What are the 3 rules of Elliott Wave?

    Quick Answer

    The three inviolable rules: Wave 2 never retraces more than 100% of Wave 1, Wave 3 is never the shortest, and Wave 4 never enters Wave 1 territory.

    Detailed Explanation

    Elliott Wave Theory has three absolute rules that cannot be broken. If any rule is violated, the wave count is invalid and must be reconsidered. These rules distinguish valid wave counts from incorrect interpretations and are fundamental to proper Elliott Wave analysis.

    Key Points

    • 1Rule 1: Wave 2 cannot retrace more than 100% of Wave 1
    • 2Rule 2: Wave 3 can never be the shortest impulse wave
    • 3Rule 3: Wave 4 cannot overlap with Wave 1 price territory
    • 4Breaking any rule invalidates the count
    • 5Guidelines (like Wave 2 retracing 50-61.8%) are preferences, not rules

    Example

    If Wave 1 goes from $100 to $120, Wave 2 cannot drop below $100. If it does, your wave count is wrong.

    Common Mistakes to Avoid

    • ✗Confusing guidelines with rules
    • ✗Forcing counts to fit bias
    • ✗Ignoring rule violations
    • ✗Not having alternative counts

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