PRACTICAL APPLICATION

OF
ELLIOTT WAVE PRINCIPLE
(The Secret to Identify Stock Market Moves)

Author: Deepak Kumar

Copyright © 2021 Deepak Kumar

All rights reserved.
ISBN: 9798524792617
[Practical Application of Elliott Wave Principle]

Sweeglu Elliott Waves

VPO Sungal, J&K
India – 182101

Website: https://www.sweeglu.com
Email: [email protected]

Copyright Notice:

©All rights reserved. No content of this book may be reproduced, copied, transmitted by any form
or by any means without prior written permission of the author.

Legal Disclaimer:

No claim is made that the analysis and trading methods or ideas covered in this book will result
in profit and will not result in loss. No claim is made about the accuracy of analysis method as analysis
is result of probabilities and accuracy depends upon the analyst. Trading/investment is risky
business and may not be suitable for recipients of this book. Although, the analysis method
contained in this have been reliable in the past but there is no guarantee by the author or
distributors that they will work in future. Each trader is responsible for his/her own action in the
market if any. Purchase of this book constitutes your agreement to this disclaimer and exempts
its author and distributor from any liability or litigation.

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 [INTRODUCTION]

INTRODUCTION

This book “Practical Application of Elliott Wave Principles” is result of my years of practice and
deep research on Elliott Wave Theory. I am not only practicing waves but applying it on real time
charts of many Indian scripts and indices. I shared my years of research and experience in this
book to explain how EWT can be applied on real charts to read market behavior.

The original work of Ralph Elliott may have been modified because I tried to reflect my own
approach towards Elliott’s Wave theory based on my personal research and techniques.

Elliott Wave Theory is not something like Holy Grail to predict stock market with 100% accuracy
but it is definitely an important tool to find an edge for low risk entry and high rewarding trading
decisions. You will be able to feel where market is heading in future, it will help you to take
confident and accurate trading decisions and it will be the first one to warn if you are wrong.

I am not promising that you will be the master of Elliott Wave Theory after reading this book but
I can promise that you will be able to apply these principles in your real time trading after
practicing it for a couple of months. And I am confident that you will never enter trade without
seeing waves on chart after understanding this effective analysis method.

I organized this whole book in two parts, first parts covers all basic rules, principles, patterns and
theory whereas second part covers the Practical application of Elliott Wave Theory with my
personal tips and techniques.

Every single chapter and topic of this book is important because I already ignored philosophical
and unnecessary part and covered only which is needed. So I advise you to read every part of it
the way I advised. I tried to explain everything in very simple language with examples on
imaginary images as well as on real chart, so just follow the instruction for fast better learning.

EWT can be applied on any financial instruments like Indexes, Stocks, Currencies and
commodities etc. But avoid applying EWT on derivatives (Futures and Options) as it may have
less accuracy due to premium fluctuation. Apply EWT on spot/cash price and trade in futures
with respect of cash price.

Elliott Wave Theory is a complex subject and I tried to organize the content in best possible way.
The doubts you face in earlier chapter may be cleared in later chapter. So, I advise you to read
the complete book roughly first time and keep reading even if you have doubts just to get
familiar with the content. Read 2nd time thoroughly.

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[Practical Application of Elliott Wave Principle]

I added a special chapter “Practicing Elliott Wave Theory” explaining how a learner can practice
it for easier and faster learning. So, read and practice as I advised and you will be amazed with
the result.

I solely wrote and edited this book, so you will definitely find some typos or grammatical errors.
Please accept my apologies in advance.

Regards and Best Wishes.

Deepak Kumar

4
 [TABLE OF CONTENT]

TABLE OF CONTENT
PART – I
CONCEPTS, RULES AND GUIDELINES OF ELLIOTT WAVE THEORY

CHAPTER 1 : Wave’s Cycle and Basic Rules of Elliott Wave Theory P 7-18
CHAPTER 2 : Fibonacci Ratios P 19-20
CHAPTER 3 : Breakdown of Elliott Wave Theory P 21
CHAPTER 4 : Personalities of Waves P 22-25
CHAPTER 5 : Fibonacci Calculation of Waves P 26-35
CHAPTER 6 : Elliott Wave Patterns P 36-39
CHAPTER 7 : Impulse P 40-42
CHAPTER 8 : Leading Diagonal Triangle (LD) P 43-51
CHAPTER 9 : Ending Diagonal Triangle (ED) P 52-60
CHAPTER 10 : Simple Zigzag Correction P 61-62
CHAPTER 11 : Irregular Correction P 63-70
CHAPTER 12 : 3-3-5 Flat Correction P 71-74
CHAPTER 13 : Complex Correction P 75-86
CHAPTER 14 : Extended Waves and Failure Wave P 87-91
CHAPTER 15 : Alternations P 92-93
CHAPTER 16 : Overlapping of wave (4) with (1) when P 94-95
wave (2) is Irregular Correction

PART –II
PRACTICAL APLLICATION OF ELLIOTT WAVE PRINCIPLE

CHAPTER 17 : Combining the Patterns and Fibonacci Ratios P 98-103

CHAPTER 18 : Importance of 38% Retracement P 104-109
CHAPTER 19 : Alternate Wave Counts P 110-113
CHAPTER 20 : 38% Retracement Breakout Technique P 114-122
CHAPTER 21 : Important Techniques to Count Waves in Difficult Conditions P123-125
CHAPTER 22 : Failure of Elliott Wave Analysis P 126
CHAPTER 23 : Trading with Elliott’s Wave Principle P 127-140
CHAPTER 24 : Suitable Time Frame for Elliott Wave Analysis P 141-151
CHAPTER 25 : Identifying MultiBagger Stocks P152-164
CHAPTER 26 : Practicing Elliott Wave Analysis P165-174
CHAPTER 27 : Short Summary on Elliott Wave Rules P 175
CHAPTER 28 : Author’s Advice P 176-178

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[Practical Application of Elliott Wave Principle]

PART – I
Concept of Elliott Wave Theory
All the concepts, rules, guidelines, patterns and Fibonacci Calculations of Elliott
Wave Theory are covered in first 16 Chapters. Understand and memorize every
rule and guideline because it is the foundation for effective and accurate Elliott
Wave Analysis.

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 [Wave’s Cycle and Basic Rules of Elliott Wave Theory]

CHAPTER – 1

Wave’s Cycle and Basic Rules of Elliott Wave Theory

Wave Cycle is the base of Elliott Wave Theory and you need to understand it thoroughly before
going forward. These are just simple wave’s rules but applicable in every pattern and in every
condition.

I tried to explain these simple rules with imaginary graphic images and real charts to make the
concept clear and easy to understand. Don’t try to compare these imaginary graphics with real
time charts in this chapter and just try to understand the concept. Everything will be explained in
later chapters with lots Imaginary Images and real charts. So let’s start from simple end.

RN Elliott (The father of Elliott Wave Theory) observed that every financial market, stocks or
financial instrument moves in zigzag formation and he called it Wave’s Cycles. And this zigzag
formation consists of a set of 5 waves in the direction of Primary/Main/Bigger trend followed by
a set of 3 waves opposite to direction of main trend.

Note: - If we look at the history of stock market, the main/primary trend is always up as the
market cannot go below zero. In this book, most of the examples I covered with uptrend (bullish
trend) as main trend and down trend (bearish trend) and as corrections. But all the 8 waves
forms in both the directions, so the rules for a particular wave are absolutely same let it be in
any direction.

 The set of 5 waves in the direction of main trend he called “Impulsive” or “Impulse”.
 And the set of 3 waves opposite to the direction of main trend he called “Corrective” of
“Correction”

Rule for Numbering/Marking the waves:

All the 5 waves move (Impulsive or main trend) can be marked with numbers as wave 1, 2, 3, 4, 5
or (i), (ii), (iii), (iv), (v) or any other numbers format of your choice.

And 3 waves move (Corrective or correction) can be marked in alphabets as A, B, C or a, b, c or

any other alphabetic format of your choice. We can use different variations of these numbers
and letters to distinguish inner/lower degree waves.

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[Practical Application of Elliott Wave Principle]

Suppose we marked an Impulse wave as (1), then its inner 5 waves can be marked as (i), (ii), (iii),
(iv), (v) or [1], [2], [3], [4], [5] or any number format of your choice.

The aim of using different variations of numbers/letters is to distinguish different levels of waves
otherwise there is no hard rule to use a particular format of number or alphabet for a particular
wave.

Inner/Lower Degree Waves: - Every wave consists of a set of small inner waves or we can say that
a set of small waves combines to form a big wave. So, the small inner waves are called as Inner
or Lower Degree Waves and biggest waves are called as Main or Higher Degree waves.

All the rules are same for a particular wave let it be main wave or inner waves. Suppose I am
explaining the rules of wave 3, then the same rules will be applicable to every wave 3, let it be
major wave 3 or inner/lower degree waves (3), (iii), [3] or [iii].

You will understand this numbering and marking easily as we proceed further.

Just look at image (1.1) below, it is just a simple imaginary representation of movement of
market based on Elliot Waves Theory. Just read the points and try to identify it on image.

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 [Wave’s Cycle and Basic Rules of Elliott Wave Theory]

Image (1.1) Wave Cycle

Five waves move (impulsive) started from point (0) and completed at point (5) where,

 Inner wave (1) started from points (0) and completed at point (1)
 Inner wave (2) started from points (1) and completed at point (2)
 Inner wave (3) started from points (2) and completed at point (3)
 Inner wave (4) started from points (3) and completed at point (4)
 Inner wave (5) started from points (4) and completed at point (5)

Thus, a whole impulse wave is completed from point (0) to (5).

After completion of Impulsive move, a three wave’s move (corrective) started from point (5)
(end of impulsive) and completed at point (C) where: -

 Inner wave (A) started from points (5) (end of impulse) and completed at point (A)
 Inner wave (B) started from points (A) and completed at point (B)
 Inner wave (C) started from points (B) and completed at point (C)

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[Practical Application of Elliott Wave Principle]

This is the basic idea of “Impulsive” and “Corrective” now we can go bit deeper into the concept
for better understanding.

As I already explained, Impulsive wave is consists of Five inner waves 1,2,3,4 and 5 in the
direction of main trend and corrective wave consists of Three Waves A, B and C opposite to the
direction of main trend.

But if you observe the formation of Impulse (set of 5 waves up move marked as 1,2,3,4 and 5),
then wave 1, 3 and 5 are in the direction of main trend but wave 2 and 4 are opposite to the
direction of main trend.

Here you need to understand that within Impulsive wave,

Wave 1, 3 and 5 is also a small/inner impulse of lower degree. Means, inner wave 1, 3 and 5 in
the direction of main trend are also consist of 5 smaller waves.

Wave 2 and 4 are corrective waves of lower degree. Means, inner waves 2 and 4 are opposite to
the direction of main trend and consist of 3 smaller waves (a,b and c).

Thus, a combination of 3 Impulsive and 2 corrective forms a bigger impulse wave.

And Within Correctives,

Wave A and C is impulse of lowest degree which consists of 5 inner waves whereas wave B is
corrective of lowest degree and consists of 3 inner waves (abc).

Have a careful look at image (1.2) and try to identify Impulsive and correctives.

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 [Wave’s Cycle and Basic Rules of Elliott Wave Theory]

Image (1.2) Wave Cycle

On image (1.2), I just broke down bigger waves into smaller/lower degree wave. Bigger wave are
marked with big characters (1) (2) (3) (4) (5) and (A) (B) (C) where as lower degree/inner waves
are marked as small characters (i, ii, iii, iv and v) and (a, b and c).

Read this image carefully and try to identify how I displayed waves 1, 3, 5, A and C as impulsive (5
waves moves) and wave 2, 4 and B as corrective (3 waves move).

In the same way,

Completion of smaller set of 5 waves move is a completion of bigger Impulse followed by the
start of bigger correction. Let me explain the same graphically on image (1.3).

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[Practical Application of Elliott Wave Principle]

Image (1.3) Wave Cycle

Look carefully at image (1.3),

Small set of 5 inner waves (i, ii, iii, iv, and v) completed a wave cycle and formed bigger wave (1)
and (a, b, c) correction formed wave (2).

Wave (1) and (2) started a next major wave cycle which completed after completion of wave (3),
(4) and (5) [set of 5 waves].

Further, set of 5 waves [(1), (2), (3), (4), (5)] completed a higher degree wave [1] and further [(A),
(B), (C)] correction formed higher degree wave [2].

Now, this higher degree cycle started with wave [1] and [2] will get completed after completion
of waves [3], [4], [5] to form another higher degree wave {1} and same pattern will repeat again
and again. This is never ending cycle.

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 [Wave’s Cycle and Basic Rules of Elliott Wave Theory]

Stock Market moves in this formation by completing bigger impulsive followed by bigger
correction. The up move till the completion of bigger impulse (wave 1) is Bull Market and later
correction (wave 2) is Bear Market followed by the start of new Bull Phase that goes well above
previous high again. And the cycle goes on.

Example: - The completion of bigger impulsive in 2008, most of the world’s market completed
bigger Bull cycle in 2008 followed by bigger correction. Most of the major indices corrected
almost 60-70-% from life time high and started new bull trend for new cycle. Have a careful look
at chart on (Image 1.4) below.

(Image 1.4) Wave Cycle

On image (1.4), Nifty completed its major wave cycle at 6357 [wave (1)] in 2008 followed by
major correction [wave (2)]. Nifty corrected whole life move by more than 70% after completion
of wave (1). The bounce till 6357 was bull phase and correction till 2252 was bearish phase or
crash.

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[Practical Application of Elliott Wave Principle]

I marked major wave Cycle completed at 6357 as major wave (1) and correction as major till
2252 as wave (2), major wave (3) completed at 12430, (4) completed at 7511 and last wave (5) is
in progress.

I also marked inner waves of major wave (3) on this chart but it will be difficult for you to
understand at this point of time, so just take it as example of wave cycle and try to understand it
after reading the whole book.

Now, Nifty needs to complete wave (5) to complete next major wave cycle before any further
crash like 2008. Let’s me give a visual example on same Nifty chart by drawing imaginary lines to
show how this ongoing major wave cycle would complete.

Have a careful look at Chart on Image (1.5), it is general expected road map of Nifty to complete
ongoing wave cycle.

(Image 1.5) Imaginary road map of Nifty based on Elliott Wave Cycle

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 [Wave’s Cycle and Basic Rules of Elliott Wave Theory]

Here, I tried to explain that,

Major wave (1), (2), (3), (4) is completed and last wave (5) is in progress from 7511.

Major wave (5) can complete somewhere in 14713-19166 range and there will be completion of
next major wave [1] with the completion of wave (5). Wave (1), (2), (3), (4), (5) will form major
wave [1].

After completion of next major wave [1], there will be major downside correction as wave [2]
(major correction or bear market).

Wave [2] will be a set of 3 inner waves (A), (B) and (C). Within wave [2],

 Wave (A) will be impulse with (i), (ii), (iii), (iv), (v) as inner waves.
 Wave (B) will be Corrective with (a), (b) and (c) as inner waves.
 Wave (C) will be impulse with (i), (ii), (iii), (iv), (v) as inner waves.

I marked waves using different number formats to distinguish different degree of waves. I tried
to explain how a set of lower degree waves completes a higher degree wave and how we can
use different number formats to mark waves of different degree.

Please read the chart carefully and try to understand the formation of wave cycle. Read step by
step and focus on waves marked with similar number format to understand its inner
composition.

Don’t focus on logic because it will be difficult for you to understand the reasons and rules
behind these waves counting right now. You will be able to understand the logics behind these
wave counts after reading the book completely. Now, just focus on understanding the concept of
Wave Cycle.

I hope you are familiar with basic cycles of Elliott Wave Theory now. In short, wave cycle is set of
5 waves in the direction of main trend (12345/Impulse) followed by set of 3 waves opposite to
the main trend (abc/Corrective).

If we dig further then,

 Wave 1 is impulse which is a set of 5 inner waves.

 Wave 2 is corrective which corrects wave 1, and is a set of 3 inner waves
 Wave 3 is again impulse after completion of wave 2, and is a set of 5 inner waves.
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[Practical Application of Elliott Wave Principle]

 Wave 4 is corrective which corrects wave 3, and is a set of 3 inner waves.

 Wave 5 is again impulsive after completion of wave 4 and a set of 5 inner waves.

Completion of a set of 5 waves (12345) forms a bigger wave (1) and there will a bigger corrective
wave (2) to correct whole wave (1).

Wave (2) is again a set of 3 waves (ABC) and if we did further then,

 Wave A is impulsive which a set of 5 inner waves.

 Wave B is corrective which corrects wave A, and is a set of 3 inner waves
 Wave C is again impulsive after completion of wave B, and is a set of 5 inner waves.

And this process repeats again and again and never ends. Turn back and read once more if you
are not clear of the concept and then step forward to next topic, “Basic Rules of Elliott Wave
Theory”.

Basic Rules of Elliott Wave Theory:

The basic concept of wave’s cycles of EWT is already explained and now is the time to know 3
basic rules applicable on waves. I am not explaining every rule and condition here in this topic
but just stating three basic principles to remember.

You learnt that a wave cycle is a set of 5 waves upside followed by 3 waves downside but there
must be some rules to justify these wave counts. You can’t start marking wave 1,2,3,4,5,A,B,C
anywhere, there must be some rules which justify or confirm these wave counts.

There are many rules, calculations and patterns to justify accurate wave counts in different
conditions (we are going to read about everything later) but these 3 basic rules are mandatory
and applicable in all conditions.

1. Wave 2 can never correct more than 100% of wave 1, i.e. Wave 2 can never go below the
start of wave 1.
2. Wave 3 can never be the shortest impulse wave in full 5 wave’s cycle. Means, wave 3 can
never be shorter than both 1 and 5.
3. Wave 4 cannot overlap wave 1, i.e wave 4 cannot go below the end of wave 1. There is
exceptions in this rule and will be explained in later chapters.

Isn’t it easy to remember?

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 [Wave’s Cycle and Basic Rules of Elliott Wave Theory]

Though these three rules are not everything about Elliott Wave’s Theory but these three simple
rules are backbone of EWT which you can’t ignore. These rules will help you a lot in identifying
patterns, predicting levels and taking low risk entries in market for high profit.

Where to take Point ‘0” or “the start of a wave cycle”?

I started wave counting from point ‘0’ in most of the imaginary examples in this book. Point ‘0’
indicates the “start of a wave cycle” in imaginary examples because we don’t have a particular
price point, otherwise “All Time Low” of any script is “start of wave cycle”.

So, life time low of any particular stock or index is actually point ‘0’. Otherwise every inner wave
starts with the end of previous wave.

Some stocks crashes after completing a wave cycle to register new life time low. So, when a
stock registers its fresh life time low then all its previous waves becomes invalid and new major
wave cycle starts from new life time low. Let me explain the same on chart. Please refer (Image
1.6) below.

(Image 1.6) Start of a major wave cycle

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[Practical Application of Elliott Wave Principle]

This is monthly chart of Capital First (CAPF) covering its life time of move. This stock listed above
1000 but declined to register its life time low 91 in 2012-2013. Later, it completed one major
wave cycle from 91 to 901 as marked on chart.

So, its major wave cycle is started from 91 and same we can mark as point (0). And all the wave
formations and patterns formed before this life time low are of no use.

Because all previous journey of a stock becomes invalid after breaking below its life time low and
new wave cycle starts from fresh low with new perspective and new personality.

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 [Fibonacci Ratios]

CHAPTER 2

Fibonacci Ratios

“Fibonacci Ratios” is very important part of Elliott Wave Theory. All the calculation including
length of waves, retracements, calculating levels, predicting targets etc are done with the help of
Fibonacci Ratios and you are going to witness that these ratios (percentages) repeats again and
again in EWT patterns. That’s why I am covering this chapter about “Fibonacci Ratios” before
going any deeper into Elliott Wave Theory.

I am not going deeply into History and other aspects of “Fibonacci Numbers” here to avoid
distraction and lengthy chapter, so I covered the only part of “Fibonacci Ratios” which is
important with respect to Elliott’s Wave Theory.

Basically, 1, 2, 3, 5, 8, 13, 21, 34, 55 …., are Fibonacci Numbers where you can start from 1 and
get next number by adding previous two numbers. i.e. 1+2 = 3, 2+3 = 5, 5+3 = 8, 8+5 = 13 and so
on.

And by dividing these numbers randomly we get some ratios/percentages. i.e.

8/34 = 0.236 = 23.6%

13/34 = 0.382 = 38.2%
1/2 = 0.50 = 50%
21/34 = 0.618 = 61.8%

These ratios are repeated again and again in financial market and we use most repeated ratios in
Elliott Wave Theory.

The most repeated ratios in corrections/retracements are 23.6%, 38.2%, 50%, 61.8%, 78.6% and
100%. Elliott mentioned 61.8% as important ratio and also called it “Golden Ratio”. I will explain
later why 61.8% is important.

The most repeated ratios in projections/extensions/impulsive are 38.2%, 61.8%, 50%, 78.6%,
100%, 138.2%, 150%, 161.8%, 178.6%, 200%, 238.2%, 250%, 261.8%, 278.6%, 300%, 338.2%,
350%, 361.8%, 378.6%, 400%, 438.2%, 450%, and 461.8% and so on.

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[Practical Application of Elliott Wave Principle]

You need to memories these ratios. Just memorize 5 ratios of corrections and keep on adding
100 for extensions and projections. Otherwise, I am providing you an Excel Calculator with this
book which I prepared for easy and fast Fibonacci Calculations.

This is all about “Fibonacci Ratios” you need to know for “Elliott’s Wave Theory”. Use of these
Fibonacci rations is explained in later chapters.

Note: I will be writing Fibonacci retracements and projections in round figures in my analysis.
Like 23.6% will written as 23%, 38.2% will be written as 38%, 61.8% will be written as 61% etc.
but calculations will be exact.

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 [Breakdown of Elliott Wave Theory]

CHAPTER 3

Breakdown of Elliott Wave Theory

We already know, there are only 8 waves in Elliott’s wave theory which repeats again and again
(1,2,3,4,5 and A,B,C) either on smaller time frame or on bigger time frame, either these are
lower degree waves or higher degree waves but at last, there are only 8 wave’s in EW cycle
which consist of a set of 5 waves upward/main direction (1,2,3,4 and 5) followed by a set of 3
waves downwards/opposite direction (A, B and C). And waves 1, 3, 5, A and C are lower degree
impulsive whereas waves 2, 4 and B are correctives.

But, knowing the wave’s cycle and basic principle will not help you to take trading and
investment decisions. Every single wave carries different personality, Fibonacci Calculation and
Pattern.

So, Elliott Wave Theory is not just a Wave Cycle consist of 8 waves but is a combination of: -

1. Wave Cycle
2. Wave’s Personalities
3. Fibonacci Calculations
4. Wave patterns

You need to have complete understanding of all these 4 factors of Elliott Wave Theory to use it
practically. Otherwise missing of any one these factors will make this awesome analysis method
confusing.

First you need to understand every aspect of Wave Cycles, Wave Personalities, Fibonacci
Calculation and Wave Patterns and then you can use the combination of these 4 factors to find
market movements with ease and precision.

