Elliot Wave Theory’s Correction Patterns

Elliot was mostly open-ended on the interpretation and application of his wave theory. When it comes to corrections, however, Elliot had very firm guidelines for how these corrective wave patterns would look.

While we could bombard you with every single one of the 21 patterns he outlined in his book, we just want to give you the basics of the corrective pattern that comes after the 5-3 wave. In general, the corrective wave should take the shape of chart patterns which you learned about in Chapter X.

Flags and Triangles

The most common type of ABC corrective price action takes the shape of flags, or triangles:

After the 5-3 waves, then this pattern should appear. The flag and triangle are really basic technical patterns, from which the price should break into a new trend.

Flats

In a flat corrective pattern, the market creates a nearly perfect double top or double bottom, depending on the 5-3 wave pattern that leads into the flat correction waves. Very simple, and very easy to spot, the flat formation looks a little like this:

In other parts of this website we go into Elliot Wave Theory in full. If this is your first lesson in Elliot Wave Theory, do know that even without an implicit understanding of EWT, you already know 99% of what you need to make good trades with the wave theory.

In the next section we’ll touch on how waves show up on a chart, and note the necessary items you need to look for to confirm that what is forming on the chart is actually an Elliot Wave.