- 1). Count "impulse waves," which separate into five distinct waves. They're characterized by a relatively steep slope of increase or decrease within a short time.
- 2). Subtract corrective wave patterns from impulse waves, which are their opposite. Identify corrective waves by their lack of change over a long period of time (producing a flatter line slope). Overlapping waves also indicate corrections.
- 3). Mark off the five divisions of impulse waves. A division is marked at the point where the slope changes from negative to positive, or vice versa (in other words, when the price goes from a decline to incline, or vice versa).
- 4). Insert an entry trigger after wave 5, when the corrective pattern begins. An entry trigger is the "buy" point, when you enter into an investment. According to Elliott wave methodology, after wave 5, the price of an asset tends to increase.
- 5). Count the number of completed wave cycles (going completely from impulse to corrective and back to the first wave of the impulse pattern again) from the entry trigger point (buy) until the exit trigger point (sell).
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