Actionary Waves and Reactionary Waves

Video Transcription:

Hello, traders. Welcome to the Elliott Wave Theory course and the third module, Advance Elliot Wave Analysis.

In this lesson, we are going to talk about actionary waves and reactionary waves and what we are going to talk about is actually which waves inside of the pattern are we going to be trading. Now, let’s start by defining what these waves are.

Actionary and reactionary waves

In previous lessons, we have described the only two functions waves have inside a pattern. A wave can either be actionary or reactionary. This means that a wave inside a pattern can only be an impulse wave or a correction wave, okay? It doesn’t matter if we are talking about a five-wave basic pattern, or a triangle, or a zigzag, or a flat or the extended flat, we always have two types of waves: an actionary wave or a reactionary wave. And, of course, we have two modes of structural development of a pattern: a motive pattern or a corrective pattern which is also the same. An impulse pattern or a corrective pattern and here are the labels for actionary waves on all patterns we have learned so far. Wave one, three, five. Wave A, C, E, W, Y, and Z. And right here wave one, three and five are waves of the…or it can be waves of the basic design or on any diagonal. Wave eight and C can be the waves of ABC correction or a triangle, etc. But always label one, three, five, A, C, E, W, Y and Z are actionary waves. And reactionary waves are waves two, four, B, D, X. All reactionary waves develop in corrective mode and most actionary waves develop in motive mode.

And here is where it becomes interesting. With the Elliot Wave Theory, we only try to trade actionary waves which develop in corrective modes. For example, we have the wave one, three, and five in an ending diagonal, wave A in a flat correction, wave A, C, and E in a triangle, wave W, Y, and Y in double threes, and wave Z in triple threes. And these are the waves we are going to try to trade, okay? And, of course, we can also trade the end of the pattern, which means that if we are in a corrective pattern, and we have spotted that this pattern is actually a flat, we are going to wait for the completion of that pattern for us to trade the continuation of the move, okay?

Now, we are going to go back to the previous example. All right, here we go. Remember that we correctly assessed that this five-wave basic design was actually a deep correction of the entire move to the downside, but we could have actually traded the impulse waves or the action waves, I’m sorry, on these patterns. Which means that the waves that we could have traded were waves two and wave five. And the reason these waves are the waves we can trade inside of the pattern are because, not only with Elliot Wave Theory, we want to trade the end of the pattern, which means like we saw on the previous lesson, the end of the one, two, three, four, five with a wave count but we can also trade this wave three and wave five on the basic design.

And the reason we are going to be looking to trade wave three and wave five is because, as you can see for yourself, in this case, wave three is 600 pips and wave five is 400 pips. Now, I know this sounds redundant, but it’s very important for you to make a list of the previous waves that I just taught you on this lesson because once you start focusing on the Elliot Wave Count, you are going to be looking at these waves as trading opportunities.


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