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Elliot Waves Complete Guide | Chapter 4.1 - "Alternation"

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Hello Traders. Welcome to Chapter 4.1, our FINAL chapter! In this sub chapter, we will learn the theory of alternation. In chapter 4, you will learn all of the applications and guidelines on how to connect a lot of the patterns that we learned in the previous chapters.

The rule of alternation lies within the pattern of two corrective macro swings in a completed 5-wave sequence to alternate between a simple (very often an ABC) correction and one of the more complicated or complex Elliott corrections. In simple terms, as long as the general picture of the five wave structure is in tact, we can look for any alternations within the five wave structure. In even more simple terms, an alternation is basically a five wave structure that just has two different patterns within the overall trend. This is a very helpful observation on a macro perspective, because if Wave 2 unfolds as a simple ABC correction then probability will suggest that Wave 4 is more likely to unfold as a more complex correction. And vice-versa, if Wave 2 is complex, then you should anticipate that wave 4 is likely to unfold as a simple ABC pattern. That is it, literally.

Chapter 4 Glossary:

4.1 Alternation
4.2 Channeling
4.3 Psychology
4.4 Fib-Ratio
4.5 Motive Wave Multiples
4.6 Corrective Wave Multiples

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Alternation:

Now that we have the understanding of all the theories and rules behind each pattern discussed in the previous chapters, we need to start understanding guidelines and applications. The first application that we must learn is the concept of 'alternations' In simple terms, alterations occur when you are analyzing the markets and you expect the next common pattern to occur, that differs from the previous related pattern as shown in the above example. If you look at the above graph, the first example shows that:

• Wave 2 corrects rather sharp against the major trend to the expected 61.8% Fibonacci level.
• Wave 4 on the other hand is more of a sideways correction and only corrects to the 38.2% Fibonacci level.

❗NOTE: Wave 2 is usually a 'zig-zag' pattern which corrects much of the price movement and wave 4 is either a flat, triangle, double or triple three correction whose purpose lies in the extension of duration (accumulation phase).

On the right of the graph, we can see alternations within the actual waves within themselves. Not only does an alternation take place between different primary waves, but but you can have alternations inside of the waves, too.

Let's look at the two corrections: they are both showing an (A),(B),(C) pattern, but differ in the actual development of the pattern itself.

1. In the first variation example, wave (A) is made of an ABC Flat correction, which is followed by an ABC Zig-Zag correction that forms a wave (B).
2. The second variation represents the exact opposite. In both cases the second component of the correction (Wave (B)), varies from the first component.

→ BOTH of these corrections finish with a classic wave (C), which is a five-wave countertrend movement. Confused? Re-read over and over.

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Elliot Waves Complete Guide | Chapter 1 - "The Overall Cycle"