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Chris Cammack
Partner Manager and Financial Writer

<p>Chris manages the relationships with our partners to provide our users with the best Forex trading experience possible. Chris has 15+ years of experience in research, editorial and design for political and financial publications. His background has given him a deep understanding of international financial markets and the geopolitics that affect them.</p>

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What is the Elliott Wave Principle

Reading time: 3 min | Intermediate | Technical Analysis

Ralph Nelson Elliott, the man behind the Elliott Wave Theory, discovered that crowd behaviour trends in recognisable patterns.   In his research, Elliot found similar recurring patterns regardless of the financial market and time frame.  This research would eventually lead him to develop the Elliott Wave Principle. At the core of this principle, Elliott noted thirteen distinct market patterns or waves that periodically repeat in both shape and form.

The main take away from the Elliott Wave Principle is that the financial markets are fractal and we see the same patterns repeating on lower time-scales (lesser degree). Since trading using Elliott Waves is an advanced and more complex trading method, it is perhaps best to introduce the core principles and patterns outlined in this theory.

The Basic Elliott Wave Pattern

In the theoretically perfect world, Elliott Waves occur in sets of five sub-waves - three up and two down (see Figure 1). After the 5th wave, the trend reverses and corrects the prevailing trend in three large corrective waves. The market doesn’t move linearly and the purpose of having a 5-wave move is to allow for variations.

In Elliott Wave Theory, there are two main sub-types of waves in the Elliott Wave Pattern:

  1. Motive Waves (waves 1,3 and 5; A and C) which tend to be smooth and firm.
  2. Corrective Waves (waves 2 and 4; B) with tends to be messy and choppy.

Motive Elliott Wave Patterns

Each the Motive waves (1, 3 and 5) are in the direction of the trend, and the declining Corrective waves (2 & 4) are smaller than the motive waves and go against the prevailing trend.  If you see this pattern play out in full, it serves to reinforce the idea that we’re moving in a trend and points to the direction of the trend.

Elliott Wave Pattern - Motive Waves & Corrective Waves

Figure 1: Elliott Wave Count

A genuine Elliott Wave (EW) pattern must satisfy three essential rules for the five-wave move to be confirmed (Source):

  • Wave 2 never retraces more than 100% of Wave 1. Usually, the retracement is between 50% and 61.8% of wave 1.
  • Wave 4 never retraces more than 100% of wave 3 — usually, declines between 38.2% and 50% of wave 3.
  • Wave 3 always travels beyond the end of wave 1, and it’s never the shortest one; Wave 3 will usually extend 161.8 x wave 1.

These rules ensure that there is progress in a trend, which makes for a more detailed version of Dow Theory that the market moves in several big swings. Other guidelines to keep in mind are as follows:

  • Usually, wave 1 and 5 tend to have the same length in price and time;
  • Corrective wave A and wave C tend to be the same length.
  • The waves must be symmetrical in both time and price;
  • The law of alternation, if wave 2 is a simple Elliott Wave Pattern, wave 4 must be a complex Elliott Wave pattern and vice versa.

Corrective Elliott Wave Patterns

Unlike Motive waves, Corrective waves sub-divide into three sub-waves, with the primary objective or correcting the Motive waves. Corrective waves are labelled using letters rather than numbers to distinguish the three different types of corrective wave structures.

Flat EW pattern

A flat Elliot Wave pattern is made up of three waves A, B and C of higher degree that follows a 3-3-5 wave structure, meaning that wave A subdivides into 3 waves, wave B into 3 waves and wave C into 5. There are three different types of flat EW patterns: Regular, Irregular and Expanded or Running flat.

Zigzag EW pattern

The Zigzag Elliott Wave pattern is made up of three waves A, B and C that follow a 5-3-5 wave structure, meaning wave A subdivides into 5 waves, wave B into 3 waves and wave C into 5. Zigzags have a sharp look and usually occur in wave 2 of an impulsive wave.

Triangle EW pattern

The Triangles Elliott Wave pattern is made up of five waves A, B, C, D, E of higher degree, that follows a 3-3-3-3-3 wave structure.   All five waves are subdivided into 3 sub-waves. There are three different types of triangle patterns: Contracting, Barrier and Expanding.

Trading Using The Elliott Wave Pattern

A useful strategy for trading using the Elliot Wave Patterns is called Channeling. Draw a I-III channel line connecting the peaks of wave I and III, to identify the bottom of the IV (fourth) wave by extending that line from the II wave.  As the Elliott wave principle states that following the 5 waves, there will be 3 corrective waves; a trader can establish directional bias, and place take-profit orders accordingly.

Figure 2: Elliott Wave Channeling

Figure 2: Elliott Wave Channeling

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Meet the Experts Behind Our Unbiased Reviews

Chris Cammack

Partner Manager and Financial Writer

Chris Cammack

Chris Cammack is partner manager and senior financial writer at FxScouts, specialising in broker relations and forex market analysis. As the former Head of Content (2019–2024), he set editorial standards for all content published at FxScouts, including broker reviews, broker comparison pages and education.


With over a decade of experience in editorial management and partner relations, Chris builds and maintains our relationships with our partners to provide the best Forex trading experience for our users.


He also co-hosts the “Let’s Talk Forex” podcast with Alison Heyerdahl, where he explores trading strategies, industry news, and macroeconomic trends to help traders navigate the markets with confidence.

Alison Heyerdahl

Head of Content

Alison Heyerdahl

Alison joined the team as a writer in 2021. She is the Head of Content for FxScouts. She has a medical degree with a focus on physiotherapy and a bachelor's in psychology. However, her interest in Forex trading and her love for writing led her to switch careers. She has a passion for Forex trading and over a decade of editorial experience researching Forex and the financial services industry, producing high-quality content. She hosts a weekly podcast, "Let's Talk Forex", alongside Chris and has produced over 100 Forex educational videos for the FxScouts YouTube channel. She also writes weekly technical analyses and has tested and reviewed over 120 Forex brokers.

Ida Hermansen

Financial Writer

Ida Hermansen

Ida is a financial writer with a degree in Digital Marketing and a strong background in content writing and SEO. Her expertise extends beyond marketing and writing, with a keen interest in cryptocurrencies and blockchain networks. Ida's passion for crypto trading sparked a deeper fascination with Forex technical analysis and price movement. She is continually expanding her knowledge in Forex trading, staying informed about the latest trends and identifying the best trading environments for new traders.

Stefan de Clerk

Financial Writer

Stefan de Clerk
The newest member of our team, Stefan has a degree in Marketing and more than a decade of experience writing quality content in both finance and tech. Stefan's deep fascination with how factors like geopolitical events, big data and market sentiment influence the financial markets drives his passion for Forex trading. He believes that if you want to feel the pulse of the world economy, trade Forex, and if you want to trade Forex, you need well-researched, unbiased and objective information.