I had explained “Wave’s Cycle” in chapter 1. Let’s move to Wave’s Personalities, Fibonacci
Calculations and Wave Patterns in next Chapters.

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[Practical Application of Elliott Wave Principle]

CHAPTER 4

Personalities of Waves

“Personalities of waves” doesn’t carry very serious importance in Elliott Wave Theory but it helps
to confirm the accuracy of wave counts in tough conditions. Understanding of Personality or
behavior of waves can help to get out of confusion of Alternate wave counts some times. Out of
8 waves, understanding the personality of wave (3) is most important for every analyst. But I am
writing short notes on personalities of every wave one by one this chapter.

Wave 1

Wave 1 generally doesn’t carry any particular personality or characteristics and we don’t need to
give much importance to it. Wave (1) is just like a newly born child, as we can’t understand its
behavior. Wave (1) of main cycle can take months and even years to form. We must wait for the
completion of wave (1) and (2) for efficient Elliott Wave Analysis.

Wave 2

Wave 2 starts with the end of wave 1 when investors and traders start booking profit after a big
bull rally. Wave 2 is generally a period of bear phase/recession/consolidation when profit
booking at higher levels followed by accumulation at lower levels is going on and it is the time
when market decides where it wants to go in near term.

Wave (2) is a corrective wave and corrective waves are mostly confusing. So, it is advised to
avoid trading during progress of wave (2). Reason for the same will be explained in “Wave
Patterns” chapter.

Wave 3

Wave 3 is most important and most focused wave among the entire waves. Elliott Said, “Wave 3
can make you rich if you manage to catch it”. You are going to understand it in later chapters
that why he stated so and why wave 3 is most important.

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 [Personalities of Waves]

Wave 3 starts with the end of wave 2 when correction for wave 1 is completed. Start of wave 3 is
the time when majority of investors and traders are convinced that previous trend (Short term or
long term) had changed and now is the start of new bigger trend.
Wave 3 is normally steeper, sharper, faster and largest of all waves with formation of gaps in
between because investors and traders are fully confident of the trend and they want to buy/sell
at any levels especially when wave 3 crosses above the end of wave 1 (start of wave 2). Wave 3 is
always faster and creates gaps because buyers don’t wait and want to buy at any price and stop
losses of seller’s triggers.

The experience says, we should not estimate the top of wave 3 and we should not book profit
during the progress of wave 3, trailing stoploss at upper levels is best strategy to get maximum
profit. The trader who tries to chase (trade against the direction) wave 3 often get penalized. The
sharp and fast move of wave 3 makes it difficult to identify its inner wave formation, which
further makes it impossible to calculate its top.

Trading Volume increases and most of short term chart, technical indicator, RSI etc shows
market in overbought/oversold state during the progress of wave 3 but it doesn’t stop even in
highly overbought/oversold state.

I explained personality of wave (3) later also after explaining all the rules of EWT for better
understanding.

Wave 4

Wave (4) carries the same personality and characteristics as wave (2). Smart investors who
bought at start of wave (3), starts booking maximum profit. But those who missed or were not
confident at lower levels starts buying during the progress wave (4) because they are now
convinced that price will move higher after seeing the furious move of wave (3).

So wave (4) is also a time of consolidation after a very Sharp and Big move of Wave (3) because
profit booking at higher levels and buying at lower levels continues for some time.

Wave 5

Wave 5 is a last leg of main trend which is often confusing and can ends diagonally sometimes. It
is almost difficult to predict the top of 5th unless you are experienced because it either ends
diagonally or its inner waves follow rare calculations.

Wave 5 mostly driven by new/weak/common traders and investors who are now convinced that
the stock is in extreme Bull Run and going to rise higher after seeing a previous sharp run of
wave 3. Most of the new investors/traders buy at top of wave 5 and often get penalized.

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[Practical Application of Elliott Wave Principle]

During wave 5, price of stocks/instrument rise sharply but with very low volumes, (lower than
average volume) this is also the indication of trend reversal.

(Image 4.1) Personalities of Waves

Wave A

Wave A is an impulse which carries the same characteristics and personality of wave 1. It is often
slow as traders/investors are not yet fully convinced of trend and starts booking profit slowly
seeing a break after a good rally. But wave A can also be sharp if it is after a highly extended
wave 5.

Wave B

Wave B also carries same characteristics as wave 2. It is a period of consolidation when there is
tug of war between buyers and sellers. Investors/Traders who are still in hope of further upside
keep on buying on dips and those who bought at lower levels keep booking profit.

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 [Personalities of Waves]

Wave B plays very important role in predicting how much correction may be and how much next
up move may be.
Wave B is a corrective wave for wave A and most confusing wave because wave (B) have no
minimum/maximum retracement limit (will be explained later).

Wave C

Wave C plays very important role in EWT (Elliott’s Wave Theory) because it is last wave of
correction and there is always a start of new impulsive after completion of C. So, if you are able
to identify wave the end of wave C, you can catch next impulsive for Big-Big profit.

Wave C is always have Impulse Pattern like wave (3) `and is a last leg of a correction. Wave C is
normally faster than A and B as it is the time when majority of traders/ investors are convinced
that last upside rally has ended. So they start booking profit immediately as soon as wave B
completes.

Wave C is often sharp and faster because majority of traders starts booking profit on bounce of
wave B and stop losses of buyer’s triggers. Wave C somewhere resembles wave 3. Wave C can
be destructive sometimes to hit many stop losses and results in heavy quick losses. But C can
also be slower in some cases if wave A was sharper and faster.

Wave C is actually an end of ongoing correction followed by reversal. So, it is faster most of the
time and scares traders before reversal.

Please look carefully at (Image 4.1) and try to compare of personalities of waves.

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[Practical Application of Elliott Wave Principle]

CHAPTER 5

Fibonacci Calculation of Waves

Calculation of Waves is all about Fibonacci Retracements and Projection of Waves. We learnt
about Fibonacci Ratios in Chapter 2 and this chapter is all about the use of these Fibonacci Ratios
in Elliott Wave Analysis. Every Wave has particular Fibonacci Projection or retracement and I
placed this chapter before “Wave’s Patterns” because you must have understanding of wave’s
calculations before understanding the patterns.

Let me explain the concept of “Projection” and “Retracement” before going deeper into Wave’s
Calculations.

Projections: Projections we can resemble with Extensions. It is the extension after completion of
Correction. Projections are used for wave (3), (5) and (C).

 Wave (3) projects with respect to (1)

 Wave (5) projects with respect to total move till wave (3)
 Wave (C) projects with respect to wave (A).

Retracements: Retracement we can resemble with corrections. It is correction after completion

of an Impulse. Retracements are used for wave (2), (4) and (B).

 Wave (2) retrace wave (1)

 Wave (4) retrace wave (3)
 Wave (B) retrace wave (A)

Categories of Retracements and Projections: I categorized Retracements and Projections in 4

different types which you need to understand before proceeding further. I will be using these 4
categories of projections and retracements limits in this chapter while explaining Fibonacci
calculations of waves.

1. Normal Retracement and Projections: The Normal retracements and projection are those
which happen about 80% of the times. This is Fibonacci limit of a wave which we see most of
the times and we always expect these normal projections and retracements during analysis.

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 [Fibonacci Calculation of Waves]

2. Rare Retracements and Projections: The rare retracements and projection are those which
happen about 20% of the times. This is Fibonacci limit of a wave which we see rarely, so we
normally avoid rare projections and retracements during analysis because we will be wrong
only 20% of the times even if we avoid these rare projection/retracement limits.

3. Minimum Projection: It is the minimum projection limit which a particular Impulse wave has
to achieve. Projections have minimum limit but it doesn’t have maximum limit, that’s why
projections are used to calculate targets.

4. Maximum Retracement: It is the maximum retracement limit which a particular wave can
achieve. Retracements have maximum limit but it doesn’t have minimum limit, that’s why
retracements are used to calculate low risk entry range and stoploss.

Now, let me explain the Fibonacci calculation of Waves one by one: -

Calculation of Wave (1):

There is no calculation for wave (1). We need some reference to calculate projections and
retracements but wave (1) is the base of wave cycle. So, we need to wait for formation of wave
(1) to start counting and calculating further waves.

Fibonacci Retracement for Wave (2):

Wave (2) retraces wave (1) by 38%-61% in most of the cases and 61% retracement also called as
Golden Ratio. But there is no minimum limit of retracement for wave (2), it can be less than 38%
also in some case.

100% is maximum retracement limit for wave (2). Wave (2) can never retrace more than 100% of
(1), means wave (2) can never break the start of (1).

We call 61% retracement as Golden ratio because it gives best Risk Reward. If we buy at 61%
retracement of wave (1) then stoploss will be just 38% (start of wave 1, 100%-61% = 38%) and
minimum Targets will be 61% (end of wave 1).

So, 38%-61% is normal retracement limit for wave (2), 61% is golden retracement ratio and 100%
is maximum limit of retracement for wave (2). But there is no minimum limit of retracement.

Have a careful look at Image 5.1 to understand it visually.

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[Practical Application of Elliott Wave Principle]

(Image 5.1) Retracement Limits for wave 2

Fibonacci Projection for Wave (3):

 Wave (3) projects minimum 100% of (1).

 100%-161% is called as Normal Projection for wave (3).

 Wave (3) is called as extended wave when project more than 161%. Wave (3) is extended
most of the times.

 There is no maximum limit for projection of wave (3). Wave (3) normally project 161%-461%
but it can go even higher.

So, 100% is minimum projection limit for wave (3) and there is no maximum limit. That’s why
analysts says, wave (3) can make you rich if you can manage to catch and ride it.

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 [Fibonacci Calculation of Waves]

Have a careful look at Image 5.2 to understand it visually.

(Image 5.2) Projection Limits for wave 3

Retracement Limits for Wave (4):

Wave (4) retraces wave (3) normally by 23%-38%. Means 23%-38% is normal retracement limit
for wave (4). And we normally expect wave (4) to retrace 23%-38%.

But there is no minimum limit of retracement for wave (4), it can be less than 23% and can even
be as low as 10% in some cases.

Wave (4) can retrace more than 38% also in some cases but maximum limit of retracement for
wave (4) is the end of wave (1). Means wave (4) can never break beyond the end of wave (1) or
wave (4) can never overlap wave (1) within Impulse.

Note: Wave (4) can overlap wave (1) within “Diagonal Triangles” but this is separate case and I
explained it separately in “Diagonal Triangles” Chapter.
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[Practical Application of Elliott Wave Principle]

Have a careful look at Image 5.3 to understand it visually.

(Image 5.3) Retracement limits for wave 4

Fibonacci Calculation of wave (5)

Projection for wave (5) is to be calculated with respect of total move from start of wave (1) to
end of wave (3). Means we take total move from (0) to (3) to calculate projection of wave (5).

Wave (5) projects “minimum 38%” and must “complete beyond the end of wave (3)”. This is the
minimum requirement for completion of wave (5) and both the conditions must meet.
38%-61% is normal projection limit for wave (5).

Wave (5) called as extended wave after projecting more than 61%.

There is no exact maximum limit of projection for wave (5) but we rarely see wave (5) projecting
more than 100%.

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 [Fibonacci Calculation of Waves]

Have a careful look at Image 5.4 to understand it visually.

(Image 5.4) Projection limits for wave 5

Fibonacci Calculation of Wave (A)

There is no particular retracement or projection for wave (A) like wave (1). We need to wait for
the formation of wave (A) to calculate next waves. But idea of retracement for wave (A) can be
taken from previous waves.

Suppose wave (3) is completed, then wave (4) normally retraces 23%-38% of (3). So, (A) of (4)
can be assumed to retrace 23%. We can just get idea but we should not trade it.

Have a careful look at Image 5.5 to understand it visually.

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[Practical Application of Elliott Wave Principle]

(Image 5.5) Retracement Limits for wave (A)

Fibonacci Calculation of Wave (B)

Wave (B) is most confusing wave of Elliott Wave Cycle because there is no minimum or
maximum limit of retracement for wave (B). Wave (B) retraces its previous wave (A), means
retracement for wave (B) is calculated with respect to wave (A)

38%-61% is normal retracement limit for wave (B).

Wave (B) retraced wave (A) exactly by 100% in “3-3-5 Flat Correction”, it is explained separately
in next chapters.

Wave (B) retraces wave (A) by more than 100% in “Irregular Correction”, it is also explained
separately in next chapters.

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 [Fibonacci Calculation of Waves]

But there is no minimum or maximum limit of retracement for wave (B). Wave (B) can retrace
lower than 23% or higher than 123%, that’s why it is most confusing wave of Elliott Wave
Theory.

Have a careful look at Image 5.6 to understand it visually.

(Image 5.6) Retracement Limits for wave (B)

Fibonacci Calculation for wave (C)

Projection for wave (C) is calculated with respect to wave (A).

Wave (C) normally projects 100%-123% of (A).

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[Practical Application of Elliott Wave Principle]

Minimum projection limit of projection for wave (C) is 61%, means wave (C) must be 61% in any
case.

Wave (C) rarely project more than 161% but there is no exact upper limit for projection.

Wave (C) can even be 261%-461% in some cases when wave (A) is smaller. We can get maximum
limit of wave (C) from previous wave. Suppose, if wave (C) is of wave (4) then maximum limit of
wave (C) is end of wave (1) because wave (4) can not overlap (1).

Wave (C) always completes beyond the end of (A) in Simple Zigzag. But (C) can complete before
the end of (A) in Flat or Irregular Correction (explained in next chapters)

Have a careful look at Image 5.7 to understand it visually.

(Image 5.7) Projection limits for wave (C)

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 [Fibonacci Calculation of Waves]

One important thing you must have observed in this chapter that there is “no minimum limit for
Retracement” and “No maximum limit for Projection” of a wave. But there is always “maximum
limit for Retracement” and “Minimum Limit for Projection”.

So, we always take retracements as Stoploss because stoploss we always placed at maximum
limit and Projections we use for Targets because we always use minimum limits for targets.

And Fibonacci ratios can be used best only with combination of Elliott Waves because Every
wave has its particular Fibonacci Calculations limits and you can use it accurately if you can
identify the wave in progress. Using Fibonacci Ratios without Elliott Wave still works to some
extent is just a guess work.

“Fibonacci Calculations” we use for calculating probable limits of waves but “Elliott Wave
Patterns” has more importance in Elliott Wave Theory Analysis because we need to have idea of
pattern for accurate Fibonacci Calculations. I will explain this point separately in later chapter
“Combining Wave Patterns with Fibonacci Calculations”.

So, we need to know the pattern of every wave to be able to check if wave is completed or not,
and next chapter is all about patterns of waves.

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CHAPTER 6

Elliott Wave Patterns

This chapter is most important part of this book because Elliott Wave Theory is nothing without
Elliott Wave Patterns. Elliott wave cycle consists of 8 waves but every wave has its own Elliott
Wave Pattern. We must have picture of every pattern in our mind to identify waves accurately
and to confirm if waves you are marking are correct or not.

There are only 7 Patterns of Elliott Wave Theory which further divided into 3 categories. And 3
categories are, Impulse, Diagonal Triangle and Corrections:-

Impulse is an Independent Pattern

Corrections or Correctives: There are 04 types of Corrections/Corrective Patterns

1. Simple Zigzag Correction

2. Irregular Correction
3. 3-3-5 Flat Correction
4. Complex Correction (Double Zigzag and Triple Zigzag)

Diagonal Triangles: There are 02 type of Diagonal Triangle

1. Leading Diagonal Triangle

2. Ending Diagonal Triangle

So, there are total 07 Elliott Wave Patterns: -

1. Impulse
2. Leading Diagonal Triangle (LD)
3. Ending Diagonal Triangle (ED)
4. Simple Zigzag Correction
5. Irregular Correction
6. 3-3-5 Flat Correction
7. Complex Correction

I am going to explain every pattern in details later in this chapter but let me explain which wave
can have what pattern before going further.

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 [Elliott Wave Patterns]

Patterns of Wave 1: Wave 1 can have 02 patterns,

1. Impulse
2. Leading Diagonal Triangle

Means, whenever you are marking any move as wave 1, you must ensure that the move you are
marking as wave 1 is either “Impulse” or “Leading Diagonal Triangle”.

Patterns of Wave 2: Wave 2 can have 04 patterns,

1. Simple Zigzag Correction

2. Irregular Correction
3. 3-3-5 Flat Correction
4. Complex Correction

Patterns of Wave 3: Wave 3 can have only 01 pattern,

1. Impulse

Means wave 3 is always an “Impulse”. Wave 3 can never have any other pattern.

Patterns of Wave 4: Wave 4 can have 04 patterns,

1. Simple Zigzag Correction

2. Irregular Correction
3. 3-3-5 Flat Correction
4. Complex Correction

Patterns of Wave 5: Wave 5 can have 02 patterns,

1. Impulse
2. Ending Diagonal Triangle (ED)

Patterns of Wave A: Wave A can have 02 patterns,

1. Impulse in Simple Zigzag

2. Any Corrective Pattern (Simple, Irregular or Flat) in case of Irregular and Flat Correction.

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[Practical Application of Elliott Wave Principle]

Patterns of Wave B: Wave B can have 04 patterns,

1. Simple Zigzag Correction

2. Irregular Correction
3. 3-3-5 Flat Correction
4. Complex Correction

Patterns of Wave C: Wave C can have only 01 pattern,

1. Impulse

Means wave C is always an “Impulse”. Wave C can never have any other pattern.

Please look carefully at (Image 6.1) to understand it visually.

(Image 6.1) Patterns of Elliott Waves

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 [Elliott Wave Patterns]

I hope the concept of “which wave can have what pattern” is clear. Now, let’s proceed to pattern
of Elliott Wave Theory one by one.

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CHAPTER 7

Impulse

“Impulse” is a basic pattern of Elliott Wave Theory or we can say that Impulse is base of Elliott
Wave Theory. The whole Elliott Wave Cycle is identified as an Impulse which includes all other
patterns.

When I say that “wave (3) and (C) is always an Impulse”, you must know what the Impulse
actually is, and what are the rules and guidelines to justify a 5 waves move an Impulse. So, let me
explain the pattern Impulse with all its rules and guidelines.

“Impulse” is always a 5 wave’s move and we mark it as 12345 or (i) (ii) (iii) (iv) (v) or by any other
number format. Means an Impulse is consist of five waves, Wave 1, 2, 3, 4 and 5.

If you look at real time chart of any stock or index then you will see the formation of many up
and down waves, but you cannot select any set of 5 waves as Impulse, rather there are definite
rules and guidelines which justify a set of 5 waves as Impulse Pattern. So, let’s know the rules
and guidelines of an Impulse: -

The mandatory rules and guidelines of Pattern Impulse: -

1. Inner Wave (2) of an Impulse can never retrace more than 100% of previous wave (1), means
wave (2) can never be larger than wave (1), or wave (2) can never breach the start point of
wave (1).

2. Wave (3) always project more than 100% of wave (1), means wave (3) is always larger then
wave (1) within Impulse. There is no maximum limit for projection of wave (3), means wave
(3) can project 161%-461% or even 1000% of wave (1) but it can never be less than wave (1).
Wave (3) don’t have any such relation with wave (5), means wave (3) can be either smaller or
larger than wave (5).

3. Wave (4) can never overlap wave (1), means wave (4) cannot breach the end point of wave
(1). End point of wave (1) or start point of wave (2) is the maximum limit for wave (4) to
retrace.

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 [Impulse]

4. Wave (5) always project minimum 38% and must complete beyond the end of wave (3).
Means wave (5) can never be shorter than 38% in any case, or 38% is minimum limit for
projection of wave (5). (If wave (3) is not extended then minimum projection for wave (5) is
61%, “Rules of extensions”). But there is no maximum limit for projection of wave (5).
Fibonacci calculation for wave (5) is explained in earlier chapter.

5. Any one out of wave (3) or (5) must be extended. Both waves (3) and (5) can also be
extended but “both waves (3) and (5) not extended” is impossible. If you are seeing that
wave (3) is not extended then you must expect wave (5) to be extended (project more than
61%).

Read all the rules and guidelines carefully and also have a careful look at the Image 7.1 to
understand it visually.

(Image 7.1) Impulse

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[Practical Application of Elliott Wave Principle]

These are the five basic and mandatory rules for identification of an Impulse. If the wave counts
you are marking are breaching any of these rules then you are wrong somewhere at identifying
the actual pattern.

Example: Suppose you are expecting a move on chart as wave (C) and you know that wave (C) is
always an Impulse or have Impulse Pattern. So, you must make sure that wave (C) is consist of 5
waves and this set of 5 waves is following all the rules explained above. And if the set of 5 waves
is not following any of these rules then either it is not wave (C) or you are wrong at marking the
wave counts.

Please look at (Image 7.1) and read the explanation carefully for visual understanding.

4 2
 [Leading Diagonal Triangle (LD)]

CHAPTER 8

Leading Diagonal Triangle (LD)

Leading Diagonal Triangle also called as LD (short form) is one of the complex patterns of Elliott
Wave Theory and is the part of main proceeding trend. Many analysts and learners find it
difficult to identify this pattern accurately because of ignorance or lack of knowledge about the
rules and its inner wave calculations.

This chapter is going to explain “Leading Diagonal Triangle” pattern in details with its structure,
rules and inner wave calculation, and I am going to make sure that whenever you observe this
pattern, you identify it perfectly and accurately.

(Image 8.1) Leading Diagonal Triangle Pattern

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[Practical Application of Elliott Wave Principle]

First and most important thing to note is that “Leading Diagonal Triangle” pattern occurs only in
wave (1)” of an impulse, let it be a major wave (1) or inner wave (i) of an impulse.

So whenever you are observing something like LD, you must be aware that it is wave (1) and
there will be wave (2), (3), (4) and (5) later to complete impulse. Inner wave (1) of any Impulse
can only be LD, but inner wave (1) of LD cannot be LD.

Look carefully at Image 8.1

Structure of Leading Diagonal Triangle:

Same as Impulse, Leading Diagonal Triangle (LD) comprises of 5 inner waves with 5-3-5-3-5
pattern. Inner wave (i), (iii) and (v) of LD are Impulse (5 waves) and inner wave (ii) and (iv) are
corrective (3 waves) that’s why we call it 5-3-5-3-5. And within those 5 waves,

Waves (i), (iii) and (v) is always a clean Impulse.

Wave (ii) and (iv) can have any corrective pattern out of Simple Zigzag, Flat Correction, Irregular
Correction and Triple Zigzag (combination of ‘abc’ patterns).

Wave (iv) always overlap wave (i) in Leading Diagonal Pattern. Wave (iv) can never overlap (i) in a
Impulse but Wave (iv) must overlap wave (i) in LD. Actually overlapping of wave (iv) with (i) only
makes it Diagonal otherwise it would be impulse. Though wave (iv) always enters the range of
wave (i) but it can never break below the end of (ii).

Inner wave (iii) of Leading Diagonal can never be extended wave, means wave (iii) can never
project more than 161% in LD. Wave (v) of LD always is extended, means wave (v) always project
more than 61%. Its inner waves follow the same rule of alternation that either one out of wave
(iii) or (v) needs to be extended. Because wave (iii) cannot be extended in LD, so wave (v) is
always extended.

