In the first article of this series, you learned the basics of Elliott wave patterns. Now let’s take a look at how we can (or can't) identify completed wave structures in order to see where the market is within a larger pattern (or trend). Then we’ll use the Three Rules of Elliott to decide where it is likely to go, and use "alternate counts" to order the probabilities.
You may know that one of the Three Rules of Elliott states that, "Wave 2 can never retrace more than 100% of wave 1." By applying this rule in your trading, you always know the exact price point where your "wave 2" is no longer a wave two. Which means that you always know the exact price point where to place your stop-loss...
In yesterday's story about Soybean futures, we talked about the Three Rules of Elliott. Today, let's look at the second rule: "Wave 3 is never the shortest among waves 1 and 5," as it applies to the current picture in Cocoa futures.
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