1. Introduction To Elliott Wave
An in-depth introduction to the Elliott Wave Principle
Presented by Todd Gordon – Founder of TradingAnalysis.com and CNBC Contributor

2. The Wave Principle

3. Elliott Wave Principle
Recommended reading :
Elliott Wave Principle by
A.J. Frost &
Robert Prechter

4. Ralph Nelson Elliott (1871 - 1948)
“In the 1930’s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns…are repetitive in form, but not necessarily time or amplitude”
Prechter – Elliott Wave Principle

5. Charles Dow Phase 3- Excess to Distribution
Phase 2- Widespread Participation
Phase 1- Accumulation
Post-extended bear market

6. Objections To Elliott Wave
Some Classics Objections
“If you put 10 Elliott analysts you get 10 different interpretations”
“It’s curve fitting”
“It’s all hindsight analysis”
“Too subjective to be of any use”

9. Elliott Wave
A Disciplined Approach to pattern recognition to gain market context while minimizing risk exposure

10. Objections To Elliott Wave
Some Classics Objections
“If you put 10 Elliott analysts you get 10 different interpretations”
“It’s curve fitting”
“It’s all hindsight analysis”
“Too subjective to be of any use”
1) If a hater has objections to Elliott Wave,
then they have objections to widely accepted traditional technical analysis!
2) They are likely too damn lazy to put in the work and learn the methodology
3) They are personal afraid of uncertainty and lack confidence in the markets

11. Is Elliott Wave Too Subjective?
General going into battle with one game plan?
Have a backup plan is required when partaking in an exercise that deals with the unknown future.
Successful leaders and business men are strong in their vision and determination to meet a goal on their chosen path.
However, a leader can control the outcome of his goal as his actions in this company, on his team, or with his army can impact the course of events and how the future unfolds
Aside from a handful of behemoth trading funds, a trader has no control of future events and cannot impact price change, thus it’s foolish to be steadfast in your primary trading plan
A backup plan is required as the markets hard right edge must be your guide.

12. Andrew Baptiste, Chief Technical Analyst at Morgan Stanley, JP Morgan for 20+ years In essence,  "The Wave Principle is a simple rule-based methodology (3 rules) that allows the practitioner to dissect the collective ‘mindset’ of the market’s participants, which allows for defined, attractive / positive Risk-Reward trading / investing parameters – A Game Plan.“
(Andrew with my boys, Jake and Brody)

13. Paul Tudor Jones
Worth over $3 billion from his hedge fund, Tudor Investments, and has donated over $1.25 billion to charity through his Robin Hood Foundation

14. Tudor Uses Elliott Wave
On Oct. 5, 1987, Mr. Prechter, then and now the best-known proponent of the theory, told his subscribers to sell. While the rest of Wall Street counted its losses, Mr. Jones, at age 32, returned 200 percent for his investors that year and drew a payday of an estimated $100 million for the year, an almost unheard-of sum at the time.
The “Lost” Tudor Video
Tudor mentions Elliott Wave several times in this lost video

15. George Soros From the New York Times
“As far as Mr. Soros is concerned, the crack came two weeks ago, when Robert S. Prechter, the popular market forecaster who had run at the front of the herd of bulls for five years, reversed course in mid-stride and warned his clients to pull out of the market. ''Mr. Prechter's reversal proved to be the crack that started the avalanche,'' Mr. Soros said yesterday” (speaking about the 1987 crash)
Source New York Times-

16. Robert Prechter – Modern Day Elliott Ambassador
‘…the stock market is at high risk of a sharp collapse. Near term, we’re prepared to see the Dow make one more high. But it doesn’t have to happen.’
Robert Prechter, Elliott Wave International
Source: Elliott Wave Theorist

17. Motive Waves

18. Basic 5-Wave Pattern 5 3
Wave 5
Wave 4
Wave 3 1 4
Wave 2
Wave 1 2

19. The 5-Wave Pattern 5
Wave 2
Investors fully bearish, certain of new lows
- Heavily retraces W.1
- Fundamentals horrible, doom and gloom
Volumes light, as sellers dry up
Wave 3
- Strong, deliberate, and extended price action
Fundamentals increasingly better
- Investor confidence greatly improved
Wave 5
- Investors extremely optimistic
Fundamentals return, but often not to W.3 levels
Price momentum less than W.3
Wave 4
Fundamentals temporarily peak, then pullback
Often shallow, yet prolonged consolidation
Wave 1
- Fundamentals poor
- Investors fully, bearish
expecting new lows
Heavy short selling 3
Wave 5
Wave 4
Wave 3 1 4
Wave 2
Wave 1 2

20. Prices Exist in One Of Two Forms
Motive
Corrective 3 5 B 4 1 2 A C

21. Motive vs. Corrective Motive Corrective
Underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, at all degrees of trend.
Motive
Corrective

