Elliott Wave Theory proposes that markets move in predictable, repeating patterns driven by investor psychology. These patterns consist of 5-wave impulse moves in the direction of the trend, followed by 3-wave corrective moves against it.

The 5-Wave Impulse

In an uptrend, the impulse pattern looks like this:

• Wave 1 — First move up. Often small, not yet obvious.
• Wave 2 — Correction down. Never retraces beyond Wave 1 start.
• Wave 3 — Strongest and longest wave. Never the shortest.
• Wave 4 — Correction. Never overlaps Wave 1 price territory.
• Wave 5 — Final push up. Often with divergence on RSI/MFI.

Wave Personalities

• Wave 2 — The best entry. Deep retracement, high conviction longs.
• Wave 3 — The money wave. Ride it hard, trail your stop.
• Wave 4 — Choppy, frustrating. Often a flat or triangle.
• Wave 5 — Exhaustion. Watch for divergence. Your SHORT signal.

Live Chart Example

On the TA Charts tab right now, BTC is showing a possible Wave 3 (marked with ③). The previous Wave 2 retest at $66,800 held perfectly. If this count is correct, we're mid-impulse with Wave 4 and 5 still to come.