What are the 3 rules of Elliott Wave?
The 3 absolute rules of Elliott Wave: (1) Wave 2 cannot retrace more than 100% of Wave 1, (2) Wave 3 cannot be the shortest of Waves 1/3/5, (3) Wave 4 cannot enter Wave 1 price territory (except in diagonals). Any rule break invalidates the count.
Full Explanation
Elliott Wave's three absolute rules are non-negotiable. Break any one of them and the candidate count is wrong — drop it and consider the alternate. Rule 1: Wave 2 cannot retrace more than 100% of Wave 1. If price breaks below Wave 1's origin, the impulse never started. Rule 2: Wave 3 cannot be the shortest of Waves 1, 3, and 5. Wave 3 doesn't have to be the longest, but it can't be the shortest. Rule 3: Wave 4 cannot enter Wave 1 price territory. The price ranges of Wave 1 and Wave 4 cannot overlap. The only exception is inside a diagonal pattern (leading or ending diagonal), where overlap is allowed by definition. These three rules are the foundation of every wave count and the first thing every analyst checks before publishing a count.
- → 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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