phenomenon of a sharp correction is unique in the financial markets.
An Elliott wave sharp correction is often unexpected to many market participants
especially at the top of a strong bullish trend.
Indeed, Elliott sharp corrections are volatile, deep in nature as many traders and investors precipitate to reach the exit door.
A financial market sharp correction can easily erase fifty percent of prior gain within
a short period of time (within days).
corrections can generate substantial losses or gains, and change the
landscape of the financial markets. For example, numerous hedge
funds will be forced to close their positions if they accumulate
large losses at the time of the sharp corrective wave. Also central banks
may have to change their current monetary policy or review current
corrections also generate social unrest when they affect pensions
funds that are investing workers pensions in the financial markets.
sharp corrections also encourage
trading or investing activities. For instance, if a stock or another
bullish financial instrument sharply falls (in one go), many
speculators often buy it as they expect a bounce before the second
phase of the sharp correction. Sometimes, those speculative
buyers lose substantial amount of money because there was no bounce
as expected, but the asset continued to decline without any support.
Other times, those speculative buyers are well rewarded more than
they expect as the market quickly correct the sharp distortion.
cautious market participants often sell after the bounce as they
expect the decline to continue.
does not matter whether one is a more cautious or adventurous
financial markets player, one is exposing oneself to an expensive
risk any time one is dealing with an Elliott sharp correction.
Evolution Of Elliott Sharp Corrections
ago, one can easily trade the sharp correction pattern because most
market players were doing almost the same thing due to a common sharp
pattern is ABC corrective pattern where the A and C components are
sharp corrections and B component is a bounce. Consequently, after
the initial sharp correction (A component), everyone goes in and buys
the asset then the price bounces up to the sweet spot Fibonacci
trading zone before sharply dropping one more time to form C
component. As the second sharp move (C component) is in place,
everyone will buy (buy and hold) the asset at the early stages of the
new bullish trend. Obviously, the opposite is also true during the
subsequent sharp corrections of the prior bearish trend.
that distinctive sharp correction pattern is becoming more complex
than before. One is more likely to come across WXY Elliott wave where
W is ABC (zigzag pattern with A and C being sharp corrections).
is happening more and more is a complex correction after the initial
ABC instead of the new trend. Therefore, one will usually find an
Elliott wave cycle that is formed of a
phase plus a complex correction WXY pattern instead of the normal
trending phase plus a regular ABC or zigzag Elliott wave
Of Sharp Corrections
Elliott sharp correction is sharp because it is fast, volatile and
does not reveal its internal waves. In most cases, one can not
isolate the internal waves of a sharp correction. An orderly sharp
correction is subdivided into two phases A and C with the bounce or
pull back ( B wave) in the middle. More volatile sharp corrections
are vertical price moves without the bounce or pull-back
in the middle. Sometimes, the bounce or pull back is a total (100%)
Fibonacci retracement of the sharp correction. In other words, after
the sharp correction, the price quickly recovers all prior losses. It
goes down from point O to E and quickly rallies up from E to point
I like to call hybrid sharp corrections are the Elliott corrections
that are formed of a sharp correction, bounce or rally and a normal C
wave with distinctive internal waves. Another example of hybrid sharp
correction regroups A wave that is a normal price move (usually with
distinctive internal waves) plus a bounce or rally and the C wave
sharp correction. Hybrid sharp corrections are zigzag corrections
where either A or C waves are sharp corrections ( but not both A and
Or Factors Of Sharp Corrections
number one root cause of the most devastating sharp corrections is
the financial market distortions.
would recommend to those who are not ready to pay attention to what I
am about to share to take a pause so they do not miss out.
of all market players is the market distortion. Indeed, the worst
market distortions are those that built up bit by bit over the years
when the market players disregard all precursors signs. During a
distorted market, many financial instruments have inflated or
depressed valuations. For example one may pay hundred dollars instead
fifty for an asset price that has been inflated. On the other hand, a
highly valuable portfolio may lose substantial value (depressed) for
no fundamental reasons. In this instance, an asset of hundred dollars
become fifty or less without a valid justification. Smart investors
who identify those distortions can rack in immense profit. Indeed the
market distortions that are prolonged (talking about the duration)
will ultimately cause a sharp Elliott wave correction.
from the market distortions, geopolitical events, natural
catastrophes, crazy trading algorithms, unexpected bullish or bearish
earning news, sudden central banks change of monetary policies, extensive
market manipulations, boom and bust of major companies especially
market leaders, financial markets uncertainties, acute fear or greed
and high impact economic can cause sharp Elliott wave
wave traders are fluent in trading the four essential corrective wave
triangles and Elliott wave combinations). They are familiar with
them, but most neglect the sharp correction price structures.
sharp corrections are unique because they can instantly turn a
profitable trading or investing portfolio into a losing one.
those reason, it is vital that one learns how to become fluent in
trading Elliott wave sharp corrections. Though, they are risky or
volatile, one can also harvest gigantic gains within days if one
knows how to trade the different types of sharp corrections.