22. Motive vs. Corrective Motive Corrective
Underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, at all degrees of trend.
5-wave patterns that impel the trend at one larger degree
3-wave patterns or variations that interupt the trend at one larger degree
Motive
Corrective

23. Motive Wave Variations
Impulse
Impulse Extension
Diagonal Triangles

24. Basic Motive Pattern Rules of the Motive Pattern 5 3 4 1 2 2
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1. 4 1 2 2

25. Basic Motive Pattern Rules of the Motive Pattern 5 3 4 1 2 4
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1. 4 1
Wave 4 can NOT break wave 2 low. 2 4

26. Basic Motive Pattern Rules of the Motive Pattern 5 5 3 3 1 4 1 4 2 2
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1. 3 1 4 1
Wave 4 can NOT break wave 2 low. 4
Wave 3 is often the longest, but
it is never the shortest. 2 2

27. Basic Motive Pattern Rules of the Motive Pattern
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1.
Wave 4 can NOT break wave 2 low.
Wave 3 is often the longest, but
it is never the shortest.
Is this chart showing a valid motive wave?!

28. Motive Impulsive Pattern
Rules of the Impulse Pattern 5 3
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1. 4 1 2 2

29. Motive Impulsive Pattern
Rules of the Impulse Pattern 5 3
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1. 4 1
Wave 4 can NOT touch Wave 1. 4 2

30. Motive Impulsive Pattern
Rules of the Impulse Pattern 5 5 3
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1. 3 1 4 1
Wave 4 can NOT touch Wave 1. 4
Wave 3 is often the longest, but
it is never the shortest. 2 2

31. Motive Impulsive Pattern
Rules of the 5-Wave Pattern
Wave 2 can NOT retrace to the
beginning (or beyond) of Wave 1.
Wave 4 can NOT touch Wave 1.
Wave 3 is often the longest, but
it is never the shortest.
Is this chart showing a valid impulsive wave?!

32. The Motive Wave
Motive
Motive Impulsive

33. The Motive Wave
Same chart, but higher time frame
Motive

34. The Motive
Diagonal
Same chart, but higher time frame
Motive

35. Diagonal Triangles Motive, yet NOT impulsive Ending Diagonal
.iii
.iv
.ii .i .v .i
.ii
.iii
.iv .v
Ending Diagonal
Leading Diagonal

36. Ending Diagonal 1 (c) (a) (b) 2 Motive, yet not impulsive.
.iii
.iv
.ii .i .v
(a)
(b)
(c) 1 2
Motive, yet not impulsive.
Occurs at termination points of
larger degree, exhaustive points.
Common in W.5, sometimes C of
A-B-C
W.5 ends in a ‘throw-over’ break
of the trend line of W1 & 3
Subdivides into

37. Ending Diagonal – Research Posted on TradingAnalysis
Ending Diagonal – Research Posted on TradingAnalysis.com on June 17th, 2015

38. Ending Diagonal – Updated Today On TradingAnalysis
Ending Diagonal – Updated Today On TradingAnalysis.com on September 24th, 2015

39. Leading Diagonal Subdivides into 5-3-5-3-5 OR 3-3-3-3-3
.ii
.iii
.iv .v
Subdivides into OR
5-wave subdivisions convey continuation,
unlike 3-wave subdivision of ending
diagonals.
Occurs in W1 of impulse, or WA or
a Zig-Zag.
Contains converging trend lines.

43. Motive Wave Variations
Impulse
Impulse Extension
Diagonal Triangles

44. Motive Wave Variations Impulse Extensions
Elongated impulse with
Exaggerated subdivisions.
Wave 3 is always a impulse
and usually extends.
When extensions occur
they occur only once in the
impulsive count. W1,3 or 5

45. Motive Wave Variations Impulse Extensions
Elongated impulse with
Exaggerated subdivisions.
Wave 3 is always a impulse
and usually extends.
When extensions occur
they occur only once in the
impulsive count. w1,2,5

46. Motive Wave Variations Impulse Extensions
Wave 1, 3, or 5 can extend.
If wave 3 extends, then
wave 1 & 5 are often
equal in size. **Very
powerful relationship**
Often mislabeled as a
count of one larger degree.

47. Crude Oil 5 of 5 Extension

48. Motive Waves 5 3 B 1 4 A C 2
Uptrend
Downtrend

49. CORRECTIONS

50. 3 Wave A-B-C Corrective Pattern
Wave B
Wave C A C

51. Complete 8 Wave Pattern 5 Wave A – Investors remain
bullish, convinced of an easy
buying opportunity. 3 B
Wave 5
Wave A
Wave 4
Wave B
Wave C 1
Wave 3 4 A
Wave B – Bullish investors are
convinced the market is moving
to new highs.
Wave 2 C
Wave 1
Wave C – Investors highly
discouraged, stops below
Wave B lows are triggered. 2