Have a careful look at (Image 8.2)

4 4
 [Leading Diagonal Triangle (LD)]

(Image 8.2) Leading Diagonal Triangle (LD)

Drawing the Lines of Leading Diagonal Triangle (LD)

LD is always a closed pattern which forms a Wedge or Channel that’s why we call it a Leading
Diagonal “Triangle” because it always form a closed triangle pattern (Expanding or converging) or
parallel wedge. And there is a definite way to draw the lines of pattern. Most of the analysts and
learners make mistakes in drawing the lines of LD and mark it in a wrong way. So let me explain
the only perfect way to draw the lines.

First thing to remember is, LD is always a closed pattern and can never be an open pattern. So,
always draw the lines whenever you are expecting or observing a Leading Diagonal. Drawing the
line will solve maximum of your confusions.

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Rules to drawing lines are: -

There are 02 lines in Leading Diagonal Triangle pattern (upper and lower). One line must be
drawn by joining end point (tip) of wave (i) and (iii) and other line must be drawn by joining end
point (tip) of wave (ii) and (iv). Many analysts draw line from start of wave (i) which is not the
correct way.

Both the lines joining wave (i)-(iii) and (ii)-(iv) can never be disturbed. Means no part of any wave
can be out of these lines until the LD is completed. If you are expecting a Leading Diagonal but
these lines are disturbed or broken then either you are marking it wrong or it is not Leading
Diagonal.

(Image 8.3) Drawing the Lines of Leading Diagonal Triangle

4 6
 [Leading Diagonal Triangle (LD)]

Last wave (v) of LD need not to touch the line joining (i)-(iii). Wave (v) of LD just needs to break
the end of wave (iii) and to achieve 61% Fibonacci projection. The minimum limit of inner wave
(v) of LD is end point of wave (iii) and maximum limit is the line joining wave (i)-(iii). Wave (v) can
never break out of the line joining (i)-(iii).

Breakout always happens from the line joining wave (ii) and (iv) after completion of LD. Means
you can always expect price to break below/above the line joining waves (ii)-(iv) after completion
of wave (v) of LD. Leading Diagonal is always wave (1), so next wave (2) will always break and
complete below line joining inner wave (ii)-(iv) of LD. Please pay attention carefully at (Image
8.3).

LD can either be in Expanding Triangle, Converging Triangle or in Parallel Wedge form. There is
no such definite rule about types of triangle, only rules and calculation must match. But, I
observed Leading Diagonal as “Converging Triangle” or “Parallel Wedge” in most of the cases
and Expanding Triangle in very limited cases.

Leading Diagonal Triangle with wave (i)>(iii)>(v)

Inner wave (iii) of LD is larger than wave (i) most of the times, means wave (iii) of LD project
100%-161% in most of the cases. But wave (iii) can also be shorter than (i) in some cases but not
less than 61%, means wave (iii) project 61%-100% of (i) in some cases.

In such cases when wave (iii) is shorter than (i), next wave (v) must be less than (iii).

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[Practical Application of Elliott Wave Principle]

(Image 8.4) LD as wave (i)>(iii)>(v)

There is one mandatory rule of Elliott Wave Theory that wave (3) or (iii) can never be shortest
wave, means wave (3) can never be shortest waves among (1), (3), (5). So, when wave (iii) is
already shorter than (i) then wave (v) must be shorter than (iii) because wave (iii) can never be
shorter than both (i) and (v).

So, wave (i)>(iii)>(v) in such Leading Diagonal Triangles. Please look at (Image 8.4) carefully.

Important facts about Leading Diagonal Triangle

Generally Leading Diagonal Triangle should not be assumed in advance. We must wait for the
completion of this pattern as it is very easy to identify when it is completed. Wait for the
formation of wave (2) after completion of LD and then take entry confidently for great Risk
Reward.

Leading Diagonal Triangle as Jackpot Trading Opportunity

4 8
 [Leading Diagonal Triangle (LD)]

Leading Diagonal (LD) gives a Jackpot Trading Opportunity if we manage to identify it just after
its completion. Because LD is always wave (1), means we will have (2), (3), (4) and (5) after that.

After completion wave (1) as Leading Diagonal Triangle, next wave (2) can be expected to
complete below the line joining inner wave (ii)-(iv) where we can take entry with stoploss below
the start of LD for very fast and furious wave (3). Look at (Image 8.5) carefully.

(Image 8.5) Trading Strategy after identifying Leading Diagonal

Short Summary of Leading Diagonal Triangle:

 LD is always an inner wave (1) of an Impulse and there will be waves (2), (3), (4) and (5) later
to complete the impulse.
 LD always have 5-3-5-3-5 pattern
 Wave (4) or (iv) always overlaps wave (1) or (i) in LD.
 Inner wave (3) or (iii) can never be extended and inner wave (5) or (v) is always extended.

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[Practical Application of Elliott Wave Principle]

 LD always moves in a closed pattern either as Expanding Triangle, Converging Triangle or

Parallel Wedge but mostly as Converging Triangle or Parallel Wedge.
 Lines of LD always drawn by joining waves (i)-(iii) and (ii)-(iv) and these lines should not be
disturbed until pattern is completed.
 Breakout always happens from the line joining waves (ii)-(iv) after completion of LD.
 We often see a sharp move in the direction of LD after completion of pattern.

Overall, Leading Diagonal Triangle is just like an Impulse having 5-3-5-3-5 pattern but there are
only 3 differences: -

1. Inner wave (iv) of LD always overlaps inner wave (i)

2. Inner wave (iii) of LD can never be extended and wave (v) is always extended
3. LD is a closed pattern and forms a wedge.

Have a careful look at (Image 8.6) to understand Leading Diagonal Triangle (LD) on real chart.

(Image 8.6) Leading Diagonal Triangle (LD)

5 0
 [Leading Diagonal Triangle (LD)]

This is 5 minutes time bar chart of Nifty where a Leading Diagonal Triangle formed from 8008-
8025 followed by (abc) Correction.

I know that LD is always wave (1), So I assumed next (abc) correction as wave (2) and initiated
longs with stoploss below 8007 (below the start of LD) expecting big sharp bounce.

Now, let me show the personality of move after LD on next chart shown in (Images 8.7).

(Image 8.7) Move after Leading Diagonal Triangle

Look carefully at chart and observe the move after 8015, the bounce is fast and strong. We
expected a good sharp move after completion of LD not because of the LD but because of wave
(3).

When LD is wave (1), then we wait for wave (2) and trade for wave (3) expecting a sharp and big
move [personality of wave (3)].

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[Practical Application of Elliott Wave Principle]

CHAPTER 9

Ending Diagonal Triangle (ED)

Ending Diagonal Triangle also called as ED (short form) is another complex pattern of Elliott
Wave Theory like LD and is the part of main proceeding trend. This chapter is going to explain
“Ending Diagonal Triangle (ED)” pattern in details with its structure, rules and inner wave
calculation and I tried my best to make sure that whenever you observe this pattern, you identify
it perfectly and accurately.

Ending Diagonal pattern resembles Leading Diagonal Triangle, but the only difference is that ED
has 3-3-3-3-3 pattern rather than 5-3-5-3-5 and ED forms in wave (5) only. Let me explain the
same in details.

(Image 9.1) Ending Diagonal Triangle Pattern

5 2
 [Ending Diagonal Triangle (ED)]

Ending Diagonal Triangle

First and most important point not is that Ending Diagonal Triangle pattern occurs only in wave
(5) of any impulse let it be a wave bigger wave (5) or inner wave (v) of any degree. So whenever
you are observing something like ED, you need to make sure that there is wave (1), (2), (3) and
(4) before the start of this pattern. Inner wave (5) of Impulse can only be ED, but inner wave (v)
of ED cannot be ED.

See (Image 9.1).

Pattern of Ending Diagonal Triangle:

Ending Diagonal Triangle (ED) comprises of 5 inner waves with 3-3-3-3-3 pattern. All the 5 waves
of ED have 3 wave’s (abc) pattern that’s why we call it 3-3-3-3-3. And within those 5 waves,

 Waves (i), (iii) and (v) is always a Simple Zigzag (abc).

 Wave (ii) and (iv) can have any corrective pattern out of Simple Zigzag, Flat Correction,
Irregular Correction and Triple Zigzag (combination of ‘abc’ patterns).

Like in LD, Wave (iv) always overlap wave (i) in Ending Diagonal Pattern. Normally wave (iv) can
never overlap (i) in a five wave’s impulsive move but Wave (iv) must overlap wave (i) in ED.
Though wave (iv) always enters the range of wave (i) but wave (iv) can never break below the
end of (ii).

Like LD, Inner wave (iii) of Ending Diagonal (ED) can never be extended wave, means it can never
project more than 161%. And wave (v) is always extended; means wave (v) projects more than
61% every time. Its inner waves follows the same rule of alternation that “either one out of wave
(iii) or (v) needs to be extended”. Because wave (iii) cannot be extended in ED, so wave (v) needs
to be extended.

Please pay attention to (Image 9.2) carefully.

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(Image 9.2) Pattern of Ending Diagonal Triangle

Drawing the lines of Ending Diagonal Triangle (ED)

Rules for drawing line of ED are same as LD. ED is also a closed pattern which forms a Triangle or
Wedge that’s why we call it an Ending Diagonal “Triangle”. And there is a definite way to draw
the lines of pattern.

ED is always a closed pattern and can never be an open pattern. So, always draw the lines
whenever you are expecting or observing an Ending Diagonal. Drawing the line will solve
maximum of your confusions.

The rules to drawing lines are:

There are 02 lines in ED pattern (upper and lower) and one line must be drawn by joining the
end point (tip) of wave (i) and (iii) and other line must be drawn by joining end point (tip) of
wave (ii) and (iv). Many analysts draw line from start of wave (i) which is not the correct way.

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 [Ending Diagonal Triangle (ED)]

Both the lines joining wave (i)-(iii) and (ii)-(iv) can never be disturbed. Means no part of any wave
can be out of these lines until the ED is completed. If you are expecting an ED but these lines are
disturbed or broken then either you are marking it wrong or it is not Ending Diagonal.

(Image 9.3) Drawing the lines of Ending Diagonal Triangle

Last wave (v) of ED need not to touch the line formed by joining wave (i) and (iii). Wave (v) of ED
just needs to break the end of wave (iii) and to achieve its minimum 61% Fibonacci projection.
The minimum limit of inner wave (v) of ED is end point of wave (iii) and 61% projection (both
conditions must fulfill) and maximum limit is the line joining wave (i)-(iii). Wave (v) can never
break out of the line joining (i)-(iii).

Breakout happens from the line joining wave (ii) and (iv) after completion of ED. Means you can
always expect price to break below/above the line joining waves (ii)-(iv) after completion of wave
(v) of ED.

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[Practical Application of Elliott Wave Principle]

Please pay attention at (Image 9.3).

There is no such definite rule about types of triangle, only rules and calculation must match. But,
I have observed Ending Diagonal as Expanding Triangle in most of the cases and Converging
Triangle or Parallel wedge in very limited cases.

Ending Diagonal Triangle with wave (i)>(iii)>(v)

(Image 9.4) Ending Diagonal with Wave (i)>(iii)>(v)

Wave (iii) cannot be shorter than (i) in an Impulse. But wave (iii) can be shorter than (i) in
Diagonal Triangles.

So whenever you are seeing wave (iii) is shorter than (i), you must expect wave (v) shorter than
(iii). Because it’s definite rule of Elliott wave theory that wave (iii) can never be the shortest
wave. So, when wave (iii) is already shorter than (i) then it can never be shorter than (v). Rule of
extensions or alternations is not applicable in this condition.

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 [Ending Diagonal Triangle (ED)]

This condition of wave (i)>(iii)>(v) can happen in any form of Triangle (Expanding, converging or
parallel) depending upon the speed of inner waves but it is mostly seen in ED as Converging
Triangle.

Important facts about Ending Diagonal Triangle

Generally an analyst should not try to imagine Ending Diagonal Triangle in advance unless he/she
is experienced as it is a complex pattern and can take any shape. You must wait for the
completion of this pattern, because it is very easy to identify when it is already completed or
when it is very near to completion. You can plan a very good low risk high rewarding trade for
reversal after identifying the completion of this pattern.

Experienced analysts can succeed in Identifying this pattern when it is within inner wave (iii)
after seeing repeated (abc) patterns and can catch wave (iv) and (v) very accurately (point to
point) with the help of lines and calculations.

We often see a very sharp reversal after completion of Ending Diagonal Pattern especially when
ED is a major wave (5) of main trend. The effect may not be so strong if ED is an inner wave (v) of
bigger (3).

Short Summary of Ending Diagonal Triangle

 ED is always a wave (5)

 ED always have 3-3-3-3-3 pattern (abc-abc-abc-abc-abc)
 Wave (4) or (iv) always overlaps wave (1) or (i) in ED.
 Inner wave (3) or (iii) can never be extended and inner wave (5) or (v) is extended all the
times.
 ED is always a closed pattern either as Expanding Triangle, Converging Triangle or Parallel
Wedge.
 Lines of ED always drawn by joining waves (i)-(iii) and (ii)-(iv) and these lines should not be
disturbed until ED is completed.
 Breakout always happens from the line joining waves (ii)-(iv) after completion of ED.
 We often see a sharp reversal after completion of ED.

Examples of Ending Diagonal Pattern on real charts

This Ending Diagonal Triangle shown on (Image 9.5) formed in Nifty from 7118-9119 which took
11 months to complete and I managed to catch many great rallies by identifying inner waves
within this ED.

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[Practical Application of Elliott Wave Principle]

(Image 9.5) Ending Diagonal on Real Chart

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 [Ending Diagonal Triangle (ED)]

The Ending Diagonal Triangle shown in (image 9.6) completed on small time frame on 11 April
2016. This ED have wave (i)>(iii)>(v) followed by great reversal.

(Image 9.6) Ending Diagonal on Real Chart

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[Practical Application of Elliott Wave Principle]

There is one more ED like pattern completed in June 2016 (shown on Image 9.7) which is
following all the rules.

(Image 9.7) Ending Diagonal Triangle

There are many more examples on old chart but you will get real experience only when you see
forming it live. That is the reason I don’t give much importance to old examples. This pattern
forms frequently, so wait for its formation in future to observe it forming live. I will definitely
explain it in my analysis reports and will post on Sweeglu Elliott Waves blog whenever I see any
indications of Ending Diagonal Triangle Pattern.

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 [Simple Zigzag Correction]

CHAPTER 10

Simple Zigzag Correction

Simple Zigzag Correction is simple basic corrective pattern of Elliott Wave Theory and all other
patterns are derived from this simple pattern only. As we already know, a corrective pattern is a
set of 3 waves and we mark it using alphabets (A), (B) and (C). So, Simple Zigzag is also a 3 wave
pattern having inner wave (A), (B) and (C).

Rules of Simple Zigzag Correction

Wave (A) of Simple Zigzag Correction always have Impulse Pattern, means wave (A) of Simple
Zigzag can never have any other pattern than Impulse.

Wave (B) of Simple Zigzag Correction can have any type of corrective pattern out of Simple
Zigzag, 3-3-5 Flat Correction, Irregular Correction or Complex Correction.

Wave (B) retraces/corrects wave (A) normally by 38%-61%, otherwise it can also retrace less
than 38% or more than 61% also in some cases but it cannot retrace by 100%, means wave (B) of
Simple Zigzag Correction can never touch or break the start of wave (A).

Wave (C) of Simple Zigzag Correction always have Impulse pattern, means wave (C) can never
have any other pattern than impulse.

Wave (C) of Simple Zigzag normally projects by 100%-123% but there is no definite maximum
projection limit. But Wave (C) can never be less than 61% and always completes after the end of
wave (A) in Simple Zigzag Correction. Or wave (C) cannot complete before the end of wave (A)
and always projects more than 61% in this Simple Zigzag correction.

There is no complexity in this type of Zig-Zag correction, that’s why we call it “Simple Zigzag
Correction”.

Please look carefully at (Image 10.1) to understand Simple Zigzag Correction Visually.

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[Practical Application of Elliott Wave Principle]

(Image 10.1) Simple Zigzag Correction

I am not adding any real time example of Simple Zigzag Correction because it is a common
pattern and you will see it in every of the chart.

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 [Irregular Correction]

CHAPTER 11

Irregular Correction
Irregular correction is most frequently seen pattern of Elliott Wave Theory which witnessed even
more than Simple Zigzag Correction. But it is less understood by majority of Elliott Wave Theory
analysts and practitioners, even very few EWT analysts knows about this word “Irregular
Correction”.

A correction or corrective wave is comprises of 3 inner waves marked as (A), (B) and (C). Wave
(A) is impulse, wave (B) is corrective and is shorter than (A) whereas next wave (C) is always an
impulse generally equal or larger than (A).

But in some cases, wave (B) goes larger than (A) or wave (B) breaks the start point of (A). When
wave (B) breaks the start of (A) or wave (B) retraces more than 100% within a correction, we call
it Irregular Correction. See (Image 11.1). This is the simple display of an “Irregular Correction”.
We call it Irregular Correction because wave (B) is “Irregular” in this correction.

(Image 11.1) Irregular Correction as 5-3-5

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Now, an “Irregular Correction” can be of different sub pattern like 5-3-5, 3-3-5 and Double
Irregular. Let me explain one by one.

Irregular Correction as 5-3-5 Pattern: When wave (A) of a correction is impulse (5 waves move),
we call it 5-3-5 pattern. Wave (B) is always a corrective (3 waves move) and wave (C) is always an
impulse (5 waves move) in every case but wave (A) can be either impulse or corrective within
“Irregular Correction”. So when (A) is impulse (5 waves), the pattern become 5-3-5. Look at
(Image 11.1) for visual explanation of 5-3-5 pattern.

Irregular Correction as 3-3-5 Pattern: When wave (A) is corrective (3 waves move, ‘abc’), then
Irregular Correction forms 3-3-5 pattern. Wave (A) is corrective (3 waves), wave (B) is corrective
(3 waves) and wave (C) is impulse (5 waves), so the pattern become 3-3-5. Look at (Image 11.2)
for visual explanation of 3-3-5 Pattern.

(Image 11.2) Irregular Correction as 3-3-5

Double Irregular Correction: In 3-3-5 Irregular Correction pattern, sometime both wave (A) and
(B) is Irregular. Means inner wave ‘b’ of (A) is irregular followed by (B) is also irregular which
form double Irregular Correction. Look at (Image 11.3) for visual explanation.

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 [Irregular Correction]

(Image 11.3) Double Irregular Correction

Rules of Fibonacci Calculations for Irregular Correction:

Any correction becomes Irregular Correction when its inner wave (B) breaks the start of previous
wave (A). So, the first and only mandatory requirement for Irregular Correction is that, “wave (B)
must cross the start of wave (A)”. Other optional rules are as follows: -

Wave (A) of Irregular Correction can have either Impulse (12345) or Corrective (abc) pattern.

Wave (B) retrace wave (A) by 100%-123% in most of the cases but there is no exact maximum
retracement limit. Wave (B) can retrace more than 123% also in some cases, it can move as
higher as 200% or more without any maximum limit.

Wave (B) can have Simple Zigzag, 3-3-5 Flat or Irregular Correction Pattern.

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[Practical Application of Elliott Wave Principle]

(Image 11.4) Formation of Irregular Correction

Wave (C) can have only Impulse Pattern in every type of Correction. 61% is minimum projection
limit for wave (C), 100%-123% is normal projection limit but there is no maximum limit, it can
project more than 123% depending upon previous wave.

We generally see and we always expect wave (C) of Irregular Correction to complete at or
beyond the end of (A). But wave (C) of Irregular Correction can also complete before the end of
(A) provided the Impulse pattern is completed and minimum 61% projection is achieved.

Wave (C) of Irregular Correction is often sharp and fast which scare traders just before reversal,
and the next move after completion of Irregular Correction is often quick and sharp.

See Image 11.4 for visual explanation.

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 [Irregular Correction]

Formation of an Irregular Correction Step by Step

Now let me explain about the formation of an Irregular Correction in steps to make you
understand how this Irregular Correction confuses and how we can manage it.

There is no confident way to predict the formation of Irregular Correction pattern. We can
identify this pattern after its completion only.

Looks carefully at Step 1 in Image 11.5, this is the probable scenario in normal conditions.
Whenever we see a (abc) correction then we normally consider that a Corrective wave (Simple
Zigzag) is completed and new Impulse has been started as wave (i), (ii), (iii), (iv), (v).

(Image 11.5) Formation of Irregular Correction

But waves turns back and the Impulse which we were expecting as (i), (ii) and (iii) turns into (abc)
to form irregular (B), previous (abc) wave turns into wave (A) and overall pattern turns into
Irregular Correction as shown in step 2 on Image 11.5.
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[Practical Application of Elliott Wave Principle]

This changing of pattern from Impulse (expected) to Irregular (B) [unexpected] confuses and
trades goes wrong. There is no confident way to predict this change in advance but there are
tricks and techniques to protect our trades from these unexpected changes.

All the tricks and techniques to manages such difficult condistions are explained in 2 nd part of the
book “Pratical Application of Elliott Wave Theory”.

Advantage of Irregular Correction

Irregular Correction has great advantage and can give huge profit if we manage to identify it at
completion because it is the indication of strong main trend and reversal after completion of
Irregular Corrections is often sharp and strong. Have a careful look at Image 11.6

(Image 11.6) Examples of Irregular Correction

This is daily chart of Nifty covering move from Oct 2018 to March 2019. There were repeated
Irregular Correction within this period which confused multiple times because there was

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 [Irregular Correction]

Irregular Correction after Irregular Correction. Even there were repeated smaller Irregular
Corrections within bigger Irregular Correction.

There is also a perfect example of Double Irregular Correction on this chart. Wave [B or 2]
completed at 10585 is perfect Double Irregular Correction.

Have a look at speed and intensity of inner wave (c) of (iv) and then look at the intensity and
speed of bounce after completion of wave (iv) as Irregular Correction.

Now let me show you the move after completion of wave [B or 2] at 10585 on Image 11.7

(Image 11.7) Personality of Irregular Correction

This is again daily chart taken from my analysis report of 04 April 2019 (25 days after the move
on Image 11.6). Have a careful look at move after 10585 after completion of wave (B or 2) as
Irregular Correction.

Reversal after completion of Irregular Correction is often fast and strong, that’s why this pattern
gives huge profit opportunity if you develop the skills to identify it.
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[Practical Application of Elliott Wave Principle]

I explained this “Irregular Correction pattern” in depth and also explained how it actually forms,
how it confuses and how we can get advantage out of it. I explained it deeply because it is
common pattern and forms repeatedly, it confuses us for a time being but gives great profit
opportunity later and we can get benefited from this pattern only if we understand it.

Personality of inner wave (C) of Irregular: - Inner wave (C) of an Irregular Correction is often sharp
and destructive and it often shakes the confidence weak traders/investors before reversal. But
the reversal after completion of wave (C) of Irregular Correction is also sharp and doesn’t give
chance to trade.

The analysts and traders who are familiar with the personality of Irregular Correction and its
inner wave (C) try to cash opportunity when majority is scared.

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 [3-3-5 Flat Correction]

CHAPTER 12

3-3-5 Flat Correction

Flat correction is occasionally seen pattern of Elliott Wave Theory which is witnessed less when
compared to other type of correction, means 3-3-5 Flat occurs rarely. It is very less understood
by majority of Elliott Wave Theory analysts and practitioners but is very simple to understand.

