chapter 10 wave ratios and measurements 10astrocycle.net/pdf/waveratios.pdfchapter 10 wave ratios...

Chapter 10 Wave Ratios and Measurements

10~ 179

LengthsThe price distance of each wave is measured as a vertical distance from thebeginning of the wave to the end of the wave. The length is measured in pricepoints or units.In the examples below, the length of each wave is indicated by the length of itscorresponding arrow.

C H A P T E R

Wave Ratios and Measurements 10

Length of Wave 22

1

2

2

Length of Wave 3

Length of Wave 4

1

1Length of Wave 1

2

Length of Wave 5 1

3

4

5

1

3

3

2

1

3

4

4

5

eSignal, Part 2 Applying Technical Analysis

10~ 180

Fibonacci Ratios of WavesFibonacci Ratio Background

Fibonacci ratios are mathematical ratios derived from the Fibonacci sequence.The Fibonacci sequence is the work of Leonardo Fibonacci, circa 1180 CE. TheFibonacci sequence is used in many applications, including engineering, spacestudies, stock market actions, and many other fields. This is all the informationone needs as to the origin of the Fibonacci ratios, at least for trading purposes.The most common Fibonacci ratios used in the stock markets are:

1 - 1.618 - 2.618 - 4.23 - 6.85 (multiples)0.14 - 0.25 - 0.38 - 0.5 & 0.618 (ratios)

The ratios used in this manual slightly deviate from the standard Fibonacci ratioslisted below. These deviated ratios best fit the short-term wave pattern.The first wave in an Elliott sequence is Wave 1. The measurement of Wave 1 isused to find ratios of other waves. These ratios are not rules, but guidelines inestimating the lengths of different waves.

Ratios for Wave 2Fibonacci Rule for Wave 2:

Wave 2 is always related to Wave 1.Common Ratios for Wave 2:

Wave 2 = either 50% of Wave 1 or 62% of Wave 1

of Wave 1

1

Len

gth

of W

ave

One

}50%2 62%


10~ 181

Ratios for Wave 3

Wave 3 is related to Wave 1 by one of the following:Wave 3 = either 1.62 x length of Wave 1

or 2.62 x length of Wave 1or 4.25 x length of Wave 1

The most common multiples are 1.62 and 2.62. However, if the 3rd Wave is anextended wave, then 2.62 and 4.25 ratios are more common.

Ratios for Wave 4Wave 4 is related to Wave 3 by one of the following:

Wave 4 = either 24% of Wave 3or 38% of Wave 3or 50% of Wave 3

The 24% and 38% are the most common ratios for Wave 4.

Times Length

of Wave 1

1

2

3

3

4.25

2.62

3 1.62

Leng

th o

fW

ave O

ne

1

3

Len

gth

of W

ave 3 4

4

24%

38%

TimesLength

of Wave 3

2


10~ 182

Ratios for Wave 5Wave 5 has two different relationships. Both are shown below.

If Wave 3 is greater than 1.62 or extended, then Wave 5 ratios are asfollows:Wave 5 either = Wave 1 or

= 1.62 x Wave 1 or= 2.62 x Wave 1

If Wave 3 is less than 1.62, Wave 5 ratios are as follows:When Wave 3 is less than 1.62, the 5th Wave overextends itself. From research,the ratio of Wave 5 will be based on the entire length from the beginning of Wave1 to the top of Wave 3.Extended Wave 5 = either 0.62 x length

(beginning of Wave 1 to top of Wave 3) or= length of(beginning of Wave 1 to top of Wave 3) or= 1.62 x length of(beginning of Wave 1 to top of Wave 3)

3

4

5

15 based on length of 1

1 2

1

2

3

4

5

5 based on length of 1 3

1

3


10~ 183

Elliott Channels for Top of a Wave 5

Once the 5th Wave starts, the Elliott Channel Technique can be used to projectthe end of the 5th Wave. Once Wave 4 has been completed, draw a straight linebetween Waves 2 and 4.

Now draw two lines parallel to the lower channel line connecting the tops ofWaves 1and 3.

Expect Wave 5 to end on one of the two upper channel lines. Usually, if Wave 3was a normal wave, Wave 5 tends to end on the channel drawn from the Wave3 top. If Wave 3 was extended and a runaway type of wave, Wave 5 tends toend on the channel drawn from the top of Wave 1.

LowerChannel Line

1

2

3

4

LowerChannel Line

5

5

1

2

3

4

Wave 1 UpperChannel Line


10~ 184

Statistical Analysis of Wave 2 Ratios

73% Retraced between50% and 60%

Only 12% held within a 38% retracement

of Wave One

38%

1

2

15% Retraced below the 62% level

62%

2

1

50%

62%2

1


10~ 185

Wave 2 Ratio

Figure 10-1: Daily Chart, Alcoa

In the Alcoa Inc. (AA) chart above, Wave 2 retraced between 50% and 62% ofWave 1.


10~ 186


Less than 3 = 1only 2% of the time

3

1

23

1

2

1.75 X 1

1.6 X 145% of the time}

2.62 X 1

1.75 X 1

1

2

330% ofthe time}

15% of thetime

1.60 X 11 X 1 }

3

1

2

2.62 X 1

1

2

Greater than 2.62 X 18% of the time

3


10~ 187

Wave 3 Ratios


In the Alcoa Inc. (AA) chart above, Wave 3 wound up between 1.618 and 2.618of Wave 1.


10~ 188


More than 62% Retracement of Wave 3 = 10% of the time

Retrace 24-30% of Wave 3only 15% of the time

50%30%

}Retrace between 30-50% ofWave 3 60% of the time

50%62%} Retrace between 50-62% of

Wave 3 15% of the time

3

1

1

2

2

2

3

1

3

24%30% }


10~ 189

Wave 4 Ratios


In the Alcoa Inc. (AA) chart above, Wave 4 retraced between 24% and 38% ofWave 3.


10~ 190

Elliott / Fibonacci Ratios

Wave 5

Extended if Wave 3 is less than 1.62 X Wave One

5 = .62 X Length of 0 to 35 = 1 X Length of 0 to 35 = 1.62 X Length of 0 to 3

3

0

1

2

3

4

28000

28200

28100

28400

283001

2

3

4

5

?


10~ 191

Elliott / Fibonacci Ratios for Wave 5

Even when Wave 3 is extended, our research has found that the Wave 5 sequencewill often end inside the ratios calculated from 0–3 where 0 (Zero) is the start ofWave 1. This is the start of the new Five-Wave sequence. The length of 0–3 isextended from the end of Wave 4.

Wave 5 usually ends inside the windows of 62% of 0–3 and equal to 0–3 addedto the end of Wave 4.



10~ 192

NotesNotes

chapter 10 wave ratios and measurements 10astrocycle.net/pdf/waveratios.pdfchapter 10 wave ratios...

Documents