# Waves within Channels

### Video Transcription:

Hello, traders. Welcome to the Elliott Wave Theory course and the third module, Advanced Elliott Wave Analysis. In this lesson, we’re going to talk about channeling waves. The reason we’re going to talk about channeling waves is because this method is going to give us an extra edge when it comes to pinpointing the end of certain waves in certain patterns.

Now we’re going to start by defining what channeling waves is. One of the big or one of the guidelines in the Elliot Wave theory is that two of the impulse waves in a five-wave basic structure will tend to be equal. This is true in a normal five-wave basic structure or in a basic structure where we have one extended wave. We’re always going to have two impulse waves that are going to be alike in length. Where we have this relationship between two waves inside the structure, the ends of these waves can be calculated in points, pips, or percentages of extension like the 127.2%, 161.8%, etc. We have seen this in previous lessons. But what I want to tell you here is that most of the time two of these waves will be equal in length, and if one wave was 100 ticks long, there is a very high probability that another wave will be 100 ticks long. And of course you already know that if the first wave is 90 ticks and the second wave is 100 ticks, there’s a high probability that the fifth wave will be an extended wave, and etc.

So since we have an arithmetic relationship within the structure, the upper and lower boundaries of the impulse waves can be marked by Pyro Trendlines. Traders to always draw a temporary channel, and what we have here is actually a temporary channel. You can see that we are in a down move and then we have, well we have…we are starting a five-wave basic structure. We don’t know if we are in a five-wave basic structure just yet, but the channel will help us validate this idea. And this will provide estimated levels for 44 and 5, okay.

In this example, since two waves inside of the structure tend to be equal and the longest wave here is the third wave, you can see that we can have a fourth wave that will end up at the channel support, and the fifth wave will be equal in length of the wave 1, and will end up most likely at the channels resistance. So of course, if price breaks with the channel and then continues to flush, this will invalidate our account and our idea of the structure. If the fourth wave doesn’t end at a point touching the lower boundary of the channel, you must reconstruct it by connecting the ends of wave 2 and 4, to correctly estimate the end of wave 5. Then draw a parallel line for the upward boundary from the end of wave 3.

Now, in the previous example, wave 4 didn’t end up at the bottom of the temporary channel. Price came to this low, made this low, and then continued to break this high, okay. So the correcting move of wave 4 ended when price broke with this high. So what happened here is that we eliminated the channel that we draw or the temporary channel, and we connected the end of wave 2 with the end of wave 3. Then we made a parallel line for the upper boundary of the channel from the end of wave 3, to pinpoint the end of wave 5.

If we actually took this trader right here, or right here, we would know for sure, well not for sure because in trading there’s nothing exactly, but there’s high probability that wave 5 will end at the upper boundary of this channel. So this technique will help you in your trading decisions when you decide to enter the market or when you decide to exit the market with a profit. And of course, it will help you to pinpoint the entries once you start trading the ABC corrective move. And the ABC corrective move will start at the end of wave 5 as you already know, and the channel or the lower boundary of the channel must break in order for the ABC to be truly valid.