We already know that a correction or corrective wave is comprises of 3 inner waves called (A),
(B) and (C). And when wave (B) completes before the start of (A), we call it Simple Zigzag and
when wave (B) completes above the start of (A), we call it Irregular Correction.

But in some cases, wave (B) goes exactly equal to (A) or wave (B) corrects (A) exactly by 100%,
we call it Flat Correction. See (Image 12.1). This is the simple structure of a “Flat Correction”. We
call it Flat Correction because wave (B) equal to (A) is making it flat at top.

(Image 12.1) 3-3-5 Flat Correction

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[Practical Application of Elliott Wave Principle]

Flat Correction as 3-3-5 Sub Pattern: “Flat Correction” can have only 1 sub pattern which is 3-3-5.
Inner Wave (A) is always corrective (3 waves, abc) in Flat Correction, wave (B) is always
corrective (3 waves, abc) in any case and wave (C) is always impulse (5 waves).
So, (A) with 3 inner waves, (B) with 3 inner waves and (C) with 5 inner waves makes it 3-3-5 sub
pattern, that’s why we call it 3-3-5 Flat Correction.

Important Point to Remember: Wave (A) is always an impulse in Simple Zigzag Correction and it
can be corrective only in “Irregular Correction” and “Flat Correction”. Means whenever you mark
or observing wave (A) as corrective (3 waves move) then always expect or make sure that next
wave (B) is either touching or breaking above start of (A) because wave (B) must be Flat or
Irregular if wave (A) is corrective.

Identification and Trading 3-3-5 Flat Correction

3-3-5 Flat correction can be identified only after seeing Wave (A)=(B) followed by Impulsive wave
(C). Wave (A) must be (abc), wave (B) must be (abc) and completing exactly near the start of (A)
and Final wave (C) is always impulse. Same as explained on Image 12.1

Same as Irregular Correction, Flat Correction is sign of strong main trend, and there is always a
strong reversal after completion of Flat Correction. So, trade can be taken near the completion
of wave (C) expecting very sharp reversal because Price mostly breaks the start of Flat Correction
with speed.

Important Rules and Guidelines about 3-3-5 Flat Correction

Flat Correction always have 3-3-5 sub pattern where wave (A) is 3 waves, wave (B) is 3 waves and
wave (C) is 5 waves (Impulse). Wave (A) is always a corrective wave (abc) in Flat Correction,
means wave (A) can never be Impulse in Flat Correction.

Wave (B) of Flat Correction retrace wave (A) approx. by 100%, means the start of wave (A) and
the end of wave (B) is almost in same line.

Pattern of wave (B) is observed as Simple Zigzag in most of the cases, but it can be Flat or
Irregular also in some exceptional cases.

Inner wave (C) of Flat Correction is often sharp and fast which create panic before reversal.

Same as Irregular Correction, Wave (C) of Flat Correction must be minimum 61% of (A). 100%-
123% is normal projection limit but there is no exact maximum limit.

Wave (C) can complete before the end of wave (A) in some cases when (C) is less than 100%.

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 [3-3-5 Flat Correction]

3-3-5 Flat correction is a sign of strong main trend and there is always a strong reversal after
completion of Flat Correction.

3-3-5 Flat Correction is same as 3-3-5 Irregular Correction:

Wave (B) of Irregular Correction breaches the start of (A) whereas wave (B) of Flat Correction
completes exactly at the start of (A). Otherwise all other rules, calculations and personalities of
3-3-5 Flat Correction are exactly same 3-3-5 Irregular Correction.

Example of 3-3-5 Correction on real Nifty Chart

Please look at chart on (Image 12.2), this is 1 Minutes chart of Nifty taken from my analysis report
of 19 Nov 2015.

(Image 12.2) Example of 3-3-5 Flat Correction

We can see that,

Wave (A) completed from 7815-7829 as (abc).

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[Practical Application of Elliott Wave Principle]

Wave (B) completed from 7829-7815 as (abc) and it completed exactly at starting point of wave
(A).
Wave (C) completed from 7815-7834 as Impulse which projected exactly 138%.
And next reversal after completion of Irregular Correction is sharp and strong.

Example 2: -

Please look at (Image 12.3), this is one more chart I taken from my old analysis report.

(Image 12.3) Example of 3-3-5 Flat Correction

Here also, bounce from 9220 to 9267 is 3-3-5 Flat Correction and even inner wave (A) is also Flat
Correction. Observe the personality of wave (C) of Irregular Correction (from 9220-9267)
followed by the personality of reversal after completion of this Irregular Correction.

These are couple of Examples of 3-3-5 Flat Correction, otherwise the same will be explained live
on my blog whenever I find such pattern.

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 [Complex Correction]

CHAPTER 13

Complex Correction

We already learnt about Simple Zigzag Correction, Irregular Correction and 3-3-5 Flat correction
in earlier chapters and all these corrections consist of 3 waves or one (abc) cycle. But sometimes,
2 or 3 (abc) cycles repeats to form a Complex Correction. Or you can also call it Combination
Correction.

So, a Complex Correction is a combination of 2 or 3 set of (abc) cycles and every (abc) cycles
connects next (abc) cycle with a link wave (x). Wave (x) is also a corrective wave but it is very
difficult to identify its inner wave pattern. Complex Correction is of two types: -

Double Zigzag Correction: - Combination of 2 sets of (abc) cycles connected with 1 (X) wave is
called as “Double Zigzag” correction. And the pattern of this correction is (abc-X-abc).

Triple Zigzag Correction: - Combination of 3 sets of (abc) cycles connected by 2 (x) waves is called
as “Triple Zigzag” Correction. And the pattern of this correction is (abc-X-abc-X-abc).

I am going to explain “Triple Zigzag” correction first, because if you understand Triple Zigzag then
Double Zigzag is auto understood.

Triple Zigzag Correction

Triple Zigzag correction is combination or series of three zigzag corrections [three (abc) cycles]
connected by link waves (X) between every (abc) cycle and its internal structure is (abc-X-abc-X-
abc).

Triple Zigzag correction is also a closed pattern like Diagonal Triangle and can have triangle or
parallel Wedge shape.

The individual internal (abc) cycle of Triple Zigzag can have any pattern out of Simple Zigzag
Correction, 3-3-5 Flat Correction or Irregular Correction.

Link wave (X) generally has Corrective Pattern but it also has unidentifiable pattern some times.

There is no particular Fibonacci projection/retracement limit for inner (abc) cycles of Triple
Zigzag but Every next (abc) cycles must complete beyond the end of previous (abc) cycle. Means

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2nd (abc) cycles must complete beyond the end point of 1st (abc) cycle and 3rd (abc) cycle must
complete beyond the end point of 2nd (abc) cycle.

Wave (X)1 can breaks beyond the start point of 1st (abc) cycle, means wave (X)1 can be Irregular
but it is a rare case. Otherwise wave (X)1 completes before the start of 1st (abc) cycle most of the
time. Wave (X)2 cannot break beyond the start point of (X)1.

Have a careful look at Image (13.1) to understand Triple Zigzag Correction Visually.

(Image 13.1) Triple Zigzag Correction

Drawing the line of Wedge/Pattern:

Drawing correct lines is most important step for confirmation this pattern and to identify its
completion/breakout. The process of drawing line of Triple Zigzag Correction is exactly same as
Diagonal Triangles.

 1st line must be drawn joining the end points (tip) of 1st (abc) cycle and 2nd (abc) cycle.

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 [Complex Correction]

 2nd line must be drawn joining the end points (tip) of both (X) waves.

 3rd (abc) cycle (last) need not to touch the line joining end points of 1 st and 2nd (abc)
waves. 3rd (abc) cycle can complete at or before the line joining end point of 1 st and 2nd
(abc) cycles but cannot breaks out of this line.
 Breakout always happens through the line joining wave (X)1 and (X2) after completion of
pattern and price rarely enter back into the pattern again after breakout.

 Most important, lines joining the end points of wave (abc) cycles and (X) waves should
not be broken or disturbed. Means, no part of any wave can be out of these lines unless
the pattern is completed. Breakout happens only through extended line joining wave
(X1)-(X2) after completion of whole pattern.

Have a careful look at (Image 13.2) to understand it visually: -

(Image 13.2) Drawing lines of Triple Zigzag Correction

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Personality of Triple Zigzag Correction: -

Triple Zigzag correction is most confusing pattern of Elliott Wave Theory because it repeats
correction after correction and we can’t identify which pattern its inner waves will have.

We can never expect in advance if a Simple (abc) correction will turn into Double Zigzag or if
Double Zigzag Correction is going to convert into Triple Zigzag Correction. We can confirm it
after its completion only. So, there is no confident way to predict a Triple Zigzag Correction in
advance and we should not.

Triple Zigzag Correction is most confusing but breakout after completion of Triple Zigzag is
always aggressive and we generally see a great aggressive move after breakout from the pattern.

Triple Zigzag correction is a tug of war between buyers and sellers which make price to move up
and down within a range for long time. But breakout from this range bound pattern makes mass
traders/investors confident about the trend and they start taking action in the direction of
breakout aggressively after a long wait.

Importance of Triple Zigzag:

I am always excited after identifying the formation of Triple Zigzag as I feel it as jackpot
opportunity after its completion. The most important factors of this correction are: -

1. Reversal after completion of this correction is aggressive most of the time which is good for
quick profits and it is best suitable for buying options.

2. Price rarely enters back into the pattern after breakout which gives very low stop loss for
very high profit probability.

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 [Complex Correction]

Examples of Triple Zigzag Correction on Real Charts: -

The chart shown in (Image 13.3) is taken from my old Analysis Report of Aug 2014. The Triple
Zigzag correction marked on this chart started on 25 July 2014 and completed on 08 Aug 2014
and Nifty gave 11% points move within 8-10 sessions after giving breakout from this Triple Zigzag
Correction. This Triple Zigzag Correction was completed as Converging Triangle.

(Image 13.3) Triple Zigzag Correction

There is another example of Triple Zigzag correction as Expanding Triangle Pattern shown on
(Image 13.4). This pattern started on 08 Sept 2014 and completed on 17 Oct 2014. Please have a
careful look at chart.

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(Image 13.4) Triple Zigzag Correction on Real Chart

Observe the move after breakout from this Triple Zigzag Correction. Price didn’t enter back into
the pattern after breakout. Observe the personality of inner waves of this pattern. There were
huge volatile swings with gap openings.

Observe the drawing of lines of this Triple Zigzag Correction. None of the line is disturbed during
the pattern, only breakout from lines joining (X) waves happened after completion of correction.

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 [Complex Correction]

Let me show the after effect of these Triple Zigzag corrections on Bigger Time Frame Chart
(Image 13.5)

(Image 13.5) Nature of move after Breakout from Triple Zigzag Correction

This is daily time bar chart of Nifty showing move after 14 July 2014. The corrections I explained
on previous charts (Image 13.3 and 13.4) are marked here in this bigger time frame chart. Just
observe the personality of move after Breakout from pattern and Price didn’t enter within
pattern again after breakout.

You have seen Triple Zigzag Correction as Expanding Triangle and Converging Triangle, now let
me show you the same pattern as parallel wedge. Please look at (Image 13.6) carefully.

This triple zigzag correction was in upward direction in downward trend and was formed in a
single session on 5 minutes time bar chart. This Triple Zigzag Correction was identified on 09 Dec
2014 and taken from my old analysis report.

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(Image 13.6) Triple Zigzag Correction on 5 Minute Chart

These are some practical examples of Triple Zigzag Corrections I had shown from my old analysis
reports. I will explain this pattern live through my analysis reports whenever I identify the same
in future.

Double Zigzag Correction

Double Zigzag correction is also same as Triple Zigzag but it has only 2 (abc) cycle connect by 1
link wave (X) and structure is (abc-X-abc). Other difference is that Double Zigzag is open pattern
and we need not to draw line, it can be identified by calculating inner wave only.

Same as in Triple Zigzag Correction, 2nd (abc) must complete beyond the end point of 1st (abc)
cycle if wave (X) is not Irregular.

But 2nd (abc) cycle can also complete before the end of 1st (abc) cycle if wave (X) is Irregular.

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 [Complex Correction]

Please look at (Image 13.7) to understand it visually.

(Image 13.7) Double Zigzag Correction

Inner (abc) cycles can have any corrective pattern out of Simple Zigzag, Flat Correction or
Irregular Correction. Wave (X) can have any corrective pattern.

Examples of Double Zigzag Correction on Real Charts: -

The chart shown in (Image 13.8) is taken from my past analysis report. The correction completed
from 10893-10557 is perfect example of Double Zigzag Correction with normal wave (X). Please
have a careful look at the chart: -

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[Practical Application of Elliott Wave Principle]

(Image 13.8) Example of Double Zigzag Correction

There is one more example of Double Zigzag Correction with Irregular (X) wave on Nifty chart.
This chart is taken from my old analysis report.

Have a careful look at (Image 13.9): -

8 4
 [Complex Correction]

(Image 13.9) Example of Double Zigzag Correction

This Double Zigzag Correction with Irregular Wave (X) was formed in Aug 2016 and is a perfect
example.

Wave (X) of this Double Zigzag Correction have Simple Zigzag pattern and completed beyond 1st
(abc) cycle.

Again, these are just couple of examples I had shown from my old work. Otherwise I will explain
the same pattern live on my blog whenever I identify its formation on live chart.

So, all the 7 patterns of Elliott Wave Theory are explained in details and every single move on
any chart can be calculated with these 7 patterns. Please read carefully, try to understand and
memorize their structure, calculation and rules.

You can identify the formation of these patterns at first look if you have their picture in your
mind. It is easy to understand these pattern if you approach correctly because the all patterns
are interconnected to each other.

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[Practical Application of Elliott Wave Principle]

Most of the pattern I had explained are in upward direction but they forms exactly same in
downwards direction also. Suppose, I mentioned Impulse as Main/Bullish/Upward trend but
wave (C) forms in downward direction and wave (C) is also an Impulse. Wave (C) also have 12345
as inner waves and these 12345 waves in downwards direction will have all of these patterns.

8 6
 [Extended and Failure Waves]

CHAPTER 14

Extended and Failure Waves

A wave that extends beyond its normal projection is called as extended wave. We need to know
the criteria for extended waves because every wave reflects the probabilities and personality of
next wave. Elliott mentioned that wave 5 is main candidate for extended wave but I observed
wave 3 extended most of the times.

We learnt earlier that any one impulse among 3 impulsive (wave 1 or 3 or 5) must be extended
but we generally see wave 3 or wave 5 as extended and wave 1 is the smaller one in most of the
cases. We also see both wave 3 and 5 as extended. So, I am going to explain the criteria for
extended waves: -

Extended Wave 3

(Image 14.1) Extended wave 3

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[Practical Application of Elliott Wave Principle]

The normal projection limit for wave 3 is 100%-161% with respect to wave 1 but it can extend
anywhere till 461% or even higher because there is no maximum definite limit for projections of
wave 3.

Wave 3 till 161% projection is considered as normal wave but wave 3 when projects more than
161% of wave 1 becomes extended and we call it “Extended Wave 3”. Please have a carefully
look at Image (14.1) to understand Extended wave 3 visually.

Extended Wave 5

The normal projection limit for wave 5 is 38%-61% with respect to total move till wave 3 (from
start of wave 1 to end of wave 3). Wave 5 projecting more than 100% is a rare case.

Wave 5 up to 61% projection is considered as normal wave but when wave 5 projects by more
than 61% is called as “Extended Wave 5”.

(Image 14.2) Extended wave 5

8 8
 [Extended and Failure Waves]

Please look at Image (14.2) to understand extended wave 5 visually.

We must be cautious after seeing more than 61% projection of wave 5 because we often see
sharp and fast reversal after completion of extended wave 5 which corrects whole wave 5 in
quick time.

But, you may not see full wave correction if extended 5th is inner/smaller/lower degree wave
within bigger wave (3). The rule of 100% retracement of extended wave 5 is applicable for main
wave 5 or inner wave (v) of (1) or (5).

Most of the stocks and indexes had major extended wave (5) in 2008 and the whole bull rally of
last 8-13 years was retraced in just 1 years.

Please look at life time chart of Nifty on (Image 14.3)

(Image 14.3) Personality of Reversal after extended wave 5

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[Practical Application of Elliott Wave Principle]

Please have a careful look at chart. The inner wave (v) of major wave (1) was highly extended in
2008 (projected almost 100%). Same extended wave (v) was retraced 100% within a year to
complete wave (2).

This is just a simple example, otherwise you will witness extended wave 5 th and its reaction
frequently through my analysis report on Sweeglu Elliott Waves Blog.

Failure Wave

I never had seen any convincing failure wave in my whole Elliott Wave Career. But still I am
covering the topic about failure wave because RN Elliott’s mentioned it in his research. So, the
topic “Failure Wave” I am just explaining theoretically with an example but I didn’t observe it.

RN Elliott said, Failure wave is only applicable for wave 5. Wave 5 called as failure when it fails to
break beyond the end of wave 3. 5th wave failure is very rare case and happens mostly in case of
sudden drastic news/event and it often results in sharp reversal.

Generally, if we are expecting wave (5) and an Impulse Pattern completes before the end of
wave 3, then we consider that Impulse as inner wave (i) of (5) and expect an extended wave 5 th.

But, it can also be a failure wave 5 (in rare cases) which failed to achieve its minimum
requirement. The correction may be faster and bigger. So, we must have a strict stoploss just
below end of wave 4 if we are trading wave 5 to prevent huge loss.

Failure 5th wave always confuses because we don’t generally expect it, same can results in heavy
losses if trading we are trading without stoploss.

9 0
 [Extended and Failure Waves]

(Image 14.5) Failure Wave

Have a look at chart on (Image 14.5) for example of failure 5th wave. Wave 3 completed at 8160
but wave 5 reversed from 8159 only. It is 5 minutes time bar chart of NIFTY covering the move of
16-17 Sept 2014.

I am giving this example just to show how a Failure wave looks like if it happens otherwise I
personally am not convinced with it.

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[Practical Application of Elliott Wave Principle]

CHAPTER 15

Alternations

There are some exceptional rules of alternation in Elliott Wave Theory. These rules are observed
and somewhere helpful in practical application of EWT. Some of these rules are only exceptional
and some are mandatory. These rules can be used as guidelines during practical application of
Elliott wave principles.

Rule of Alternation for Corrections

Wave 2 and 4 are two main corrective waves within an Impulse and there are four types of
Corrective Patterns i.e Simple Zigzag, Irregular Correction, 3-3-5 Flat Correction and Complex
Correction.

Rule of Alternation for Correction says that “wave 2 and wave 4 of same impulse cannot have
exactly same Corrective pattern”

Means, if wave 2 is Simple Zigzag then you can expect wave 4 as Flat, Irregular or Complex but
not the same Simple Zigzag.

And if wave 2 is Complex Correction then you can expect wave 4 as Simple, Flat or Irregular but
not the same Complex Correction.

So, if you see wave 2 was Simple Zigzag, you must avoid trading wave 4 as it may unfold as some
Complex type of Correction which is really difficult to identify.

Rule of Alternation for Extensions (Mandatory)

Wave 1, 3 and 5 are three Impulsive waves within an Impulse. Rule of Alternation for extensions
says that any one Impulse out of 1, 3 or 5 must be extended. We ignore wave 1 as extended
because it is a base, so we expect only wave 3 or 5 as extended. This is a mandatory rule and
must be followed.

So, if you see wave 3 was normal wave (less than 161%) then you must expect wave 5 as
extended wave. In the same way, if you see wave 3 is extended (above 161%) you can expect
wave 5 as normal wave (below 61%).

9 2
 [Alternations]

Here, if you are seeing normal wave 3, then you can trade for next wave 5th in hope of handsome
profit expecting it extended. Especially if you see wave 4 as Irregular Correction or Flat
Correction after normal wave 3, you can buy aggressively for 5th wave.

Note: Many EW practitioners get confused with this rule of alternation for extensions. Many
analysts understand this rule as “Only one out of wave 3 or 5 can be extended” which is wrong.
The actual rule is “One out of wave 3 or 5 must be extended”.

Means, any one out of wave 3 and 5 within same Impulse must be extended but both wave 3
and 5 can also be extended. Both the waves 3 and 5 not extended is impossible, any one must be
extended or both can be extended.

Practical examples for “Rules of Alternations” will be explained through my analysis reports on
my blog because it is a frequent activity on real charts.

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[Practical Application of Elliott Wave Principle]

CHAPTER 16

Overlapping of wave (4) with (1) when wave (2) is Irregular Correction

It is a mandatory rule that “Wave (4) cannot break the end of wave (1)” within Impulse or we can
say that “Wave (4) can not overlap wave (2)”. We have two statement of same meaning: -

Wave (4) can not overlap (1)

Wave (4) can not overlap (2).

Both these statement are absolutely same in normal conditions because end of wave (1) is start
of wave (2). If wave (4) is overlapping wave (1) means it is also overlapping wave (2).

But both these statements make difference when wave (2) is Irregular Correction. Please look
carefully at (Image 16.1) to understand it visually.

(Image 16.1) Overlapping of wave (4) with (1) when wave (2) is Irregular Correction

9 4
 [Overlapping of wave (4) with (1) when wave (2) is Irregular Correction]

When wave (2) is Irregular Correction then “Overlapping of wave (4) with (1)” and “Overlapping
of wave (4) with (2)” is not same. Because, wave (2) breaks beyond the end of wave (1) in this
case.

In this case,

Wave (4) overlapping with wave (2) will be considered when wave (4) breaches the end of wave
(b) of (2) because wave (b) is a part of wave (2).

But wave (4) overlapping wave (1) will be considered when wave (4) breaks the end of wave (1).

So when wave (2) is Irregular Correction, wave (4) breaching the end of wave (1) is considered as
overlapping and not the end of wave (b) of (2).

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[Practical Application of Elliott Wave Principle]

PART – II

PRACTICAL APPLICATION OF ELLIOTT’S WAVE THEORY

We learnt about all the rules and principles of Elliott’s Wave Theory in previous chapters and
now it’s the time to discuss about practical application of these rules to identify patterns, doing
calculations and to use them for profitable trading/investment.

It is easy to plot charts, counting waves and identifying patterns on already completed market
move, but it is not as easy to identify and predict the moves before it happens.

Remember, we are not here to identifying counts and pattern that are already completed but we
are here to use EWT to make money and money can be made only if we identify the future
moves well in advance by analyzing previous waves.

I assume that you are already familiar with the concepts of Elliott Wave Theory explained till
now. Basically there are four different pillars of Elliott Wave Theory and these are: -

1. Wave Cycle
2. Wave Personalities
3. Fibonacci Ratios
4. Wave Patterns

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 [PRACTICAL APPLICATION OF ELLIOTT’S WAVE THEORY]

And we need to combine all these four studies for applying Elliott Wave Analysis practically on
real charts. EWT is confusing and incomplete if you ignore even any one of these factor, and
market movements can never be identified without combining these four different studies.

