the sub-waves of wave A (5 = zigzag family; 3 = flat or triangle family)
- Corrective wave identification in real time is the most difficult aspect of Elliott Wave analysis
- Maintain alternative corrective counts — flat vs. combination is often unclear until late in the pattern
- Use Fibonacci ratio targets to narrow down the type: zigzag C extends to 61.8%–161.8% of A; flat C to ~100%–161.8% of A
