Lesson 2

What is an Impulse Wave (Motive Wave)?

What is a Corrective Wave?

What are the Subwaves of these Waves?

The main points to take from Lesson 2:

• An Impulse Wave moves up in 5 waves, 1, 2, 3, 4 and 5.
• Wave 1 has 5 waves in it
• Wave 2 has 3 waves in it ( A-B-C)
• Wave 3 has 5 waves in it
• Wave 4 has 3 waves in it (A-B-C)
• Wave 5 has 5 waves in it

This is called an Impulse Wave 5-3-5-3.

A Corrective Wave moves down, against the trend in 3 waves, A, B and C.

• Wave A has 5 waves in it
• Wave B has 3 waves in it
• Wave C has 5 waves in it

This is a called a Corrective Wave 5-3-5

The main objective of this lesson is to take these main points from it, we will go into more detail of retracement and Fib levels as the lessons go on, but I want people to just learn the basics for now.

Image 2 should be saved by everyone, it shows how the Impulse Wave has 5 waves and each wave is then broken down into smaller subwaves.

This is the same for the Corrective Wave 2.

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What is an Impulse Wave (Motive Wave)?

In the book, they call the Impulse Wave - Motive Wave, they are both the same.

An impulse wave is a five-wave price pattern that moves in the direction of the current trend. It is a motive wave, meaning that it moves in the same direction as the larger degree trend. Impulse waves are the most common type of wave in the Elliott Wave Theory, and they are often used by traders to identify and confirm trends.

Impulse waves are labeled as 1-2-3-4-5, with waves 1, 3, and 5 being motive waves and waves 2 and 4 being corrective waves. Wave 3 is the strongest wave in the impulse pattern, and it is often the longest and most significant wave. Wave 4 is a corrective wave that retraces a portion of wave 3, but it should never retrace more than 38.2% of wave 3. Wave 5 is the final wave in the impulse pattern, and it is often the shortest wave.

Elliott Wave Theory states that impulse waves are fractal, meaning that they can be found at all degrees of trend, from short-term to long-term. Impulse waves can also be found in all types of markets, including stocks, bonds, currencies, and commodities.

Traders can use impulse waves to identify and confirm trends, as well as to identify potential entry and exit points. For example, a trader might look for a buy signal when wave 3 of an impulse wave pattern is forming. Conversely, a trader might look for a sell signal when wave 5 of an impulse wave pattern is forming.

It is important to note that Elliott Wave Theory is not a perfect science, and it is not always possible to accurately identify impulse waves. However, impulse waves can be a useful tool for traders who are looking to identify and confirm trends.

Here are some additional tips for identifying impulse waves:

• Wave 2 should never retrace more than 100% of wave 1.
• Wave 3 should always be the strongest wave in the impulse pattern.
• Wave 4 should never retrace more than 38.2% of wave 3.
• Wave 5 should never be the shortest wave in the impulse pattern.

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What is a Corrective Wave?

A corrective wave is a three-wave price pattern that moves against the current trend. It is a counter-trend wave, meaning that it moves in the opposite direction of the larger degree trend. Corrective waves are used by traders to identify and confirm trends, as well as to identify potential entry and exit points.

Corrective waves are labeled as A-B-C, with waves A and C being motive waves and wave B being a corrective wave. Wave A is the first wave in the corrective pattern, and it is often the weakest wave. Wave B is a corrective wave that retraces a portion of wave B, but it should never retrace more than 61.8% of wave A. Wave C is the final wave in the corrective pattern, and it is often the strongest wave.

Elliott Wave Theory states that corrective waves are fractal, meaning that they can be found at all degrees of trend, from short-term to long-term. Corrective waves can also be found in all types of markets, including stocks, bonds, currencies, and commodities.

Traders and Investors can use corrective wave patterns to identify and confirm trends, as well as to identify potential entry and exit points. For example, an investor might look for a buy signal when wave C of a corrective wave pattern is forming, as this could signal the start of a new uptrend. Conversely, an investor might look for a sell signal when wave C of a corrective wave pattern is forming, as this could signal the start of a new downtrend.

Here are some additional tips for identifying corrective wave patterns:

• Wave B should never retrace more than 100% of wave a.
• Wave C should always be the strongest wave in the corrective pattern.
• Wave A and wave C should not overlap in price.
• Corrective wave patterns can be complex and difficult to identify, so it is important to use multiple technical indicators to confirm your analysis.