I already explained everything about it in earlier chapters but let me explain a bit about the role
of these diffident studies: -

Wave Cycle is a base of Elliott Wave Theory or we can say it is the road map of this analysis
method. You cannot counts waves without having understanding of Elliott Wave Cycle. EW cycle
helps you to identify the current position of price within a wave cycle, so that we can get the
idea of next wave.

Wave’s Personalities actually means the general behavior of the waves. Every wave has its own
personalities and understanding of these personalities can help us to confirm our wave counts.
These personalities also give us the idea about the nature of next move. Wave’s Personalities are
already explained in earlier chapters.

Wave Pattern represents the structure of a wave and it shows the position of price within the
wave. Every wave has its own definite patterns which help us to identify if a waves is completed
or not. It also gives an idea about general trend and indicates where a particular wave is going to
complete. It gives the idea of trend reversal and same is explained in earlier chapter.

Fibonacci Ratios helps to calculate minimum/maximum limit of the waves. Every wave has its
own set of Fibonacci Projections and Retracement limits which help us to calculate estimated
completion of waves. We can calculate minimum targets and stoploss because of Fibonacci
Ratios only.

As we see, every of this study/part has different role but if we learn the tricks to analyze a chart
by combining these four studies then every single move of market can be calculated and
understood.

EW Cycle is a base of EWT without which you can’t even imagine analyzing a chart. But when you
understood EW Cycle and starts counting waves then Wave Patterns and Fibonacci Ratio are two
most important tools to identify market moves and to calculate low risk Entry Levels, Exact
stoploss and Minimum Targets.

So, let me explain how we can combine Wave Patterns and Fibonacci Ratios to calculate market
move and prepare low risk/high reward trading strategies.

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[Practical Application of Elliott Wave Principle]

CHAPTER 17

Combining Elliott Wave Patterns and Fibonacci Calculations

Theory part is over, now let’s move straight to the point.

Let me assume a condition where we are expecting an impulse wave in progress, we already
have estimated end of wave (4) and expecting next wave (5) to start. Please have a careful look
at (Image 17.1)

(Image 17.1) Combining Fibonacci projection and Pattern of wave (5)

Wave cycle shows that there will be wave (5) after wave (4). So, our first requirement is to be
aware about the Patterns and Fibonacci Projections of wave (5). We already know that:-

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 [Combining Elliott Wave Patterns and Fibonacci Calculations]

1. Pattern wise, wave (5) can have only two patterns, either “Impulse” of “Ending Diagonal
Triangle”. So, we already have idea that next wave (5) is going to be either “Impulse” of
Ending Diagonal Triangle (ED)”.

2. Fibonacci Projection wise, wave (5) projects minimum 38% in any case. 38%-61% is normal
projection for wave (5). But there is no exact maximum limit for projection of wave (5), it can
project even higher towards 100%-123% or 200%. Wave (5) projecting more than 61% is
called as Extended Wave (5).

Now, according to the patterns and Fibonacci Ratios of wave (5), it is either going to be Impulse
of ED and it will project minimum 38%.

At this point of time, we don’t know if wave (5) is going to be Impulse or ED because it is just
started and we need some structure on chart to identify its pattern. But we know that wave (5)
will project minimum 38%.

So, first we need to calculate normal 38%-61% projection of wave (5) and we will concentrate on
its pattern later when it reaches minimum 38% because there will be a formation of some wave
structure within wave (5) at that time.

Now, 38% projection of wave (5) is our minimum target for the trade which can extend to 61%
or even higher. If we are trading then we will trade for the minimum target range of 38%-61%
projection for wave (5) using stoploss just before the start of wave (5).

Further, we will look at internal pattern of wave (5) to calculate further targets and trailing
stoploss when (5) reaches 38%.

Please look at the (Image 17.1) carefully where I explained the whole process visually.

Next Step: -

Suppose wave (5) achieved minimum 38% projection. Now, we need to leave Fibonacci Ratios
part and have to concentrate on pattern of wave (5) because Fibonacci has done its job.
Minimum 38% projection is achieved but there is no maximum limit, we will keep next 61%-
100% projection in mind but just for awareness.

Wave (5) achieved its minimum projection, so now we need to see if the pattern of wave (5) is
also completed or not. If pattern is not yet completed then it can project even higher. Both
pattern and minimum 38% projection need to be completed for completion of wave (5).

So now, we will concentrate on formation of pattern within wave (5).

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[Practical Application of Elliott Wave Principle]

Suppose wave (5) is indicating the signs of impulse. We already know that Impulse is a 5 wave’s
move with some definite rules and guideline (I explained it deeply in earlier chapter “Impulse”).

(Image 17.2) Combining Fibonacci projection and Pattern of wave (5)

Please look carefully at (Image 17.2). I had shown that wave (5) achieved 38% projection but
pattern is not completed yet. Wave (5) is in progress as Impulse pattern which is within its inner
wave (iii) [shown by blue lines], so we can expect wave (iv) downwards followed by wave (v)
upwards for completion of wave (5) [shown by dotted blue lines].

Further we can calculate retracement for wave (iv) and projection for wave (v) the same way we
calculated for main wave (4) and (5). Or once we have end of wave (iv) and 38% projection of
wave (v), then we can analyze the progress of wave (v) separately on other chart using same
rules and guidelines.
There are some other conditions you are going to face during practical analysis, So, let me
explain about the tricks to handle those conditions.
1 0 0
 [Combining Elliott Wave Patterns and Fibonacci Calculations]

Conditions 1: When pattern of a wave is completed but minimum projection is not achieved:

Suppose, wave (4) is completed and (5) is in progress. And within wave (5), an Impulse pattern is
completed but minimum 38% projection is not achieved. Please look carefully at (Image 17.3).

(Image 17.3) Combining Fibonacci projection and Pattern of wave (5)

In this case, when Impulse [pattern of wave (5)] is already completed but wave (5) didn’t achieve
minimum 38% projection, you can’t assume wave (5) as completed because wave (5) needs to
project minimum 38%.

This impulse completed before 38% projection can be taken as inner wave (i) of (5) where (ii),
(iii), (iv) and (v) are still pending. You can also expect highly extended wave (5) in this case
because when inner wave (i) of wave (5) [impulse] is near to 38% then whole wave (5) can
extend much higher.
Condition 2: When minimum 38% projection of wave (5) fall below end of wave (3)

1 0 1
[Practical Application of Elliott Wave Principle]

Wave (4) retraces more the normal 38% sometimes, so minimum 38% projection for wave (5)
falls below end of wave (3) in such case. Please look at (image 17.4) carefully to understand this
condition.

In such cases, when minimum 38% projection of wave (5) falls before the end of wave (3) then
minimum target for wave (5) will be end of wave (3), not 38% projection. Because, wave (5) will
be qualified only after breaking the end of wave (3).

(Image 17.4) Combining Fibonacci projection and Pattern of wave (5)

The minimum requirements for the completion of wave (5) are: -

1. Wave (5) must complete after the end of wave (3).

2. Wave (5) must project minimum 38%.
3. Wave (5) must be completed as “Impulse” or “Ending Diagonal Pattern”.
The aim of this chapter was to give you an idea about how we can use/combine different rule of
Elliott Wave Theory to apply it practically on real charts. I explained this example of “combining
Pattern with Fibonacci Calculations” with respect to wave (5) but there will be 100s of such
1 0 2
 [Combining Elliott Wave Patterns and Fibonacci Calculations]

conditions for different waves and every single situation can be solved by combining wave cycles,
Fibonacci ratios, patterns and personalities.

Nothing is new in this chapter and we just used our common sense to apply already known rules.
You will see me doing the same every day through my analysis reports.

1 0 3
[Practical Application of Elliott Wave Principle]

CHAPTER 18

Importance of 38% Retracement

38% retracement ratio is very important in practical application of Elliott Wave Theory.

1. 38% retracement helps in calculating trailing stoploss for our trades and carrying positional
traders for maximum profit.
2. It gives most reliable breakeven/trend reversal point in trendy market.
3. It helps to calculate low risk entry levels and small stoploss even in tough conditions.
4. It helps in confirming the pattern in confusing conditions.

So in this chapter, I am going to explain the importance of 38% retracement in different difficult
conditions.

Basic Logic behind 38% retracement:

38% retracement ratio is mainly applicable for wave (4). You learnt in earlier chapters that 23%-
38% is normal retracement ratio for wave (4), means 38% retracement is maximum retracement
ratio for wave (4) in most of the cases.

{Please note that wave (4) can retrace more than 38% also but in rare cases. Maximum limit for
wave (4) is end of wave (1). But we always prefer normal conditions over rare conditions during
analysis, so normal conditions says that wave (4) rarely retrace more than 38%.}

When we say 38% retracement for wave (4), means 38% retracement of wave (3) because wave
(4) retraces wave (3) or “retracement for wave (4) is calculated with respect to wave (3)”.

So, when we are expecting that wave (3) is completed or is in progress, we always place stoploss
beyond 38% retracement of wave (3) for existing trade and wait for normal 23%-38%
retracement of wave (3) to enter fresh trade with same stoploss. Because there will be wave (4)
after completion of wave (3) and wave (4) normally retrace 23%-38% and rarely retrace more
than 38%.

Please have a careful look at (image 18.1) to understand it visually.

1 0 4
 [Importance of 38% Retracement]

(Image 18.1) Importance of 38% Retracement

But identification of waves is not as easy as shown on this imaginary image. Many times the
patterns are in such formation that you will not be able to identify the inner waves confidently.

So, now we are going to learn how we can use 38% retracement to manage such confusing
conditions.

There will be some cases when: -

1. The structure of wave (3) is making it difficult to identify its inner waves and you are not
confident if wave (3) is already completed or still in progress.

2. Wave (4) is so small or negligible that you are confused if wave (5) is in progress or it is still
(3) in progress.

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[Practical Application of Elliott Wave Principle]

3. Sometimes it is difficult to identify inner waves of (3) and you are confused if small correction
at the end is actually wave (4) or inner wave (iv of 3).

4. Sometimes pattern of wave (2) is so complex or wave (2) is so small that you are not be able
to identify wave (2).

(Image 18.2) Importance of 38% Retracement

Please look at (Image 18.2) carefully. I assumed a condition where it is tough to identify if it is
wave (3) or (5) in progress.

In this case, we will just calculate 23%-38% retracement of the total move started from end of
wave (2) (start of wave 3). We will keep this 23%-38% retracement levels for the following
purposes: -

1 0 6
 [Importance of 38% Retracement]

1. If we are already holding the trade then 38% retracement levels we will keep in mind as
stoploss for our trade.

2. If we want to plan fresh trade then we will wait for 23%-38% retracement or for some clear
corrective pattern to form. If we see any clear confident pattern within 38% correction then
we will plan next trade based on that clear pattern, otherwise 38% will be assumed as
breakeven point.

Reasons behind taking 38% retracement as breakeven point

 If wave (3) is completed or in progress than next wave (4) rarely breaks 38% retracement.

 If expected (3) retraces deeper than 38% then we can assume that the retracement is not
wave (4) but something else, i.e. may be wave (5) is already completed and the retracement
is some other wave of higher degree. The wave formation within this retracement will give
clue of next move.

Let’s move one step further to understand it better.

Suppose we are not sure if wave (3) or (5) completed at top and there is almost 23%-38%
retracement from top. Then we need to look at the pattern formed within this 23%-38%
retracement.

Please have a careful look at (Image 18.3) on next page and then read further explanation.

I displayed condition that there is clear Simple Zigzag Correction pattern formed within 23%-38%
retracement, so now we can also analyze this Simple Zigzag pattern formed within 38%
retracement on separate lowest time frame.

We already had 38% retracement levels and now we will also calculate inner waves of Simple
Zigzag pattern formed within that 38% retracement.

So within (abc) Simple Zigzag correction, we can calculate normal 100%-123% projection for
wave (c) because wave (c) projects 100%-123% in most of the cases.

Now, if the 38% retracement from top and 100%-123% projection for wave (c) is falling in same
range then we can assume that wave completed at top as wave (3), corrective pattern formed
near 38% retracement as wave (4) and we can plan trade for wave (5) with stoploss some points
below 38% retracement.

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[Practical Application of Elliott Wave Principle]

This trade will give a very good risk reward, loss is negligible if we get wrong but profit is great if
we prove right.

(Image 18.3) Importance of 38% Retracement

NOTE: 38% retracement is normally calculated with respect to wave (3) only. BUT we can also
calculate 38% retracement of the total combined move covered by wave (1), (2), (3) [from start
of wave (1) to end of wave (3)] in following conditions : -

1. When wave (2) is not identifiable

2. When end of wave (2) is very near to start of wave (1)

Have a careful look at Image 18.4

1 0 8
 [Importance of 38% Retracement]

(Image 18.4) Importance of 38% retracement

1 0 9
[Practical Application of Elliott Wave Principle]

CHAPTER 19

Alternate Wave Counts

There are some cases when it is difficult to identify which wave is completed at top or bottom. If
you are not able to conclude which wave is completed then you will not have idea about the
nature and pattern of next wave.

Because, if you know that wave (3) is completed then only you will be aware that next move will
be wave (4) having any corrective pattern with normal 23%-38% retracement of wave (3).

But, when you don’t have idea if the wave completed at top is either wave (3) or (5) or
something else then there is no way to get idea of next wave. We can use alternate wave counts
to some extent in such situations until we get clarity.

Before going further, let me give some basic ideas behind taking alternate wave counts. If you
understand Elliott Wave Cycle then any wave or move can have only two basic patterns, a wave
can either be Corrective or Impulse pattern.

A corrective pattern has 3 Inner Waves we mark as (ABC).

Impulse has 5 inner waves we mark as (12345).

But waves (A) (B) (C) and (1) (2) (3) has almost same rules and personalities respectively.

So let it be a any wave, it will have either 3 waves pattern (Corrective) or 5 waves pattern
(Impulse) and personality of first 3 waves of both the patterns is almost same. So it doesn’t
matter if wave is progressing as (ABC) or (12345), we can analyze first 3 waves in the same way.

We can assume first 3 waves as wave (A) or (1), (B) or (2) and (C) or (3) because rules and
calculations will be same till the completion of wave (C) or (3). Look at Image 19.1

1 1 0
 [Alternate Wave Counts]

(Image 19.1) Alternate Wave Counts

Now, there will be two conditions after completion of wave (C) or (3): -

1. If wave (C) is completed, means (ABC) correction is already completed and there will be
reversal for new high/low.

2. If wave (3) is completed, means there will be wave (4) and wave (5) later. And we know that
wave (4) retraces normally 23%-38% and it rarely retrace deeper than 38%.

So after completion of wave (C or 3), we need to wait for 23%-38% retracement of wave (C or 3)
and need to identify the pattern of this retracement. Wave (C or 3) means, it is either wave (3) or
wave (C) in progress.

1 1 1
[Practical Application of Elliott Wave Principle]

Now, after seeing 23%-38% retracement of wave (C or 3): -

If we are identifying a clear Corrective pattern within 23%-38% range then we can assume that
wave (3) is completed, this 23%-38% retracement is wave (4) and we can calculate minimum
targets for wave (5) and trade accordingly.

Please have a careful look at Image 19.2 to understand it visually.

(Image 19.2) Alternate Wave Counts

1 1 2
 [Alternate Wave Counts]

But, if 38% retracement of wave (C or 3) is broken and we are identifying an Impulsive pattern
after completion of wave (C or 3), then we can assume that it was wave (C) completed and new
impulse for new high/low is started.

Please have a careful look at (Image 19.3) for visual explanation.

(Image 19.3) Alternate Wave Counts

I explained about “Alternate Wave Counts” using imaginary image because aim was to explain
basic concept. I am not giving any example on real chart because you will get it frequently
through my analysis reports on my blog.

1 1 3
[Practical Application of Elliott Wave Principle]

CHAPTER 20

38% Retracement Breakout Trading Technique

Stock Market experts say that 61% retracement is a Golden Ratio. But let me show you how 38%
retracement is way more golden than 61%.

This 38% retracement breakout strategy is result of my years of observations and research and
you will see that I am using this 38% retracement breakout technique almost every day in my
analysis to identify low risk high rewarding trades.

There is nothing new in this technique, it is based on the rules and Fibonacci calculations of
Elliott Wave Theory we already learnt in earlier chapters. But this technique is most accurate and
most effective to identify reversals and high rewarding trade setups.

We can set up a profitable trade even when we are wrong at analysis, that’s why I stated that
this 38% retracement breakout strategy is most accurate and effective. This single technique is
enough to get maximum benefits out of Elliott Wave Analysis.

Let me explain the technique first, and then I will explain the concepts behind this strategy.

38% Retracement Breakout Strategy:

Whenever there is a Simple Zigzag (abc) move and 38% retracement of inner wave (c) of Simple
Zigzag breaks then,

 38%-23% retracement of wave (c) is low risk buying/selling range.

 23% retracement of (c) is stoploss for buying/selling. 23% is not exact stoploss but stoploss
can be placed some points beyond 23% retracement.
 Start of wave (c) is minimum target and start of wave (a) is 2nd target.

Eligibility for Simple Zigzag (abc) pattern:

 Wave (a) must be Impulse.

 Wave (b) must retrace wave (b) by 38%-61%.
 Wave (c) must be Impulse and must project by more than 100%.

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 [38% Retracement Breakout Trading Technique]

Confirmation of Breakout:

38% retracement will be confirmed after close of complete candle above/below 38%
retracement of (c). It must be a complete candle (high and low of the candle must be
above/below 38% retracement).

Time frame of the candle depends upon on which time frame this (abc) pattern is formed. If
pattern is formed on 15 minutes chart then wait for close of a complete 15 minutes candle
above/below 38%. Or if pattern is formed on Hourly Chart then wait for close of a complete
hourly candle above/below 38% retracement.

You must be confused right now about the technique, so let me give practical examples on
charts to clear the confusions.

Please have a look at chart on (Image 20.1).

(Image 20.1) 38% retracement breakout technique

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[Practical Application of Elliott Wave Principle]

Look at the chart carefully and observe,

 Wave (a) completed from 14977-15243 as an Impulse

 Wave (b) completed from 15243-15081 as Simple Zigzag and retraced 38%-61%.
 Wave (c) is Impulse and projected more than 100%.

It didn’t mark retracement of wave (b) and projection of wave (c) on this chart for the sake of
clarity. You can calculate retracement for wave (b) and projection for wave (c) yourself as a
practice exercise.

So, the (abc) Simple Zigzag pattern is eligible here.

Now, 23%-38% retracement of wave (c) [from 15081-15431] is placed at 15348-15297 and a
complete 15 minutes candle is already closed below 38% retracement 15297, so breakdown
below 15297 is confirmed.

Note: this (abc) pattern is formed on 15 minutes chart, so I waited for close of a complete 15
minutes candle below 15297 to confirm break below 15297.

After confirmation of breakdown,

 15297-15348 {38%-23% retracement of wave (c)} will be Low Risk Selling Range
 Stoploss for selling will be some points above 15349 {above 23% retracement of wave (c)}
 15081 will be minimum target for selling {start of wave (c)}
 14977 will be 2nd target for selling {start of wave (a)}

Now, let’s have a looks at further move of Nifty after this 38% breakout below 15297.

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 [38% Retracement Breakout Trading Technique]

(Image 20.2) 38% retracement breakout technique

This is 15 minutes chart taken 2 sessions after breakout below 15297. Nifty entered thrice in
15297-15348 range (38%-23%) after confirmation of break below 15297 and then decline to
achieve targets 15081-14977 {Start of wave (a) and (c)}.

The example is given on (abc) pattern in upside direction. So, let’s look at another example on
(abc) pattern in downside direction.

Look at the same chart on (Image 20.1) and observe wave (b) from 15243-15081. This wave (b)
from 15243-15081 also have (abc) pattern. So, let’s look at this (abc) pattern (from 15243-
15081) separately to see if it followed 38% retracement breakout technique.

Have a look at chart on Image 20.3

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[Practical Application of Elliott Wave Principle]

(Image 20.3) 38% retracement breakout technique

This is 5 minutes time bar chart of Nifty. I used alternated wave counts on this chart.

The impulse move from 14977 is marked as wave (a or 1), (abc) Simple Zigzag correction from
15243-15081 is marked as wave (b or 2) and I am expecting wave (c or 3) upwards.

I also calculated normal 100%-123% projection for wave (c or 3). 15347-15409 would be
minimum target for (c or 3) if we are right at identifying the pattern.

Now, focus on wave (b or 2) from 15243-15081. It has Simple Zigzag (abc) pattern with,

 Inner wave (a) completed from 15243-15194.

 Wave (b) completed from 15194-15230.
 Wave (c) completed at 15081.

23%-38% retracement of wave (c) is placed at 15116-15137 and Nifty already closed a complete
5 minutes candle above 38% retracement 15137.

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 [38% Retracement Breakout Trading Technique]

So after confirmation of breakout above 15137,

 15137-15116 (38%-23% retracement) is support/low risk buying range.

 Stoploss is some points below 15116 (below 23% retracement)
 Minimum Target is 15230 {start of wave (c)}
 2nd target is 15243 {start of wave (a)}

Expected target range based on overall pattern is 15347-15409 {normal 100%-123% projection
for wave (c or 3)}

Nifty already entered in buying range 15137-15116 after close of a complete 5 minutes candle
above 15137.

Now’ let’s see how Nifty moved further.

(Image 10.4) 38% retracement breakout strategy

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[Practical Application of Elliott Wave Principle]

This is 15 minutes time bar chart taken next day after breakout above 15137. Nifty opened gap
up and achieved all targets.

Concept Behind 38% retracement breakout technique:

There is nothing new in this technique. It is based on retracement of wave (4) and alternate
wave counts. We use this strategy when we are not confident about overall pattern and we have
alternate wave counts.

Look at the chart on Image 20.4 again,

I marked wave (a or 1) at 15243, wave (b or 2) at 15081 and expecting wave (c or 3). These are
alternate wave counts.

These wave counts means, that this zigzag move (14977-15243-15081-15430) is either (1), (2),
(3) or (a), (b), (c). So, we have two possibilities, either (abc) or (123).

First Possibility, if wave (1) completed from 15977-15243, wave (2) from 15243-15081 and wave
(3) in progress. Then wave (4) should not retrace by more than 38% in this case because wave (4)
rarely retrace by more than 38%.

So, if wave (c or 3) retrace by more than 38% then possibility of wave (123) will get negated and
we will have only single possibility as (abc).

Look at image 20.5

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 [38% Retracement Breakout Trading Technique]

(Image 20.5) 38% retracement breakout technique

This is 15 minutes time bar chart of Nifty taken next day after the move of chart on Image 20.4.

We can see that 38% retracement of wave (c or 3) is broken after close of a complete 15 minutes
candle below 15297 and waves are also overlapped (wave 4 cannot overlap 1).

So possibility of (123) is negated and I marked this bounce from 14977-15431 as (abc).

Now, it is the time to be aware of the patterns of waves. We must know which wave can have
(abc) pattern. This is Simple Zigzag (abc) corrective pattern and wave (2), (4) and (B) can have
this corrective pattern.

So, if wave (2) or (4) or (B) completed from 14977-15431 then next wave (3) or (5) of (C) needs
to complete below 14977 (next Impulse always complete beyond the start of Correction). Thus
all the conditions are indicating decline below 14977.

