Each wave (1–5 and A–E) has a characteristic personality rooted in crowd psychology. Most applicable at Primary degree and above.
Description
Each wave in the Elliott Wave model carries a distinct personality driven by the collective psychology of market participants. These personalities repeat consistently across history. The guideline is most pronounced at Primary degree and above, but can be observed at lower degrees as well.
Wave Personality
Wave 1
- Most market participants still believe the prior downtrend is intact
- Seen as a temporary bounce; most investors are positioned to sell rallies
Wave 2
- Fear is high; participants worry about new lows being made
- Often retraces most of wave 1 in price; creates doubt and discourages new buyers
Wave 3
- The strongest and broadest wave; most likely to extend
- Accompanied by gap openings, high volume, Dow Theory confirmations, and expanding breadth
Wave 4
- Tends to be sideways and complex (flat, triangle, or combination)
- Market participants are frustrated; the wave is boring and unpredictable
Wave 5
- Driven by speculation rather than broad fundamentals
- Momentum divergences appear; breadth weakens; fewer stocks participate
Wave A
- Often mistaken for a simple correction in the prior bull trend
- The five-wave structure of A (when it subdivides into 5) reveals the coming bear market
Wave B
- The ‘sucker’s rally’ — lures investors back in; sentiment turns optimistic again
- Characterized by low volume, technical divergences, and a lack of breadth confirmation
Wave C
- The devastating decline; most investors finally recognize the bear market
- Five-wave structure; often confused with wave 3 in appearance and psychology
Key Points
- Wave personalities are most reliable at Primary degree (monthly charts) and above
- Lower-degree wave personalities are less consistent and harder to identify in real time
- Wave 3 is the strongest: gap openings, peak volume, Dow Theory buy signals all appear
- Wave 5: divergences in RSI/MACD appear as fewer stocks make new highs
- Wave B: often the most confusing wave — can take any corrective form and fool most participants
