The Elliott wave equality principle is a very simple principle that helps to set a price target in the fifth wave. That principle can be really useful beyond the fifth wave if one digs into it a little bit more. Let's find out more.
Understanding Elliott Wave Equality Rule
According to the founder of the Elliott wave theory (Ralph Elliott), there is often equality between the 1st and 5th wave.
And it happens quite often that the 1st and 5th waves have the same length or magnitude (height). So, as soon as the 5th wave is underway, traders use both the magnitude and length of the 1st wave to set targets.
To be honest that is really how traders use the Elliott wave equality principle. Most wave traders only use that principle during the trending phase (motive wave).
Another Way To Use The Waves Equality Principle
As I said before in other writings, a corrective wave has its own motive wave.
For example the A-minor wave of the zigzag pattern is its motive wave. When one looks deeper into the equality principle, one will recognise that it is fair to say that the first leg of a directional multiple-segment price structure is often (not always) equal in length and magnitude to its last segment.
That is really the secret of the equality waves principle.
With that deduction, one can use that principle for both impulse and corrective waves or even any specific price structure or pattern.
Indeed, it is rational to say that there is often equality between the A and C minor waves of a corrective. That is applicable to the flat and zigzag corrective waves. It is also true for a triple zigzag.
Other Interpretations Of Elliott Wave Equality Principle
Considering that the main use of the waves equality principle is to set a price target, one can also argue that one can use both the magnitude and length of the first wave to set the first price target for the third Elliott wave.
In fact, one can use the first wave (length and magnitude) as a measuring stick throughout a motive wave.
Does it make sense?
Warning When one is using any deduction from the wave principle of equality, one should avoid misusing those. One can only apply the equality principle if and only if the structure is directional. For example it will be wrong to apply those deductions or sub principles to a pattern that has a structure of the letter W.
Advanced Use Of The Equality Wave Principle
One can use the same principle when one is dealing with the higher degree waves count. Sometimes, people do forget.
For example, one uses the equality principle on the daily chart, but one forgets to use it when one switches from the daily to monthly chart. Indeed, the expansion of an Elliott wave cycle does not cancel the equality principle when one is moving from a lower degree to the subsequent higher degree.
Alright, I think I have said enough already and I do want to confuse you. There are more deductions and applications of the wave principle of equality. I do not know if one is ready for it yet. Are you? Great.
Whether one is setting a price target or managing a trade the wave principle of equality does help. It also helps to forecast the financial markets both in the lower and higher degree levels.
One that has mastered that principle can apply a rational deduction to find other sub related principles. To apply any of those sub principles, it is important that the price structure is directional.
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