But if the (abc) bounce from 14977-15431 is Irregular wave (B),

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[Practical Application of Elliott Wave Principle]

then 14977 will be the end of wave (A) next wave (C) need not be complete below the end of
(A). {Wave (C) of an Irregular and Flat Correction can also complete before the end of wave (A),
refer Irregular Correction and 3-3-5 Flat Correction}

So, in case of Irregular (B), we can expect (C) of Irregular Correction to complete at or beyond
the start of inner wave (c) of (B). That’s why I assume start of wave (c) as minimum target and
start of wave (a) as 2nd target.

These are just 2 examples but you will see me using this strategy every day in my analysis report
because nothing is better than this technique to identify low risk high rewarding trades.

We get exact low risk buying range, small stoploss and high rewarding targets with this setup and
risk reward is always more than 1:3. Means you can get profit even if you are right 40% of the
times.

Important points to remember:

Always wait for close of a complete candle above/below 38% retracement for confirmation of
breakout/breakdown. Although, wave (4) rarely retrace by more than 38% but it is not a
mandatory rule. Wave (4) can retrace by more than 38% in rare cases. So, close of a complete
candle above below 38% retracement will give confirmation and more confidence.

Always wait for low risk entry range (38%-23% retracement) after confirmation of
breakout/breakdown to enter the trade. Price enters in 38%-23% retracement again after
breakdown/breakout most of the time. You can miss 2-3 trades out of 10 if you wait for low risk
trading range but you will get best risk reward. Entering trade anywhere after
breakout/breakdown reduces risk reward.

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 [Important Techniques to Count Waves in Difficult Conditions]

CHAPTER 21

Important Techniques to Count Waves in Difficult Conditions

Elliott Wave theory is not as difficult to understand theoretically but it is not easy when we apply
it practically on real charts. Many times a wave structure on chart leave us confused, so I am
writing short notes on such conditions and also sharing ideas to tackle such difficult situations.

Counting Gaps and Steep Bars

Identifying waves with Gaps and Steep bars (sharp moves) is always difficult for an EWT analyst
because it is almost impossible to identify inner wave of such moves.

But we know that “Gaps and sharp moves” is a personality of wave (3), either it can be inner
wave (iii) or a major wave (3). So, whenever you see a gap or sharp bar just assume it as progress
of wave (3). This personality of wave (3) can help in wave counting in following ways: -

If you are not able to identify waves within a move, just look for a portion with gap and sharp
waves within that move. Mark that sharp wave with gap as wave (iii) or (3) and adjust the (1), (2),
(4) and (5) accordingly keeping Fibonacci retracements and patterns in mind.

You can assume any speedy move with gaps as progress of wave (3) until there is 23%-38%
correction. Even if the pattern of wave (3) is looks completed but is still maintaining its speed,
you can assume that wave (3) is still in progress because wave (3) can have highly extended inner
waves and it is always risky to estimate the top of wave (3).

This observation will help you to hold profitable trade with confidence. Suppose we traded for
wave (3) which bounced sharply with gaps/steepness and our position is in good profit and there
is no break in steepness. We can hold that trade with stoploss of 38% retracement expecting
more upside. This observation helps to ride big moves without exiting in hurry.

This observation also prevents us to take wrong trades against the trend. Normal tendency of
traders is to take a trade in opposite direction after seeing a big one sided move expecting pull
back but many traders lose big because trend never reverse. But the trader who understands the
personality of wave (3) will never take such trade blindly.

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[Practical Application of Elliott Wave Principle]

(Image 21.1) Reading gaps and steep bars

Have a careful look at chart on (Image 21.1) above. It was difficult to identify inner wave (i) and
(ii) of bigger wave (3). So I marked the move from 7862-8023 as end of wave (iii) ignoring wave
(i) and (ii). Overall big wave (3) is steep with Gaps.

Counting repeated Overlapping: -

Repeated overlapping is most difficult structure to read. We know that wave (4) can not overlap
(1) but waves overlap repeatedly sometimes to form consolidation type of pattern and leave us
confused.

We know that overlapping happens only in Leading Diagonal Triangle, Ending Diagonal Triangle
and in Complex Correction. Sometimes, repeated Impulsive followed by corrective waves sets
the base for a big move (explained in “Identifying Multi-bagger Stocks” chapter).

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 [Important Techniques to Count Waves in Difficult Conditions]

So, we can expect the formation of any complex pattern (LD, ED or Complex Correction)
whenever there is repeated overlapping of waves. But there is no way to identify an exact
Complex Pattern in advance, so we must wait for some time to get hint of exact pattern.

LD, ED and Complex Correction has different set of rules, so we must wait for some time to get
idea of exact pattern based on the rules and personality of previous waves.

Generally, we have only option to wait when there is overlapping or has possibility of Complex
Pattern because there is no way to identify it in advance. But you can trade inner/smaller waves
if you are experienced enough.

LD and ED still can be identified in advance if we are experienced because we know that it occurs
only for wave (1) and (5) respectively but it is Impossible to identify a Complex Correction
because minimum 5 corrective waves repeats in Complex Correction and these 5 corrective
waves can have any corrective pattern.

I am not giving any particular example for these conditions because this idea is based on
common sense but you will get many such examples in my analysis reports, because market is
never easy and we often face such tough conditions.

The Aim of this chapter: -

The aim of this chapter is to explain how we can face tough/confused conditions while doing
analysis and how we can use Rules, Personalities and our common sense to tackle such
conditions.

But these tough conditions are not limited to “Gaps and Overlapping”. You can face 1000s of
different confusing conditions because of different factors but you can mange every such
conditions using your common sense provided you are familiar with all the rules, patterns and
calculations of Elliott Wave Theory.

Getting confused about a pattern is a common thing. My analysis reports will give you ideas and
techniques to manage many of such tough conditions.

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[Practical Application of Elliott Wave Principle]

CHAPTER 22

Failure of Elliott Wave Analysis

Being failed in Elliott wave analysis or predictions is not a surprising thing. Failed analysis or
predictions doesn’t mean that you are wrong or Elliott Wave Theory failed. Sometimes we fail
because of our own ignorance and mistakes which we can control with experience, but change in
patterns is another main reason for failed analysis which can never be controlled.

Complex patterns like LD, ED, Complex Correction and Irregular Correction are such patterns
which even a top expert can’t identify in advance. There are cons in every analysis method and
these patterns are cons in Elliott Wave Theory. No one can identify stock market 100%
accurately and these are pattern which restrict an Elliott Wave Theory analyst to be 100%
accurate.

These patterns are not actually cons of Elliott Wave Theory but these patterns balance the law of
nature, otherwise one can identify stock market with 100% accuracy. Every complex pattern
starts with a simple pattern and then turns into complex (you must have experienced it in early
chapters), we always expect simple pattern and calculate moves accordingly but simple pattern
when turns into complex pattern prove us wrong and we must accept it because it is law of
nature.

Although, we can’t control the formation of complex pattern and failed analysis but we can
always limit our loss again these failures. “Personalities of waves” and “Fibonacci Calculations”
gives early signs of changing in patterns and trades can be protected with trailing stoploss. And
our common sense and techniques like “38% retracement” and “alternate wave counts” can
protect us from wrong/losing trades.

On the other hand, a complex pattern confuses for a time being but always gives low risk/jackpot
opportunity later. So, never lose hope when you get failed in analysis, it is law of nature and you
can’t control it. Just protect your trades with stoploss or avoid trades in tough conditions, you
will definitely get a best opportunity later.

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 [Trading with Elliott’s Wave Principle]

CHAPTER 23

Trading with Elliott’s Wave Principle

You learnt almost everything about Elliott’s Wave Theory and I also shared some practical
techniques useful for Elliott wave analysis.

In this chapter, I am going to show how you can apply Elliott’s Wave Principle practically in your
trades. I’m going to apply every rule and guideline (you learnt in previous chapters) on charts to
initiate trade, modify stoploss, carrying trade and exiting trade. Just try to understand how I am
applying same rules and observation on charts to initiate and manage trade.

This chapter will also explain every rule, guideline, calculation of entry levels, stoploss, targets,
counting waves, identifying pattern etc. Read it carefully and try to observe the conditions you
learnt in previous chapters.

This chapter have lots of charts, so don’t be overwhelmed and read every point carefully step by
step. Don’t be in hurry and just have patience to understand. I explained everything step by step
and in simple language, so don’t miss any step as every point is useful.

I am using NSE India Index NIFTY charts to explain this chapter as Nifty is most traded index in
India and almost every one of you is familiar about Nifty. I broke down the charts in steps to
highlight the concept. Let’s start with a blank live chart as you normally see when you open your
screen.

Just have a look at chart on (Image 23.1)

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[Practical Application of Elliott Wave Principle]

(Image 23.1) Trading with Elliott Wave Principle

It is just a random chart of Nifty. We can see that there is a sharp bounce from 7940 followed by
consolidation at top but I don’t have any idea about previous waves (wave formed before 7940).

Note: - We must have idea of the previous waves because having idea about previous waves will
give us more clarity about next wave. This charts is just taken as example because it fit better for
the purpose of this chapter

So, I can see a sharp bounce with gap up after 7940 and consolidation at top. Now, I need to
identify the pattern of this move by counting waves based on Elliott Wave Rules.

Let me show the probable counts I can mark for this move on (Image 23.2).

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 [Trading with Elliott’s Wave Principle]

(Image 23.2) Trading with Elliott Wave Principle

This is same 5 minute time chart of Nifty covering move from 7940 to 8023 with my wave
counts. There is lots of marking and text on this chart for explanation, so please read the chart
carefully step by step.

I can identify that an Impulse pattern completed from 7940 to 8023 with,

1. Inner wave (1) completed as small Impulse.

2. Wave (2) completed at 7948 (may be Irregular Correction) which retraced (1) by 38%-61%.
3. Wave (3) is sharpest wave with gap and is more than 300% (approx.) of (1).
4. Wave (4) retraced exactly 23% but pattern is not identifiable on this chart.
5. Wave (5) completed at 8023 and looks like a straight Impulse and achieved minimum 38%
projection.

Please look at inner wave counts of Impulse carefully and observe if every wave is following the
rules and Fibonacci calculations you read in earlier chapters. I marked the end points of waves
on this chart, so you can use Fibonacci Calculator and calculate Fibonacci
Retracements/projections for practice.
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[Practical Application of Elliott Wave Principle]

Next, there is 3-3-5 Flat Correction from 8023-8007 with,

1. Inner wave (A) of Flat Correction completed as (abc),

2. (B) is also (abc) wave completed at 8023 [exactly at the starting point of (A)].
3. Wave (C) completed at 8007 as sharp Impulse and projected about 100%-123% of (A).
This is one more perfect example of 3-3-5 Flat Correction, please compare with the rules you
read in earlier chapter.

Now, we know that an Impulse is completed from 7940-8023 but we don’t know which wave it
is, so I can’t get idea about next wave. But one thing I know, if an upside impulse completed from
7940-8023 followed by corrective wave completed from 8023-8007 then next wave started from
8023 must be impulse.

So, my next step is look at bounce after 8007 if I can get any opportunity to trade for this upside
Impulsive move. I can see a slow bounce after 8007 with overlapping which looks like a Leading
Diagonal Triangle, so my next step is to have a closer look at it on separate chart.

(Image 23.3) Trading with Elliott Wave Principle

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 [Trading with Elliott’s Wave Principle]

Have a careful look at chart on Image (23.3) to observe bounce after 8007.

The chart shown on (Image 23.3) is a 5 minute time bar chart covering move after 8007 and is a
continuation of previous chart shown in image (23.2). I deleted some move from this chart to
explain the purpose clearly.
I observed that the bounce from 8007-8025 looks like a Leading Diagonal Triangle (LD) Pattern.
This a lowest time frame chart so you can’t see inner waves very clearly but if you observe
carefully then bounce from 8007-8025 is carrying all the rules and guidelines of Leading Diagonal
Triangle pattern with,

A sharp inner wave (i) looks like an Impulse, inner wave (ii) looks like an Irregular Correction,
wave (iii) is again sharp and looks like an impulse, wave (iv) is Simple Zigzag Correction and sharp
wave (v) looks like an Impulse. It is making 5-3-5-3-5 pattern.

Calculations wise, inner wave (iii) is not extended and wave (v) is extended. And lines joining
inner wave (i)-(iii) and (ii)-(iv) are clear without any disturbance and wave (v) didn’t break line
joining wave (i) and (iii).

Overall, this bounce from 8007-8025 is just 18 points but carrying all the rules of a very complex
Leading Diagonal Pattern. This is a perfect example of LD, you can compare this move with the
rules explained in “Leading Diagonal Triangle” Chapter.

Now, we know that Leading Diagonal Triangle is always wave (1) of an Impulse, so we can expect
wave (2), (3), (4) and (5) later. And if this wave (1) is of 18 points then the bounce till completion
of wave (5) can be of 55-100 points at least. (We can always expect whole Impulse as minimum 3
times of its inner wave 1).

So, I waited for formation of wave (2) which unfolded as Irregular Correction. We can’t identify
inner waves of (2) clearly as it’s on smallest time frame but structure and personality of move
indicating this wave as Irregular Correction because inner wave (b) of (2) completed above the
start of (a).

I calculated normal 38%-61% retracement for wave (2) which is placed at 8018-8013 and wave
(2) already entered in this range whereas start of wave (1) is 8007.

Entering a Low Risk Trade with Small Stoploss:

Now, if wave (1) started from 8007 then wave (2) can never break below 8007. So, 8018-8013 is
perfect range to Buy Nifty with stoploss of 8006. My stoploss is just 7-12 points and I am
expecting minimum 50 points bounce as wave (3), (4) and (5). The trade is giving 1:4 risk rewards
with confidence.

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[Practical Application of Elliott Wave Principle]

So, I bought Nifty in 8018-1013 range using small stoploss of 8006 and will wait for further move.
Let’s see further move on next chart shown on Image (23.4).

The chart shown on (Image 23.4) is again 5 minute time bar chart of Nifty covering bounce after
8007 and is continuation of chart shown on (Image 23.3).

(Image 12.4) Trading with Elliott Wave Principle

In this chart, wave (1) completed from 8007-8025 as LD, wave (2) completed from 8025-8015 as
Irregular Correction and wave (3) or (4) may be in progress.

I bought in 8018-8013 range with stoploss of 8006 and Nifty registered high 8066 till now. I am
already getting 40-50 points profit with risk of 12 points. But, we must try to hold this trade until
the end of wave (5) to get maximum benefits. We can book half profit if trading in multi lot and
hold rest with trailing stoploss.

So, my next step is to analyze the pattern of further bounce after 8015 to check if wave (3), (4),
(5) is completed or still in progress.

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 [Trading with Elliott’s Wave Principle]

Now, if I look at bounce after 8015, it seems wave (3) is still in progress and inner wave (i) of (3)
also looks like Leading Diagonal Triangle. So, the bounce must be big if there is LD after LD.

My next step is to calculate 23%-38% retracement of progress for wave (3) because wave (4) can
retrace 23%-38% after completion of wave (3). Now, 23%-38% will be fresh support range and
38% retracement will be breakeven point or stoploss for longs. I explained about “Importance of
38% retracement” in earlier chapters.

Now 23%-38% retracement of wave (3) is at 8053-8046. So, 8053-8046 is fresh support range
which we can use to initiate fresh buying. 8046 is breakeven point and stoploss for fresh or
existing longs can be placed some points below 8046.

So, we have immediate support range and trailing stoploss for buying trade taken in 8018-8013
range. I will hold my longs with trailing stoploss of 8039 (7 points below 8046) expecting more
bounce. My trade will end in 20 points profit even if trailing stoploss triggers.

I will trail stoploss for our longs at 38% retracement after every rise and will hold until the
pattern (impulse) seems completed or until our trailing stoploss triggers.

Now, let’s see how our trade goes if we carry forward existing longs with trailing stoploss of 38%
after every rise.

Have a careful look at Image (23.5)

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[Practical Application of Elliott Wave Principle]

(Image 23.5) Trading with Elliott Wave Principle

This is 15 minutes time bar chart of Nifty covering move after 8007 and is continuation of
previous chart shown on Image (12.4).

The Impulsive wave which started from 8007 with Leading Diagonal Triangle completed at 8142
and there is not even a single 38% correction in between. We could have gained minimum 85-
120 points with risk of 7-12 points if managed trade with trailing stoploss of 38% retracement.
Even we could have done 2 fresh trades within this move by buying fresh at every 23%-38%
retracements. There were two 23%-38% retracement within this whole Impulse.

The same concept I tried to explain in my earlier topic “Importance of 38% retracement” that
wave (3) rarely retrace by more than 38% and same can help us to ride whole Impulsive move.
We need not to exit from a profitable trade in hurry because 38% retracement of wave (3) gives
confidence to ride the whole Impulse for maximum profit.

Now, let me show you the position of this Impulse (from 8007-8142) on bigger time frame, look
at Image (23.6): -

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 [Trading with Elliott’s Wave Principle]

(Image 23.6) Trading with Elliott Wave Principle

This is hourly time bar chart of Nifty covering move from 7857-8179. It is also an Impulse pattern
from 7857-8179 with (1), (2), (3), (4) and (5) as inner waves.

You can observe wave counts, patterns, personalities and Fibonacci calculations of this Impulse
yourself and can take it as your homework.

Look carefully at inner wave (v) of (3) from 8007-8142. It is the same move which we traded
earlier in this chapter (refer Image 23.5). It is just a straight line move if we see it on this hourly
chart but the same move consist of many inner waves and pattern if we look at it on lower time
frames, even there were two Leading Diagonal Pattern within this move.

And the move from 7940-8023 is the same wave which I had explained on first two charts on
(Image 23.1 and 23.2) of this chapter.

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[Practical Application of Elliott Wave Principle]

Important Observation: -

Just look at inner waves of main wave (3) on this chart. I just marked wave (iii) at 8023, (iv) at
8007 and (v) at 8142 but I didn’t mark inner wave (i) and (ii).

Actually, this wave is sharp with continuous Gap Up openings [it is the personality of wave (3)]
which is making it difficult to identify its inner waves. So, I am not able to identify its inner waves
confidently.

But one thing I can identify that the wave from 8007-8142 is Impulse and it is last Impulse of
wave (3), and last Impulse of wave (3) is always its inner wave (v). So, I marked this wave as
started from 8007 as (v), small correction from 8023-8007 as wave (iv) and 8023 as end of wave
(iii) but I didn’t mark inner wave (i) and (ii) because I am confident where it actually completed.

So in such situations, when you see a sharp straight line move and inner wave are not
identifiable, you can mark the straight move directly as end of wave (3) without marking inner
wave (1) and (2).

This is not written in books or is not a rule but just a common sense. You need to apply this
commonsense many times during Elliott wave analysis because counting waves on real charts is
not as simple as it looks on Imaginary images.

The main aim of adding this chart (Image 23.6) is inner wave (1) and (2) on this chart. You can
observe that inner wave (2) on this chart is Impulse but we know that wave (2) is always a
corrective wave, it can never be Impulse. But at the same time, the decline from 7968-7862 can
be fitted as wave (2) only. So, let’s observe the formation of wave (1) and (2) closely on next
lowest possible time frame.

Please have a careful look at (Image 23.7)

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(Image 23.7) Trading with Elliott Wave Principle

This is 15 minutes time bar chart of Nifty covering bounce after 20 Aug 2014 low 7857 which I
had marked as wave (1) and (2) on previous chart shown on Image (12.6).

I am explaining wave counts on this chart because it carries maximum patterns, calculations and
rules we read in previous chapters and the move on this chart carries best examples of most of
the patterns and rules of Elliott Wave Theory. We also need to clarify the confusion of wave (2)
as Impulse.

There is cluster of markings on this chart but don’t get confused. Try to read the chart step by
step as I am going to explain.

Overall, wave (1) completed from 7857-7964 with inner wave [1], [2], [3], [4], [5] and wave (2) in
progress as Irregular Correction. Now, let me explain every wave step by step.

Inner Wave [1] is Leading Diagonal Triangle in (5-3-5-3-5) pattern with inner wave (iv)
overlapping wave (i) and line of pattern are not disturbed.

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Wave [2] looks like a 3-3-5 Flat Correction with inner wave (b) retracing exactly equal to (a)
followed by sharp wave (c). Wave [2] retraced wave [1] by 38%-61%.

Wave [3] have Impulse pattern and is a normal wave [3]. Wave (3) is not extended because it
projected less than 161%, thus wave [5] must be extended (project more than 61%). Inner wave
(iii) of [3] is sharpest wave with Gap Opening.

Wave [4] looks like a Complex Correction (Double Zigzag or Triple Zigzag) but it is not possible to
count inner waves because it is on lower time frame. Wave [4] retraced deeper than 38% but
didn’t overlap wave [1].

Wave [5] is an Impulse and projected more than 61%. Thus, wave [5] is extended. Inner wave (iii)
of [5] is sharpest and longest wave with gap in between. Inner wave (v) of [5] looks like an Ending
Diagonal Triangle but it is difficult to exactly count inner wave of ED.

Completion of 5 waves made a bigger wave (1) from 7856-7964 and there must be a bigger
correction as wave (2).

Inner wave [5] of (1) is highly extended and same corrected 100% with speed (reaction of
extended wave 5). Look at the personality of decline after completion of extended wave [5].

Pattern of wave (2),

Now, let’s have a focus on pattern of wave (2). This wave (2) started from 7964 looked like an
Impulse on higher time frame chart as we saw on (Image 23.6). But actually it is Irregular
Correction rather than Impulse as I marked on (Image 23.7).

There is formation of small wave (a) and Irregular (b) at top. Wave (a) started from 7964 is a 3
waves (abc) move, wave (b) completed as (abc) move at 7968 [above the start of (a)] and the
sharp and destructive Impulsive decline after 7968 was wave (c) of Irregular Correction.

Wave (c) of this Irregular Correction projected more than 700%-800%, this is the practical
example that there is no particular maximum projection limit for wave (c).

The pattern of wave (2) also justify that lowest time frames gives more details of pattern of a
waves. Wave (2) which looked like an Impulse on hourly chart is actually an Irregular Correction
on 15 minutes chart. But it is not that wave (2) have different pattern on different time frame,
wave (2) is Irregular Correction on every time frame but it was not visible on higher time frame.

I explained this chart because it covered most of the EW patterns and rules which includes: -

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 [Trading with Elliott’s Wave Principle]

 Leading Diagonal Triangle

 3-3-5 Simple Flat Correction
 Complex Correction
 Ending Diagonal Triangle
 Irregular Correction
 Impulse
 Normal wave 3 which projected less than 161%
 Extended Wave 5 projected more than 61%
 100% correction of extended wave 5 with speed
 Wave 3 retracing more than 38%.
 Wave (c) projecting more than 700-800%.
 Both wave (3) and (5) extended.
 Fibonacci Calculations of different waves.
 Personality of wave (iii) of (3)
 Rules of alternation for extensions

The aim of this whole chapter “Trading with Elliott Wave Principle” was to explain the following:
-

 How to trade using EW Principles

 How pattern forms on real charts
 Personalities and characteristics of different waves
 Counting and labeling waves
 Calculation of Impulse and Corrective using Fibonacci Ratios
 All type of corrections
 Extended waves
 Diagonal Triangle
 Wave’s Cycles

Please revise every Rules, Patterns, personalities and calculations of wave you read in earlier
chapters and observe if the same is justified here.

