There are two types of Elliott wave patterns:
- Motive (or impulsive waves) which are “trend” waves.
- Corrective waves, which are “counter trend” waves.
Motive waves contain five distinct waves that move the market forward in a trend. Counter trend waves are in 3 waves and simply correct the trend. These patterns move at what we call multiple degrees of trend (they are fractal, meaning there are smaller series of waves that move in the same patterns within the larger patterns). The keys to analyzing Elliott waves is being able to recognize the patterns and the degree of trend that you’re working within.
The motive waves shown above are typical in terms of their look and length. Subwaves of motive waves measure out to specific lengths (fibonacci ratios) very accurately. Motive waves are the easiest waves to trade.
Waves 1, 3, and 5 of a motive wave pattern each contain 5 motive subwaves. Waves 2 and 4 are countertrend waves and move in 3 waves.
Motive waves also travel in channels. The red channel above can be drawn from the apexes of wave 1 and 3 on one side and waves 2 and 4 of the other. The end of wave 5 typically meets the trend line on the wave 1 & 3 side before it reverses.
Countertrend waves move in 3 waves and always retrace. You’ll find much more about them in the countertrend section and the page on The Right Look.
To use Elliott wave analysis accurately, you must be able to recognize the difference between a trend wave (motive) and a countertrend wave (corrective).