52. Corrective Wave
Variations

53. Corrective Waves Corrective waves posses a 3-Wave (ABC) structure that
retraces a % of a prior move
Corrective waves trend in the
opposite direction as the
wave of 1 larger degree. b a
Labeled with letters. c
Waves 2 – 4 – B are
corrective waves.
2 – 4 - B

54. Label The Corrective Waves

55. Corrective Wave A

56. Corrective Wave B

57. Corrective Wave C

58. Variations of Corrective WavesB
Zig-Zag

59. Zig-Zag Corrections B A C (2) or (B) 1. 3-Wave (ABC) structureii iv a
2. Counts as 5-3-5 i ii
3. Often found in W.2 or W.B b
iii i
B-wave retraces less than 78.6% of A
The end of W.C is
considerably lower than the
start of W.A iv v A
iii v C
(2) or (B)

60. Zig Zag in Real Markets
S&P 500 – 195 Min – Red Count

61. Variations of Corrective WavesB A C
Flat

62. Flat Corrections Subdivides 3-3-5 Often occurs in W.4 or W.B
Occurs in strongly trending markets, around an extension
Wave-B retraces at least 78% of Wave-A
Wave-B usually makes a new high; 127% ext retracement is ideal
Wave-C often breaks below Wave-A low c a b i ii
iii iv v A B C
(4)/ (B)
(3)
/ (A)

63. Expanded Flat CorrectionsB
(3) c
W.B ends beyond W.A’s
beginning b ii a
W.C ends beyond W.A’ end i b
Very common variation a iv
Same composition as a
regular flat wave c A
iii v C
(4)

64. Flat In Real Markets
Apple – Daily – Red Count

65. Variations of Corrective WavesB D E
Triangle

66. Triangle Corrections (3) or (A) (5) or (C) (4) or (B)
Reflects balance of forces B D
Occurs prior to a final motive
wave in the pattern of one
larger degree, terminal move E
5 waves, all with 3-wave
subdivisions, labeled
A-B-C-D-E C
(4) or (B) A
Must retrace portion of the
prior impulse wave at W.E’s end

67. Triangle in Real Market
S&P 500 Daily Chart - Red

68. Running Triangles (5) or (C) (3) or (A) (4) or (B) B
W.B exceeds W.A’s beginning D
Advance to new high in W.B
often ‘fakes’ traders out E C
(4) or (B)
Very common variation A

69. Variations of Corrective WavesX Y W
Combination

70. X-Wave Combinations A B C (W) (X) (Y) A B C (W) (X) (Y) X W Y i ii iiiiv v a b c A B C
(W)
(X)
(Y) i ii
iii iv v a b c A B C
(W)
(X)
(Y)
Instead of an A-B-C pattern,
combinations take on an
W-X-Y pattern X
X waves are typically a
Zig-Zag pattern
W & Y waves are either
Zig-Zags, Flats or Triangles W
Combinations typically have
a side-ways appearance Y

71. Double Zig-Zag Combo B (X) A C (W) (Y) i ii iii iv v a b c
A Double Zig-Zag joined by a X wave which is also a Zig-Zag
This would be a very deep correction compared to other combinations

72. Flat Triangle Combo Flat Wave Triangle (X) (Y) (W)
Flat Waves are common in the W wave position
Triangles are common in the Y wave position
This combination looks more sideways than directional

73. Flat Zig-Zag Combo
Flat Wave
(X)
Zig-Zag
(W)
(Y)

74. Elliott Waves are Fractal5 3 A B C 1 4 1 2 3 4 5 2

75. 3 Degrees of the 5 Wave Pattern 1 .5 .3 .1 .4 .2 5 5 3 3 1 4 2 4 1 5 3

76. 3 Degrees of a Trend 1 3 Degrees Of Trend Largest: 1 .5 .3 .1 .4B 3 1 4 2 4 A .1 1 C 5 .4 B 3
3 Degrees Of Trend
Largest: 1
Middle: .5
Smallest: 5 1 2 4 A C 2 .2

77. 3 Degrees of a Trend 1 3 Degrees Of Trend Largest: 1 .5 .3 .1 .4B 3 1 4 2 4 A .1 1 C 5 .4 B 3
3 Degrees Of Trend
Largest: 1
Middle: .5
Smallest: 5 1 2 4 A C 2 .2

78. 3 Degrees of a Trend 1 3 Degrees Of Trend Largest: 1 .5 .3 .1 .4B 3 1 4 2 4 A .1 1 C 5 .4 B 3
3 Degrees Of Trend
Largest: 1
Middle: .5
Smallest: 5 1 2 4 A C 2 .2

79. 3 Degrees of a Trend 1 3 Degrees Of Trend Largest: 1 .5 .3 .1 .4B 3 1 4 2 4 A .1 1 C 5 .4 B 3
3 Degrees Of Trend
Largest: 1
Middle: .5
Smallest: 5 1 2 4 A C 2 .2

80. Label Table

81. Let’s work real charts on this…