This chapter is just for the general idea about actual formation of Elliott Wave Patterns on real
chart and how we can analyze market, predict moves and trade using these Elliott Wave Rules.
Otherwise, I personally don’t believe in giving example on old chart as it is easy to count waves
and identify patterns on old chart.

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Identifying the running patterns on live chart and predicting next waves is only what make sense.
So, I post detailed “Elliott Wave Analysis Report of Nifty” frequently on Sweeglu Elliott Waves
Blog explaining how I counts waves in different conditions, how I get outlook of next move based
on wave counts and how I decide low risk trades based on this outlook. My Analysis reports will
give great practical experience if used correctly.

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 [Suitable Time Frame for Elliott Wave Analysis]

CHAPTER 24

Suitable Time Frame for Elliott Wave Analysis

Question about using best/suitable time frame for Elliott Wave Analysis was asked many times
by my followers and students. I didn’t explain it in my first edition of Book because I didn’t feel
the need of it. In my understanding, anybody who understood Elliott Wave Theory automatically
understands which time frame to use in different conditions. But I added this chapter because
many learners failed to understand it.

On the other hand, many debates are going on about using time frames for EWT analysis. Many
EW analysts claim that respected RN Elliott (father of this wave theory) mentioned in his writing
that Hourly or Daily Time frames are best to use for EW Analysis and it doesn’t works on lower
time frames.

We need to understand that RN Elliott was practicing his wave theory in 1930-1940s. Charts
were prepared manually at those times and only hourly, daily or monthly chart could be
prepared. And charts were available to brokers only.

But today, charts are available on our finger tips and we have access to even 1 minute or 1
second chart. Intelligence of RN Elliott could have researched it to deeper levels if he had access
to the technology of today.

So, claiming that lower time frame chart doesn’t work for EW Analysis based on 70-80 years old
writing is not a wise idea. Hourly chart was the lowest time frame at that time. I have immense
respect for RN Elliott but you have access to lower time frames, let’s try and experience if it
works or not.

Best Time Frame for Elliott Wave Analysis: -

In my experience, we must use “Lowest Possible time frame for a particular wave” during Elliott
Wave Analysis. It might be difficult for you to understand this statement right now but
everything will be clear as we progress to the end of this chapter.

Before understanding time frames, we must understand that we can’t start wave counting or EW
analysis from any point of your choice on the chart. First you need to identify the exact wave in
progress within major wave cycle, and then you need to analyze that particular wave on lowest

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[Practical Application of Elliott Wave Principle]

possible time frame to identify its pattern and to calculate its completion range. Then only we
can predict the move for next wave.

Now, let me explain the same by giving examples on Nifty charts step by step. This chapter will
be lengthy as I need to use minimum 6-7 charts for explanation but everything is well organized
and it will be easy to understand.

Focus of this chapter is not analysis but to understand the concept of using time frame.

Let me start the explanation with a random chart of Nifty on Hourly time frame. Please look
carefully at chart on (Image 24.1).

(Image 24.1) Using Time Frame for Elliott Wave Analysis

This is hourly time frame chart of Nifty with random move. This is the maximum move of Nifty I
can see on Hourly chart in my Charting Application.

On this chart:-

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 [Suitable Time Frame for Elliott Wave Analysis]

We can see that a wave completed at 14753 but we don’t have idea which wave it is.

Later the decline from 14753-13596 looks like a Simple Zigzag Correction but we don’t know
which wave this correction is. It is a corrective pattern so it can be any of wave (2), (4), of (B).

Further, the bounce after 13596 looks likes an Impulse but again we don’t know which wave it is
because we don’t have any idea of previous wave. Even we don’t know if this Impulse started
from 13596 achieved its minimum projection or not because we can calculate projection only if
we know which wave it is.

Although, we can identify the possibility of Irregular Correction at top, can calculate
retracements and can use it for trade up to some extent but we don’t have complete idea. We
must have idea of complete pattern for confident trade setup but this chart is incomplete.

So, we can’t take any random hourly chart of our choice and starts analyzing. This practice can
give you some idea but will not give you complete idea. It will leave you confused at some point.

So, our first step is to identify which wave is in progress within major wave cycle. Having idea
about the position of inner waves within bigger wave cycle will give more clarity. So, first we
need to have a look at the life time move of a script to get the idea of its position on major wave
cycle.

I am doing complete Elliott Wave analysis of Nifty using all required time frames to give you idea
about using most suitable time frame. Read the charts and analysis carefully to understand the
concepts. This is real time analysis of Nifty, so you will also get idea of wave counting and
calculations practically.

Nifty listed in 1995 and its life time move of 22 years can be seen on Monthly Chart only. It is not
possible to see 22 years of Nifty move in Weekly or Daily chart on my Charting Application. So, I
am seeing it on Monthly chart.

Please have a careful look at chart on (Image 24.2).

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(Image 24.2) Using Time Frame for Elliott Wave Analysis

This is monthly time bar chart covering life time move of Nifty. I didn’t take this monthly chart
because it is a suitable time frame, I took this chart because it is required. I need to see complete
Nifty move after 1995 and this move can be seen on monthly chart only.

Analysis on Monthly Chart:

It seems major wave (1) completed from 775-6357, wave (2) may be completed from 6357-
2252, wave (3) may be completed from 2252-12430, wave (4) may be completed from 12430-
7511 and wave (5) may be in progress.

Major wave (5) already achieved 61% projection after break above 12713 and entered in
extended zone. Next 100% projection is placed at 19166 which may or may not be achieved.
100% projection for wave (5) is a rare case. It registered high 15431 till now.

Note: Major wave (5) started from 7511 is extended. So there is possibility to decline towards
7511 again after completion of wave (5). Extended wave 5 often retraces 100% with speed.

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From this monthly chart, we can conclude that major wave (5) is in progress from 7511 which
already achieved its minimum 38%-61% projection and is even in extended zone.

Now we need to check if pattern of wave (5) is completed or not. Wave (5) can have “Impulse”
or “Ending Diagonal Pattern”. Here wave (5) looks like a sharp and straight move so it cannot be
Ending Diagonal Triangle, it can be Impulse only. So, we need to check if the bounce after 7511 is
completed as Impulse or not.

Wave (5) looks like a straight line on this monthly chart, so we need to analyze this wave (5)
started from 7511 on lowest possible time frame so that we can identify its inner wave clearly
with more details.

Keep in mind, we are not concentrating on time frame here, we just need to see/analyze the
move after 7511 or wave (5) and we will chose the lowest possible to analyze it because lowest
time frame will have more details.
Have a careful look at chart on (Image 24.3).

(Image 24.3) Using Time Frame for Elliott Wave Analysis

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[Practical Application of Elliott Wave Principle]

This is daily time bar chart of Nifty covering bounce after 7511 which I marked as start of major
wave (5) on monthly chart. I took daily chart because this move after 7511 can be seen on daily
chart only, it cannot be seen on hourly or lower time frame.

And I am not taking any random chart, this chart is a continuation of monthly chart and I am just
analyzing wave (5) of monthly chart separately here on daily chart so that I can identify its
pattern with more details.

Analysis on daily chart:

It seems inner wave (i) of (5) completed from 7511-9038, wave (ii) may be completed from
9038-8055 and wave (iii) may be either completed at 15014 or still in progress.

23%-38% retracement of progress of whole wave (iii) [from 8055-15431] is placed at 13690-
12613. So, 13690-12613 is major support and 12613 is major downside breakeven point.

Nifty is in positive zone for medium/long term as long as trading above 12613. Close of a
complete daily candle below 12613 can result in major downside correction.
Within wave (iii), it seems inner wave [1], [2], [3], [4] is completed and [5] may be in progress.

Within wave [5], it seems inner wave [i], [ii], [iii], [iv] is completed and [v] may be in progress
from 13596.

Wave [v] already achieved minimum 38% projection after break above 15109 and next 61%
projection is placed at 15577 which may or may not be achieved.

From this daily chart, we concluded that lower degree wave [v] of [5] of (iii) of major (5) is
started from 13596.

So, our next step is to analyze the progress of wave [v] started from 13595 separately on lowest
possible time frame to check its pattern and to calculate short term levels.

Observe again, we are not concentrating on time frame, we just need to see/analyze the bounce
after 13596 (wave [v]) and we need use lowest possible to analyze it because lowest time frame
will have more details. Lets’ proceed: -

Please have a careful look at chart on (Image 24.4)

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(Image 24.4) Using Time Frame for Elliott Wave Analysis

This is Hourly time bar chart of Nifty covering bounce after 13596 which I marked as start of
wave [v] on daily chart. I took hourly chart because Hourly is the lowest possible time frame at
which I can see this move.

And I am not taking any random chart, this chart is a continuation of daily chart and I am just
analyzing wave [v] of daily chart separately here on daily chart so that I can identify its pattern
with more details.

Analysis on Hourly Chart:

It seems wave [v] is completed from 13596-15257 as impulse [wave (1), (2), (3), (4), (5)] is
completed and also achieved minimum 38% projection shown on daily chart).
But there is possibility of Irregular Correction pattern after 15257 after completion of wave [v].

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So, our next step is to look at this possibility of Irregular Correction on lowest possible time
frame for more details.

We also calculated 23%-38% retracement of wave [v] because the Irregular Correction after end
of wave [5] can complete somewhere around 23%-38%. Break below 38% retracement can
result in even deeper correction.

Again, we are not concentrating on time frame, we just need to see/analyze the move after
15257 to check if the Irregular Correction we are expecting after 15257 is following the rules or
not. And we need use lowest possible to analyze it because lowest time frame will have more
details.

(Image 24.5) Using Time Frame for Elliott Wave Analysis

This is 15 minutes time bar chart of Nifty covering move after 15257 which I am expecting as
start of Irregular Correction on hourly chart.

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Why am I expecting Irregular Correction after 15257?

The decline from 15257 to 14977 is Impulse but corrections always have corrective pattern. The
Impulsive decline is indicating that correction is not completed yet.

The bounce 14977-15431 is 3 wave’s move and 38% retracement of 3rd wave is broken, even
waves are overlapped. This 38% retracement breakout and overlapping is indicating that the
bounce from 14977-15431 is corrective (abc) rather than Impulse.

Downside Impulse pattern from high followed upside corrective pattern completed at fresh high
is indicating the possibility of Irregular Correction. This Irregular Correction can be just simple
Irregular Correction or can turn into Complex Irregular correction.

Check out all the rules and you will find that only Irregular Correction pattern is best fitted for
this condition.

Analysis on 15 Minutes Chart:

It seems inner wave (A) of Irregular Correction completed at 14977 as an impulse, irregular wave
(B) may be completed from 14977-15431 as simple zigzag (abc) and wave (C) may be in progress.
Wave (C) can complete anywhere between 15081-14622.

15081 is start of inner wave (c) of (B) {target based on 38% retracement breakout strategy} and
14622 is 38% retracement of wave [v] calculated on hourly chart.

23%-38% retracement of inner wave (c) of (B) is placed at 15348-15297 and same is already
broken. (This is 15 minutes chart and Nifty already closed a complete 15 minutes candle below
15297)

Break below 15297 is indicating decline towards 15081-14977 and 15297-15348 can act as
immediate resistance (based on 38% retracement breakout trading strategy).

We need to check pattern again if Nifty trades above 15348 for more than 15 minutes.
Probable Nifty Outlook after combining conditions and levels from all the charts is:

For medium/Long term,

13690-12613 is major support and 12613 is major downside breakeven point. Nifty is in positive
zone for medium/long term as long as trading above 12613. Close of a complete weekly candle
below 12613 can result in major downside correction.

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For Short Term,

14865-14622 is short term support and this support will be valid until 15611 is achieved. Any
short term weakness can be expected after close of a complete hourly candle below 14622.

For Intraday or very short term,

Nifty is indicating decline towards 15081-14977 again which further can extend towards short
term support 14865-14622 and 15297-15348 can act as immediate resistance. Nifty already
declined by more than 100 points twice from 15297-15348 in last 2 sessions.

We need to check pattern again if Nifty trades above 15348 for more than 15 minutes and same
15348 can be used as stoploss for shorts.

Important observations for learning in this analysis:

Observe how I marked different degree of wave with different number formats. It use (1), (2),
(3), (4), (5) for major waves, (i), (ii), (iii), (iv), (v) for 1st lower degree waves, [1], [2], [3], [4], [5] for
2nd lower degree waves, [i], [ii], [iii], [iv], [v] for 3 rd lower degree waves and again (1), (2), (3), (4),
(5) for 4th lower degree waves to distinguish different degree of waves. You can use any format
of our choice, there is no definite rule.

Observe how I calculated projection and retracements of waves. It is important to calculate

projection and retracement of every wave for efficient analysis. Learners must calculate
retracement and projection of every wave during practice, it helps to memories required
retracements and projections ratios of waves and also improves the speed of analysis.

Observe how I used 38% retracement breakout technique on most of the charts to predict
reversal, breakouts, supports, resistance and targets. No matter what the pattern is, we need
38% retracement breakout strategy for low risk entry levels, small stoploss and high rewarding
targets.

Also observe different conditions like extended wave 5, how I identified the possibility of
Irregular Correction pattern and how I am managed it using 38%.
Conclusion:

You must have observed that we analyzed life time move of Nifty but Time Frame was not an
important factor in this analysis and there is nothing like best time frame we used.

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The main focus was to see the structure of a particular wave on your screen and we preferred
lowest possible time frame to see it because lowest time frame has more details. We used time
frames based on our needs, it was not predetermined.

What you can see on 5 minute chart is not even identifiable on daily chart and whatever you can
see on daily can never be covered by 15 minutes or hourly chart. We use most suitable time
frames based on our needs but every time frame is equally important.

So, there is no special best or perfect time frame to use for Elliott Wave Analysis. First you need
to identify the wave in progress within major wave cycle and then you need to analyze those
waves on lowest possible time frames step by step. Our focus is to see clear inner structure of a
particular wave.

I started this analysis with Monthly chart and ended up with very last wave on 15 minute chart
step by step. Every next chart was the continuation of previous chart and every wave was a part
of previous larger degree wave. No wave is independent, even the wave (B) on last 15 minute
chart is part of largest wave cycle explained on Monthly Chart.

So, Lowest Possible time Frame for a particular wave is perfect time frame to use for Elliott Wave
Theory Analysis.

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CHAPTER 25

Identifying MultiBagger Stocks

The scope of a multi-bagger return in a stock means a possibility of big move. And big move is
directly associated with major wave (3) in Elliott Wave Theory. So, the stock in which major wave
(3) is not started yet has scope to be multi bagger.

Wave (3) is known to be steepest and longest wave with gap up openings. Wave (3) gains its
speed just after completion of wave (2), but wave (3) also consolidates before gaining speed in
some cases. And major wave (3) which consolidates before gaining speed becomes fastest,
furious and longest later.

In this chapter, I am going to explain about the conditions when wave (3) consolidates before
gaining speed because an investor can multiply his/her investment multi-fold if manage to
identify such stock.

So, let me explain the basic formation of pattern with reasons which initiates such big move. I
used an imaginary image to explain these conditions but will also show practical examples on
real charts later in this chapter. But you must have a basic understanding of Elliott Wave Cycle to
understand this chapter.

We know that wave (3) starts after completion of wave (2) and it always project more than 100%
of (1). Means wave (3) is always longer than wave (1). And the pattern of wave (3) is always
impulse, means inner wave (iv) of (3) can never overlap (i) of (3).

In some cases, when an impulse pattern completes within wave (3) but it completes before
100% projection of (1). Or if wave (3) achieves minimum 100% projection but the later
correction overlaps wave (1). The next impulsive wave after wave (2) becomes inner/lower
degree wave (i) of (3) in this case.

When this pattern repeats 3 or more times makes overall pattern as Major wave (1) and (2)
followed by 1st lower degree wave (i) and (ii) of Major (3), followed by 2 nd lower degree wave [1]
and [2] of 1st lower degree wave (iii) and so on.

Have a look at (Image 25.1).

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(Image 25.1) Identifying Multi-Bagger Stocks

This is the imaginary chart where I explained the formation of pattern we generally observe
before the start of a big move (pattern marked in circle). Please look carefully at chart.

The structure shows that: -

 Major wave (1) and (2) is completed and (3) in progress followed by,

 1st lower degree/inner wave (i) and (ii) of major (3) is completed and (iii) in progress followed
by,

 2nd lower degree wave [1] and [2] of 1st degree wave (iii) is completed and [3] in progress
followed by,

 3rd lower degree waves [i] and [ii] of 2nd lower degree wave [3] is completed and [iii] is in
progress.

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In this overall pattern, the major wave cycle will complete after completion of major waves (3),
(4) and (5) and all the lower degree waves needs to be completed for completion of this major
wave cycle. So,

 The 2nd lower degree wave [3] will get completed after completion of 3rd lower degree wave
[i], [ii], [iii], [iv] and [v].

 The 1st lower degree wave (iii) will get completed after completion of 2 nd lower degree wave
[1], [2], [3], [4] and [5].

 The major wave (3) will get completed after completion of 1st lower degree wave (i), (ii), (iii),
(iv) and (v).

 Then major wave cycle will get complete after completion of major wave (3), (4) and (5).

We already know that wave (3) is known to be faster, steeper and longest and it is applicable all
major and lower degree wave (3), (iii), [3] and [iii]. So, the combination of these lower degree
waves [iii], [3] and (iii) will result in faster and longest major wave (3).

Let me show some real examples on Nifty Charts:

Have a careful look at chart on (Image 25.2) below. This is the 5 minutes chart and formation of
repeated upside impulsive followed by downward correctives resulted in 400 points straight line
bounce in just 4 sessions.

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 [Identifying MultiBagger Stocks]

(Image 25.2) Identifying Multi-Bagger Stocks

This is one of the main reasons behind any big move based on Elliott Wave Theory and I
explained it giving examples on small time frame charts of Nifty.

Formation of same type of pattern at bottom on life time chart of any stock indicates the
possibility of big bounce in that stock and makes that stock a suitable candidate to be multi-
bagger.

Identifying a stock with Mutlibagger capabilities:

Almost every stock give a biggest bull rally at least once in its lifetime and most of the stock show
this type of rise after a long consolidation. Longer the consolidation is, Bigger the move would
be.

The longer consolidation at bottom is generally the pattern which I had explained above,
“repeated upside impulsive waves followed by downward corrective waves”. This is the same
concept of “High lows, higher highs”.

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I am going to show some examples of such patterns on real chart as it will help learners to
understand it easily and clearly.

(Image 25.3) Identifying Multi-Bagger Stocks

Please have a careful look at chart on (Image 14.4) above. This is a life time chart of “Aurobindo
Pharma” stock on Monthly time frame. We can observe that this stock bounced from 80 to 880
(1000%) in just 2 year but there was a long consolidation of 15-16 years before the start of that
bounce. Overall this stock bounced about 8000% in 20-22 years.

The longer consolidation is wave 1s and 2s (repeated upside impulsive followed by downward
corrective waves), and the sharp and big bounce is combination of major and lower degree wave
3s.

Just look at life time charts of some stocks, you will observe that almost all the stock had given
such sharp, big and straight line rise at least once in a life time like Aurobindo Pharma bounced
in 2012-2014.

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 [Identifying MultiBagger Stocks]

Look at life time move of at least 20 stocks on monthly chart for exercise.

So, stock which consolidated at bottom on its life time chart without showing such sharp rise has
possibility to be multi-bagger in long term because we can expect at least one sharp and big rise
in its lifetime.

We need to ensure following important points before making investment: -

 Stock must be consolidating above its life time low with repeated up down waves (with
overlapping) for at least 5-8 years. Because I observed that most of the stock give such big
bull rally at least once in 8-10 years, so the stock which is consolidating for 5-8 years had
possibility to show such sharp and multi-fold rise within 0-3 years. Stock which is trading at
life time low or registered its life time low recently must be avoided.

 The stock which already bounced sharply by 100%-200% above its earlier all time high must
be avoided because the profit probability will decrease and risk will increase as the stock
move higher.

We can observe on this Aurobindo Pharma chart that an investment made in 130-40 range
during consolidation gave 800%-2000% return with lower risk. But those who invested at middle
of wave (3) around the price of 300-400 have gained just 100%-200% with more risk. So, the
stock which is still in consolidation is best to invest for multi-fold returns.

But most of the inexperienced traders/investors buy stock at the middle or top of wave (3)
because it is the time when almost every broker, media channel and advisors talks about that
stock after seeing a sharp move. Nobody talks about the stock when it as bottom, every technical
or fundamental expects improves only when a stocks starts rising.

The investors who buy stock at middle or top of waves (3) or (5) after getting advice from
brokers or media often get their money trapped because the stock which decline after
completion of wave (3) or (5) may not register new life time high for years again. Crash of 2008 is
best example, many of the great stocks of that time failed to bounce again, even many good
stocks of that time are dead now and trading at its all time low now.

Let zoom out Aurobindo Pharma chart and see how the pattern looked like in 2012 just before
the start of biggest rise of its life.

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(Image 25.4) Identifying Multi-Bagger Stocks

This is again monthly time bar chart of Aurobindo Pharma covering its life time move till 2013-
2014. This was the pattern of this stock in 2013-2014 formed just before the start of biggest
move.

This stock gave 3 bull rallies of 800-1000% within the time period from 1996-2014 but crashed
back by about 70%-80% every time. Waves overlapped every time and formed wave (1) and (2),
followed by inner wave (i) and (ii) of (3), followed by inner wave [1] and [2] of (iii), and
combination of wave [3], (iii) and (3) made a sharpest and fastest bull rally in 2013-2015.

Let me shown one more chart which I actually identified in 2015 having possibilities to be multi-
bagger and also posted the same on my website before Diwali of 2015

Please have a careful look at chart on (image 25.5) below. This is the chart of Rain Industries I
had taken from my old analysis report of 2015.

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(Image 25.5) Identifying Multi-Bagger Stocks

This is monthly Chart of “Rain Industries” taken in 2015. Stock was trading at 37 at that time and
I expected this stock to rise multi-fold in 3-5 years. And the reason was: -

This stock registered life time low in 2009 and was consolidating above life time low for last 6
years. So, I expected this stock to bounce multi-fold in 3-5 years. This stock had very beautiful
consolidation pattern.

Now, let’s have a look at current position of this stock, have a careful look at image (25.6):

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(Image 25.6) Identifying Multi-Bagger Stocks

This is again monthly chart of “Rain Industries” taken in Jul 2018. This stock started bouncing in
2016-2017 and registered it life time high 467 in 2018.

I identified this stock when it was in 6 years of consolidation and I expected a multi-fold bull rally
within 3-5 years because most of the stocks give such sharp move once within 8 years at least.
No one was even talking about this stock at that time.

This stock started best move of its life exactly after 02 years in 2017 and bounce from 37 to 467
within a year. Overall, it was more than 1300% return within 3 years and one could have gained
600% at least even if booked systematically in installments.

But just think of those who bought this stock at highs in 350-450 range after seeing this stock in
news. Many of them may not get their buying price in coming years.

