What it is
Elliott Wave theory, from Ralph Nelson Elliott in the 1930s, says trends move in five waves (1, 2, 3, 4, 5) and corrections in three (A, B, C). It is a way of labelling price, and two analysts can count the same chart differently and both follow the rules.
WickSpeak does the mechanical part for you: it finds the swings, labels a count, and says plainly when the count in front of you breaks one of the hard rules. That keeps the labels honest without pretending there is only one answer.
How it is calculated
1. Find swing highs and lows using the swing size setting (auto picks a size to suit the chart). 2. Try to fit the latest swings as a five wave move up or down (or either, the default). 3. Check the three hard rules: wave 2 must not retrace beyond the start of wave 1; wave 3 must not be the shortest of waves 1, 3 and 5; wave 4 must not enter the price range of wave 1. 4. Draw the wave path and labels, and report any rule the count breaks. 5. If targets are on, project Fibonacci extensions of wave 1 from the end of wave 2 to show where wave 3 and wave 5 commonly finish.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| swing size | auto | auto, or a fixed 0.25%, 0.5%, 1%, 2%, 3%, 5%, 8%, 12% or 20% | How big a move must be to count as a swing. Smaller finds more, smaller waves; larger finds the main waves. |
| look for | either | either, up or down | Whether to count rising five wave moves, falling ones, or whichever fits. |
| wave 3/5 targets | on | on or off | Shows or hides the Fibonacci projection lines for wave 3 and wave 5. |
How to read it
How to trade it
- 1
Wait for the count to show waves 1 and 2 complete in the direction you want.
- 2
Entry trigger: price breaks and closes beyond the end of wave 1, confirming wave 3 is under way. On gold 1 hour, buy that close.
- 3
Stop: below the end of wave 2. If price goes beyond the start of wave 1, the count is wrong.
- 4
Target: the 1.618 times wave 1 projection drawn on the chart, measured from the end of wave 2.
- 5
Take partial profit there and manage the rest for wave 5, which often ends near another Fibonacci extension.
A bullish count is proved wrong if price falls below the start of wave 1. During wave 4, a fall into the price range of wave 1 also breaks the count.
WickSpeak draws the wave path and labels on the chart, the wave 3 and 5 Fibonacci targets when switched on, and writes a plain-English reading: which wave the count thinks you are in, how to trade it, and which rule would break it. If the visible count breaks a hard rule, it says so.
Best markets and timeframes
Elliott counts read best on 1 hour to daily charts of strongly trending markets such as gold, US30 and NAS100. Very short timeframes produce too many small swings to count reliably.
Common mistakes
- Treating the auto count as certain; recount when price breaks a rule.
- Forcing a five wave count on a sideways market.
- Using a swing size too small, so tiny wiggles are labelled as full waves.
Works well with
Questions traders ask
What are the three rules of Elliott Wave?
Wave 2 never retraces more than 100% of wave 1; wave 3 is never the shortest of waves 1, 3 and 5; and wave 4 does not overlap the price range of wave 1. Break any of these and the count is invalid.
Can Elliott Wave be counted automatically?
The swings and the rule checks can be done automatically, and WickSpeak does that. The final label is still a judgement, which is why the tool shows one count and says when it breaks a rule.
What is the usual target for wave 3?
Wave 3 often extends to about 1.618 times the length of wave 1, measured from the end of wave 2. It is a common area, not a guarantee.
Does Elliott Wave work on gold?
Gold trends strongly at times, which suits wave counting on 4 hour and daily charts. During sideways spells counts become unreliable and are often relabelled.