Can Wave 2 retrace 100% of Wave 1?
No. Wave 2 cannot retrace 100% or more of Wave 1 — this is the first absolute rule of Elliott Wave. If price breaks the swing-low that started Wave 1, the impulse never started and the count is invalidated. A 99% retracement is technically valid but rare in practice.
Full Explanation
The first absolute rule of Elliott Wave is that Wave 2 must retrace less than 100% of Wave 1. This rule is what defines an impulse — if the corrective Wave 2 fully reverses the gains of Wave 1, the move was never a Wave 1 to begin with. In practice, Wave 2 typically retraces 50% to 78.6% of Wave 1, with 61.8% (the golden ratio) as the most common terminal point. Anything beyond 78.6% suggests the move was probably not an impulse Wave 1 at all but the first leg of a complex correction. A retracement of 95%-99% is technically rule-compliant but very unusual; when it happens, the count needs careful examination because Wave 3 is unlikely to develop the typical strong impulsive character.
- → Elliott Wave Theory Guide — the 5-3 pattern, rules, Fibonacci, wave degrees
- → How to Count Elliott Waves — 6-step process used on 108 instruments
- → Elliott Wave Fibonacci Guide — the 7 core ratios and how they're applied
- → Rules and Guidelines — the 3 absolute rules + 7 guidelines
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