Now, let me show 02 stocks having same type of pattern in July 2018. It will give some idea
about identifying those stocks: -

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Look at (Image 25.7) below. This is monthly time bar chart of “Nectar Lifescience” covering its
life time move. This chart was taken in July 2018.

(Image 25.7) Identifying Multi-Bagger Stocks

This stock also has long 12-13 years of consolidation at bottom and has not completed its major
wave (3), and it is available at very cheap price of 18-21. This stock also has possibility to be
multi-bagger in coming 3-5 years because major wave (3) is within inner wave (ii) yet. Otherwise,
bounce towards 50-60 is expected at least even if it doesn’t be multi-bagger. The possibility can
be negated only if it registers new life time low again.

And other stock in same pattern is Blue Chip ICICI Bank. Please look at (Image 25.8).

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(Image 25.8) Identifying Multi-Bagger Stocks

This is monthly chart of ICICI Bank covering its life time of move from 1997-2018. This stock
completed major wave (1) and (2) in 2008-2009 but later waves overlapped. The overlapping
indicated that this stock has not completed its major wave (3) yet because wave (4) can never
overlap wave (1).

Major wave (1) of this stock is of 260 points, so the full wave 5 wave’s cycle {completion of wave
(1), (2), (3), (4) and (5)} can be expected as minimum 3 times of wave (1). So, full wave cycle may
complete somewhere above 780 (3 x 260 = 780).

So overall, this stock can be accumulated systematically in 256-160 range [till wave (ii)] expecting
minimum 780 in long term.

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 [Identifying MultiBagger Stocks]

Summary:

The stock with following conditions has maximum capabilities to be Multi-Bagger in longs term: -

Stock must be consolidating above its all time low for minimum 5-8 years with overlapping of
waves. The stock with upward slope/parallel consolidation has more scope to bounce quickly.

Stock must not have shown sharp and straight line bounce [Major wave (3)] after consolidation.
The stock which didn’t show sharp and big bounce even once after its listing has more scope.

Any stock which already moved by more than 100%-200% above its earlier life time high must
be avoided because profit probabilities is less and risk is more in those stocks. Even the stock
which is declining after completion of wave (3) must be avoided for long term investment.

It is not important to count inner waves if the stock is following above mention rules. The main
factor to ensure is that major wave (3) is not started yet or just started.

For Getting More Practical Experience: -

Just have a look at life time chart of 10-15 stocks daily. You will observe that most of the stock
had shown at least one big and sharp bull rally once in a life time (like Aurobindo Pharma and
Rain Industiries).

Just zoom-in the chart and observe the pattern formed just before the start of that Big Bull Rally.
And also observe the personality of fall after completion of such big bull rallies. You will get good
practical experience and get a new vision after seeing 100 of such chart. The more you observe,
the more you get experienced.

Fundamental expects to see in such stocks:

Actually there is no need to see any other fundamental or technical expect if you are using above
mention methods to identify mutli-bagger stocks because these stock are cheap only because
fundamentals are not great and these stock has possibility to be multi-bagger because
fundamentals have scope to improve. Almost all the fundamentally strong stocks are already in
major wave (3). This method is 100% psychological and less fundamental.

But still we needs to check some simple and basic fundamental expect. Any stock you are
choosing must have Market Cap of minimum 300 Crore (3 Billion) and stock must be trading
actively with average volume.

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Success Ratio and Investment Strategy:

Most of the stocks are going to perform if you check all the rules mentioned above carefully.
These stocks may give at least 70-100% returns in 5 years even if failed to be mutli-bagger. On
the other hand, this type of stocks has very low risk to be dead and can recover quickly even
after declining by 61-78%. This idea is based on decade of experience gained by observing 1000s
of charts, but still nothing is permanent and anything is possible in stock market.

For Investment, we should not invest our full capital in a single stock because there is always a
possibility to be wrong and it will be a huge loss if the stock we choose fails to deliver.
So, we must search 5-10 such stocks and invest in all the stocks with equal money distribution.
Suppose you have Rs. 50,000 to invest then choose 5 stocks and invest Rs. 10,000 in every stock
and hold for 3-5 years without any stoploss.

Your money will recover even if 1 such stock performs and other 4 becomes zero. This is the
worst scenario, otherwise 4 stocks will not become zero. Any 1 may become zero, 1 may give
small loss, 1 may not give any profit or loss, 1 may perform average and 1 may give huge returns.
Overall, there are negligible probabilities for loss if you hold for 3-5 years and there is possibility
of huge returns even if 30-50% of your stocks perform.

In 2015, I identified 3 such stocks: - Rain Industries, South India Bank and Magma Finecorp and
advised to invest equally in all these 3 stocks. Rain Industries gave 1000% returns, South Indian
Bank gave 60% returns and Magma Finecorp gave 100%-120% returns.

Combination of all these stocks gave average 300%-400% returns in 3 years.

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CHAPTER 26

Practicing Elliott Wave Theory

Practice makes man perfect, and there is always a best way to practice for better and faster
result. Wrong approach in practicing always results in loss of energy, time and confidence. And
Elliott Wave Theory is an Analysis and reasoning methods which needs a systematic approach
otherwise it can leave you confused for whole life. You must have observed that even best
analysts with decade of experience fail to understand Elliott Wave Theory and find it confusing.

So, let me guide the best and most systematic way of practicing Elliott Wave Theory to master it
easily and faster. A human with average intelligence must be able apply Elliott Wave Theory
practically within 02 months if he/she practice it in the way I am going to explain. I am not going
to explain any guidelines which I read from any book, but I am sharing the way I learned Elliott
Wave Theory myself in just 2-3 months.

Approach for Practicing Elliott Wave Theory: -

Elliott Wave Theory is combination of Wave Cycle, Wave Patterns, Fibonacci Calculations and
Wave Personalities and everything about these factors is explained briefly in this book. But there
is big difference in Knowing every rules theoretically and applying it practically.

It looks easy and satisfying when you a see a chart with counts marked on it but it is not as easy
to counts waves on a blank chart, many new practitioners just left blank thinking where to start.

So, there are 02 important points we need to keep in mind while Practicing Elliott Wave Theory: -

We must practice in such a way so that we can see and observe the formation of all type of
waves, patterns, Fibonacci Retracements/Projections practically on chart at least 5-10 times
within 02 months.

You know every rule of Elliott Wave Theory but observing it happening live and practically on
chart gives huge practical experience. You need to do mild calculations in the beginning but
observing the patterns repeatedly several times will train your mind to identify every pattern just
by a look within seconds. Your speed and accuracy of analysis will increase after every single
observation.

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The 2nd most important is Trial, Error and Result Factor. If you analyze a chart and mark your
wave counts or expecting any pattern then you also need to know/confirm if the analysis you are
doing is right or wrong.

Every of your analysis is an exam and you must have result immediately within a day or two to
get experience. There are 7 different patterns in Elliott wave theory with 100s of other rules, so
it will take whole life to learn Elliott wave Theory if you are expecting a pattern today but it takes
month to know if you were right or wrong at identifying the pattern.

By keeping these 02 points in mind, the best and fastest way to master Elliott Wave Theory is to
practice it on a particular High Volume Script using lowest time frame. And the best script to
practice EWT is Nifty/Bank Nifty Index using 5 and 15 minutes charts continuously for 2-6
months.

I am going to explain it briefly by giving examples on real chart for better understanding. Let me
start with an hourly chart first. So, have a careful look at chart on (Image 26.1)

(Image 26.1) Elliott Wave counts on hourly chart of Nifty

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This is hourly chart of Nifty indicating a possibility of Ending Diagonal Triangle (ED) pattern
started from 10417 and this pattern is within its wave [iii].

This pattern started in May 2018 and reached the middle till 20 July. This pattern is running since
2 months and may take another couple of months to complete. I identified the possibility of this
Ending Diagonal pattern in mid of Jun but still don’t know if I was right at identifying this ED
pattern or not.

Possibility of this ED pattern can be confirmed only when it complete or when it gets negated.
Means I am already waiting for one month to know if I was right or wrong at identifying this
pattern and I need to wait more.

The point is, pattern formed on higher time frames take longer time to complete. If I practice on
higher time frame and identify the possibility of any pattern, then I need to wait for months to
confirm if I was right or wrong at identifying the pattern so that I can mark my achievements or
mistakes. But if it takes 2 months for a single pattern then it will take years to understand all the
patterns and formations.

So, the fastest way to understand and master Elliott Wave Theory is to practice it on lowest
possible time frames so that we can observe the formation of pattern in quick time. If we are
counting waves on 5 minute chart and expecting any pattern, then market will tell instantly
within couple of days if we are right or wrong at identifying the pattern.

I think the point, “why to use lowest time frame charts for practicing Elliott Wave Theory” is
cleared. Now, let me explain why to prefer Nifty or Bank Nifty Chart instead of individual stocks.

So, let’s compare the details of waves on 5 minutes chart of a high volume stock with 5 minutes
chart of Nifty. I am comparing Nifty chart with SBI (State Bank of India) because it has high
trading volume.

So, let’s have a careful look at 5 minute chart of SBI.

The chart shown on (Image 26.2) is 5 minutes time bar chart of SBI covering last 3-4 days of
move. I am not giving importance to analysis on this chart because we need to check all time
frames charts for that, the aim of this chart to see that how much details of wave patterns we
can identify on this chart.

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[Practical Application of Elliott Wave Principle]

(Image 26.2) Details of Elliott Wave Patterns on SBI 05 Minutes chart

Just have a look at wave structure formed after 261.40 because we don’t have any idea about
the waves formed before 261.40.

From 261.40, we can see that some sort of wave (1), (2), (3), (4) is completed and (5) in progress.
We can’t identify wave (1) and (2) clearly because of steepness whereas wave (4) is irregular.

We can identify an impulsive move with satisfactory details but wave (1) and (2) is not
identifiable, we also identified an Irregular Correction in wave (4) on this 5 minutes chart.

Now, let’s have a look at 5 minutes chart of Nifty for the same period. Please refer chart on
(Image 26.3).

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 [Practicing Elliott Wave Theory]

(Image 26.3) Details of Elliott Wave Patterns on Nifty 5 Minutes Chart

This is 5 minute time bar chart of Nifty covering last 3-4 days of move. I am analyzing the move
after 10980 because I don’t have idea about the waves formed before 10980.

From 10980, we can identify an impulse completed from 10980-11045 with clear identification
of inner waves and further simple zigzag correction from 11054-11023 is also identifiable.

Further from 11023, we can identify that wave (1), (2), (3), (4) is completed and (5) in progress.
And within wave (5), inner wave (i), (ii), (iii), (iv) completed and (v) in progress. We can even
identify the inner most wave with more details.

The aim of comparing 5 minutes charts of SBI and NIFTY is to show that Nifty chart provides
more details of waves comparing to the chart of any high volume stock. I compared Nifty with
highest volume stock, otherwise low volume stocks doesn’t even show the formation of waves
on 5 minutes chart.

We already observed that Nifty 5 minutes chart has move details of wave formations comparing
to the 5 minutes chart of any high volume stock. Means, Nifty 5 minutes chart provide more
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[Practical Application of Elliott Wave Principle]

details and opportunities to learn/understand Elliott Wave Theory in quick time comparing to
the chart of any other stock.

Let me show the formation of even complex patterns on 5 minutes time bar chart of Nifty.
Please refer chart on (Image 26.4) below.

(Image 26.4) Complex Pattern on Nifty 5 minutes chart

This is 5 minute chart of Nifty covering random move from 10558-10648. This is a Nifty move of
a single session only.

A Double Zigzag Correction (Complex Corrective Pattern) [abc-X-abc] is completed from 10558-
10648 and there is possibility of Triple Zigzag Correction [abc-X-abc-X-abc] on the same chart.
There are following observations on this chart: -

A complex correction is completed in just a single session on Nifty 5 minutes chart and even
inner waves are clearly identifiable. Whereas, it is almost impossible to identify such complex
pattern on 5-15 minute charts of stocks. This type of identifiable complex patterns takes months

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 [Practicing Elliott Wave Theory]

or even years to complete on charts of stocks. So, lowest time frame chart of Nifty gives
opportunity to understand even complex patterns in quick time.

I am expecting a Triple Zigzag Correction on this chart and there is no way to know if I am right or
wrong at identifying the formation of Triple Zigzag right now. Only market is the judge here and
only market will show in future if I am right or wrong in analysis.

This pattern formed in a single session and is about to complete, so we can get confirmation in
next session only. Means we don’t need to wait for weeks or months to know if I was right or
wrong at identifying this complex pattern, we will get the result next day only.

So, we can see that even complex pattern forms on Nifty 5 minutes chart in a single session
which gives best opportunity to understand these pattern in quick time. We can confirm
immediately in next sessions if our analysis was right or wrong and can mark our mistake and
achievements.

Now, let me show one more example of complex pattern on lowest time frame chart. Please
have a careful look at chart on (Image 26.5)

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(Image 26.5) Triple Zigzag Correction on 5 minutes chart

This is again 5 minutes time bar chart of Nifty covering a random move of single session. A Triple
Zigzag Correction (most complex patter of EWT) is completed in a single session on this 5 minute
chart and we can also observe the personality of breakout and next move after completion of
Triple Zigzag Correction.

We have lots to learn and get practical experience in a single session on this 5 minutes chart
which is not possible on charts of individual stocks.

So, the overall analysis in this chapter proves that Nifty lowest time frame charts are best to
practice Elliott Wave Theory for mastering it in quick time because: -

Pattern forms frequently on Nifty lowest time frame chart and we can identify the pattern with
maximum details and depth. Practicing on Nifty lowest time frame charts will give practical
experience of patterns, rules and calculations of Elliott Wave Theory faster than any other script.

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 [Practicing Elliott Wave Theory]

We can confirm the accuracy of our analysis immediately in next couple of sessions if we practice
on lowest time frame chart. If we are expecting the formation of any pattern or wave counts
today, then next day we can confirm if we were right at identifying the pattern or not.

It will give us confidence and practical experience if we prove right and it will help us to identify
our mistake if we prove wrong at the same. The more you know about your mistakes, the less
you repeat it.

Practicing EWT on lowest time frames charts of Nifty helped me to understand this Elliott Wave
Theory faster and helped me to apply it practically.

Practicing Elliott Wave Theory with the help of my Analysis Report of Nifty: -

I am aware that it is easy to understand Elliott Wave Theory theoretically but many new
practitioners feel it difficult to apply on blank chart. Many of the new learners even fail to
understand from where to start.

That’s the reason I am posting my detailed Analysis Report of Nifty on my blog frequently and
also providing detailed Elliott wave analysis report of Nifty for minimum 01 months with my book
to help new practitioner practically. The practitioner can see practically how I am applying the
same rules of Elliott Wave Theory to analyze Nifty so that they can get their starting push.

Observing my analysis report and practicing for 01 months give enough opportunities to
understand Elliott Wave Theory Practically and the best way to use my analysis report for
learning is : -

I provide my analysis report of Nifty with my probable wave counts every day at around 10:30
PM. So, I am already providing an idea about the wave counts till date. So, practitioners can
analyze the move of next session after closing (between 3:30-10:30 PM) on 5 minutes chart of
Nifty based on their understanding and wait for my analysis report.

Compare your analysis with my analysis report and observe if there is any difference. Try to
understand the reason behind the difference and try to find out yourself by referring the book
because you will never forget your mistake if you identify it yourself, otherwise you can ask me in
case of any complexity.

You will have your analysis and my analysis report, now don’t do anything and wait for next
session. Next session will show if your or my analysis was right or not. It is not necessary that you
are wrong or I am always right, Even I never know if my wave counts are right or wrong at the
time of analysis, only market shows next day if was right or wrong.

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This is the best way to practice Elliott Wave Theory for faster learning. I am already providing you
the idea of previous wave counts and you just need to analyze the progress of last move. Every
right analysis will give you the confidence and practical experience and every wrong analysis will
help your to identify your mistakes so that you can avoid it later.

Overall, you will add something to your practical knowledge every next day and your experience,
accuracy, speed and confidence will increase day by day.

Most Important requirement is to understand Elliott Wave Theory Practically, and practicing it
on Nifty lowest time frames charts is best way to achieve that. You can apply it on any other
script, stocks, index, commodities, or currencies later after learning it.

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 [Short Summary on Elliott Wave Rules and Principles]

CHAPTER 27

Short Summary on Elliott Wave Rules and Principles

Let’s revise some of the important points to keep in mind when applying EW principles on chart.
The same points are already explained in earlier chapter with deep details, but I am just writing
short notes for easy reference.

 Wave 1 can have Impulse or Leading Diagonal Triangle Pattern

 Wave 2 can have Corrective Pattern only.
 Wave 2 can never break the start of wave 1.
 Wave 3 can never be shortest wave.
 Wave 3 always have Impulse pattern.
 Wave 3 is usually the steepest and faster wave with Gaps.
 Wave 3 up to 161% projection is normal wave and more than 161% projection is called as
extended wave 3.
 Wave 4 can have only corrective pattern.
 Wave 4 can never overlap wave 1 within impulse pattern. Wave 4 always overlap wave 1 in
Diagonal Triangles.
 Wave 5 can have Impulse or Ending Diagonal Triangle Pattern.
 Wave 5 must project minimum 38% and must complete after the end of wave 3.
 Wave 5 up to 61% projection is normal wave more than 61% projection is called extended
wave 5.
 Extended wave 5 corrects 100% most of the time. But extended wave 5 may not correct
100% if it is inner wave 5th of wave bigger 3.
 Wave A always have Impulse pattern in Simple Zigzag Correction. Wave A can be corrective
only in case of Irregular Correction and 3-3-5 Flat Correction.
 Wave (B) always have Corrective pattern and it is the only corrective wave which is allowed
to retrace more than 100%.
 Wave C always have Impulse pattern and carries same personalities as wave 3.
 Any one wave out of wave (3) and (5) must be extended, but both wave (3) and (5) can also
be extended.
 Leading Diagonal Triangle is always an inner wave (1) of an Impulse.
 Ending Diagonal Triangle (ED) is always an inner wave (5) of an Impulse.

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CHAPTER – 28

Author’s Advise

No matter how high the level of your knowledge is, it is of no use if you can’t use it for your
benefit. Same is with EWT, no matter how deeply you know of Elliott’s wave theory or how
efficiently you can find pattern; there is no use if you can’t make money with it. I am not going to
irritate you with lengthy lecture but just suggesting some simple points to keep in mind while
applying EWT.

Accuracy of Elliott Wave Theory:

There is no doubt that that every stock, index, currency or commodity follows Elliott Waves
Pattern 100%, but it is not necessary that you will identify patterns 100% accurately every time.
Accuracy of any method depends on analyzing skills of analyst. Elliott Wave Theory is useless if
you fail to identify pattern accurately. So, don’t try to judge the accuracy of Elliott Wave Theory
because it is 100% accurate, just concentrate on developing your analyzing skills so that you can
identify wave patterns accurately most of the times (at least 50% of the times).

Though, waves always follow rules but we are human and we are meant to make mistakes.
Never be overconfident and avoid trading heavily on your predictions, no matter how much
convinced you are because there is always a scope to be wrong. So, always have a protection
plan before you put money in market.

Marking End Point of any Wave:

Please remember that end point of any wave in EWT is always price basis, it is never closing and
staying basis. Suppose start of wave (1) is 100, so wave (2) even if touch 99.99 (fraction below
100) will negate the pattern, wave (2) doesn’t need to stay below 100 for pattern negation.

Other example: - Suppose minimum 38.2% projection for wave (5) is 120 then wave (5) needs
touch 120 to qualify. Even if it touch 119.99 (fraction below 120) then also wave (5) must be
assumed to be incomplete.

Same move can never have different patterns:

Just keep in mind that a particular move can have only one pattern let it be on any time frame.

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 [Author’s Advise]

Suppose, you are analyzing the move of last 10 days and seeing it on different time frames like
hourly, and 15 minutes. But you are identifying/marking this move as Impulse on hourly chart
and Corrective on 15 minutes chart. Then, any one of these two patterns must be wrong
because a particular move can have only one pattern.

Always accept that you are wrong in identifying pattern if you are seeing two different patterns
for a particular move on different time frame. Use lowest possible time frame chart to count
inner waves because lower time frames carry more details and go with the pattern which is more
convincing.

Leave it when you are confused:

You will find it difficult to identify pattern sometimes. Just leave that pattern for time being and
wait if you are confused, you will definitely get the hint of exact pattern later.

A stock or Index never forms simpler pattern every day, you will often witness many complex
and confusing patterns. Ignoring a confusing pattern for time being and waiting for clarity will
increase your accuracy. Never try to create a pattern, just wait for pattern to form.

Never follow news or other’s views:

Never follow news or other’s view when you are using EWT. Human is a slave of emotions,
listening others and news will definitely divert you to take wrong decisions.

Just keep in mind that there is no such analyzing method to predict market with 100% accuracy.
Even the biggest experts gives their views on probabilities and possibilities, nothing is 100% sure
in stock market.

So, you are no less than experts, believe in your analysis because personality of a wave on chart
reflects everything in advance if you manage to identify it. Even, you will feel the effect of any
important news in advance after getting experience.

Get out when things are not in favor:

Never hold your trade when you see the things are not going according to your expectations.
Every wave has personality and it reacts according to that. When a wave is not behaving
properly, just protect yourself as you might be wrong in identifying the pattern. Suppose you are
trading expecting wave (3) but it is taking more than normal time, so you must protect your
trade because wave (3) is known for speed and steepness.

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Don’t be in love with stocks:

Don’t try to waste your time and effort on stocks where you are not able to identify pattern.
There are times when a particular stock is in confusing or complex pattern. Just leave those
stocks and search for other, you will find many stocks already waiting to give you handsome
profit.

Some traders love a particular stock and always like to trade in that stock. But risking money in
confusing conditions doesn’t make sense. Leave such stock for time being and trade where there
is confident low risk opportunity.

Make your own strategy:

No two human can trade in same way. You have knowledge and you can predict future move.
Just make your own trading strategy according to your capital, risk tolerance and psychology.
Never hesitate to try something new if you are feel it is working. There are many observations I
identified myself which you will never find anywhere else. May be, you find something worthy
which no one had discovered yet.

Keep EWT as your main weapon:

Every analyzing method works in some way and no method is 100% accurate, there are cons
everywhere. My personal advice is to use other analyzing methods as supporting tools and keep
EWT as your main weapon because Elliott wave theory is the first one to warn if the behavior of
market is changing. You will realize it after getting experience.

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 [Author’s Advise]

Important Links and Websites

IMPORTANT: Register your email ID for further downloading “Fibonacci Calculator”, “further Life
Time Support” and “01 Months detailed Analysis Report” by sending email at
([email protected]). Conditions Apply***

Let’s me provide some important links and websites where you can get old and fresh analysis
reports of Nifty and Bank Nifty based on Elliott Wave Theory for reference and examples: -

https://sweeglu.com (This is my personal Blog where I am posting my occasional analysis reports

since 2015).

http://ewanalyst.com (This Blog is maintained by my personally trained student Vinod Sharma.

He is posting Elliott Wave Analysis report of Bank Nifty frequently in this Blog since 2017).

These blogs can be visited to get best practical examples and illustrations of Elliott Wave Analysis
based on the method explained in this book.

At last, I wish you profits and success in trading business.

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