Elliott Wave Rules and Guidelines — 2026 Complete Reference
Elliott Wave has 3 absolute rules and 7 key guidelines. Rules invalidate a count if broken: Wave 2 cannot retrace 100%+ of Wave 1, Wave 3 cannot be the shortest, Wave 4 cannot overlap Wave 1. Guidelines (alternation, equality, channeling, depth, Wave 3 strength) are statistical tendencies that confirm count confidence.
The distinction between rules and guidelines is the single most important concept in Elliott Wave Theory. Rules are non-negotiable: break one and the count is dead. Guidelines are probabilistic patterns — they confirm a count when they hold, but a valid count can occasionally violate a guideline if the wave structure is strong enough. This reference is the complete checklist Artavest analysts run through before publishing every wave count.
The 3 Absolute Rules
These three rules are absolute — no exceptions, no edge cases (one allowed exception for diagonals on rule #3). If any one of them is violated, the candidate count is wrong. Drop it and consider the alternate.
If price breaks below Wave 1's origin (in an uptrend), the impulse never started. The move you thought was Wave 1 was the first leg of something else — likely a corrective structure. Drop the impulse count and consider corrective alternatives.
Wave 3 doesn't have to be the longest — it just can't be the shortest. If you've labeled Wave 3 and it measures shorter than both Wave 1 and Wave 5, your degree assignment is wrong. Most commonly: what you labeled Wave 3 is actually Wave 1 of a higher-degree count, or what you labeled Wave 5 is an extended Wave 3.
The price ranges of Wave 1 and Wave 4 must not overlap. This is the most common rule violation — analysts mis-label complex corrections as Wave 4 and let the count drift into Wave 1 territory. The only exception is inside a diagonal (leading or ending), where overlap is allowed by definition.
The 7 Key Guidelines
Guidelines are statistical tendencies. They hold in the majority of cases — 60–80% depending on the guideline — but exceptions exist. When multiple guidelines line up with your count, confidence is high. When several are violated simultaneously, your count probably needs revisiting.
If Wave 2 is sharp (zigzag), Wave 4 tends to be sideways (flat/triangle). If Wave 2 is sideways, Wave 4 tends to be sharp. Holds in ~60–70% of impulses.
When Wave 3 is the extended wave, Waves 1 and 5 tend toward equality in length and duration. Useful for projecting Wave 5 targets from Wave 1's amplitude.
Trend channel drawn from the impulse's origin through Wave 2 low, parallel to a line touching Wave 1's peak. Wave 4 reacts to the lower channel; Wave 5 ends near the upper channel.
Wave 3 is the strongest wave in most impulses — heaviest volume, strongest momentum, often gaps and breakouts. If Wave 3 doesn't show this signature, the labeling is probably off.
Wave 5 occasionally fails to exceed Wave 3's high (in an uptrend) — a 'truncated Wave 5'. Signals exhaustion and often precedes a sharp reversal.
Wave 2 typically retraces 50–78.6% of Wave 1 (most common: 61.8%). Wave 4 typically retraces 23.6–38.2% of Wave 3 — shallower because the impulse is gaining strength.
Wave 3 is most commonly 1.618× Wave 1. Wave 5 is most commonly equal to Wave 1, or 0.618× of Waves 1 through 3. Strong proportional fit increases count confidence.
Why Rules vs Guidelines Matters
The rule/guideline distinction is how serious Elliott Wave practitioners stay disciplined. A count that satisfies all 3 rules but violates 5 guidelines is technically valid — but its probability is low and a competing count probably fits better. A count that satisfies all 3 rules and all 7 guidelines is high-confidence and worth acting on.
The mistake beginners make: treating guidelines as rules and rejecting valid counts that violate them. The mistake intermediate analysts make: treating rules as guidelines and clinging to invalidated counts. Discipline means knowing which is which.
How Artavest Stress-Tests Every Count
Before any wave count is published in the weekly analysis, Artavest analysts run it through this checklist:
- Rule 1 check: Wave 2 retracement < 100% of Wave 1.
- Rule 2 check: Wave 3 length not the shortest of Waves 1/3/5.
- Rule 3 check: Wave 4 price territory does not overlap Wave 1 (unless diagonal).
- Guideline check: alternation between Waves 2 and 4.
- Guideline check: Wave 3 shows strongest momentum and volume.
- Guideline check: Fibonacci proportions are within typical ranges.
- Channel check: trend channel respects Wave 4 and projects Wave 5.
- Alternate count produced for the second-most-likely scenario.
- Explicit invalidation level documented — the price where the count breaks.
The full methodology is documented in how we count waves, and the quick-reference checklist is available on the Elliott Wave cheat sheet.
Frequently Asked Questions
Wave 2 cannot retrace more than 100% of Wave 1. Wave 3 cannot be the shortest of Waves 1, 3, and 5. Wave 4 cannot enter Wave 1 price territory (except in diagonals). Any candidate count that breaks any one of these is immediately invalidated.
Rules are absolute — break one and the count is wrong. Guidelines are statistical tendencies that hold most of the time but can be overridden by structure. Wave 2 cannot retrace 100%+ of Wave 1 (rule), but Wave 2 might retrace 50%, 61.8%, or 78.6% (guideline — any of these is valid).
If Wave 2 is sharp (a zigzag), Wave 4 tends to be sideways (a flat or triangle), and vice versa. Alternation is a guideline, not a rule — it shows up in roughly 60–70% of impulses. When Wave 4 looks identical to Wave 2 (both sharp or both sideways), the count probably needs revisiting.
When Wave 3 is the extended wave (most common in stocks), Waves 1 and 5 tend toward equality in length and duration. This guideline helps project Wave 5 targets: if Wave 1 ran from $100 to $115, Wave 5 often projects a similar $15 move from the Wave 4 low.
After Waves 1, 2, and 3 are complete, you can draw a trend channel connecting the origin and Wave 2 low (lower channel line) parallel to a line touching Wave 1's peak (upper channel line). Wave 4 typically reacts to the lower channel line; Wave 5 typically terminates near the upper channel line.
Yes — the rule is that Wave 2 cannot retrace 100% or more of Wave 1. A 99% retracement is technically valid but rare; in practice anything beyond 78.6% suggests the move was probably not an impulse Wave 1 at all but the first leg of a complex correction. Strong impulses usually show Wave 2 retracements of 50% to 61.8%.
Apply the rules to 108 live wave counts
Every wave count Artavest publishes is stress-tested against all 3 rules and all 7 guidelines. See the framework applied weekly.
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