The ABC Correction Elliot Wave Forex Pattern is another method of Elliott Wave Theory, A geometrical shape is created in every pattern. Forex Trading patterns such as Ascending Triangle, Descending Triangle and Symmetrical Triangle etc are formed by a counter trend correction occurring with in an impulse up or impulse down. This counter trend correction is called an ABC correction and every pattern has an ABC correction. As we know according to the Elliott Wave theory, a complete Forex Trading market cycle contains eight waves in which five waves are in the trend direction and the other three waves are against the trend direction. The five waves that are in the trend direction are known as the Impulse waves and the other three waves that are against the trend direction are known as the Corrective Waves. Fxstay traders wrote how use corrective Eilliot Wave theory in stocks and currency trading.
ABC Correction Elliot Wave Theory
The Corrective Waves are not as easy to indentify as the Impulse Waves because the Corrective Waves have more variations as compared to the Impulse Waves. Corrective Waves of any trading pattern are broadly termed as the ABC Corrections. Corrective Waves are always the three wave patterns that unfold in the direction opposite of the larger trend. Corrective patterns can be classified into four types. These are Zigzags, Flats, Triangles and Double and Triple Threes.
ABC Corrections is the broad name given to the Corrective Waves. These waves differ in the way of subdivision and the distance travelled by their sub waves in comparison. ABC Corrections are mostly the second sub waves of the impulse waves. The waves that form the corrective patterns are the Corrective Waves. The corrective patterns formed by the Corrective Waves are against the trend direction. For example, wave 1 is corrected by the wave 2 and wave 3 is corrected by the wave 4. After the 5 – wave pattern finishes, the entire move will be corrected and this correction will occur as a single wave or a multiple wave move. ABC numbered waves are also the corrective.
Zigzag is the most common correction. Zigzag patterns can be single, double and triple. A single Zigzag is a simple declining pattern of the three waves labeled as A-B-C and subdividing the 5-3-5. The top point of wave B is lower than the starting point of wave A. Occasionally the occurrence of Zigzags can be twice or the Zigzags may also occur maximum of three times in the succession. Double and Triple Zigzags occur only if the first Zigzag is not able to touch its normal target and falls short of it. In such cases, there is an intervening “three” between each Zigzag. Such a Zigzag produced is called as the Double Zigzag or the Triple Zigzag. Examples of all the three types of Zigzags are shown in the figures below.
A Flat correction is formed by the 3-3-5 sequence. Flat corrections retrace lesser preceding impulse waves as compared to the Zigzags. Flat Corrections participate in the periods that involve a strong and larger trend and so always follow or precede extensions. The strong the underlying Forex trend is, the shorter the Flat Correction is. A Flat correction is of three types that are Regular, Expanded and Running Flat. The Expanded Flat is a more common correction and the Running Flat is a rare correction. Examples of all three types are shown in the figures below.
Running Flat has been assumed but not been seen in the price records.
Triangles are of five overlapping waves. Triangle Corrections cause a sideways movement associated with volatility and decreasing volume. Triangle Corrections are of four types that are ascending, descending, expanding and contracting. The first three are termed as the Regular Triangles and occur with in the area of the preceding price action. The last is the contracting triangle correction that is also termed as a running triangle.
Double and Triple Threes
According to Elliott, the sideways combinations of the corrective patterns are called the “Double Threes” and the “Triple Threes”. A Double Three or a Triple Three is a combination of the simple types of corrections. This combination is of different types of the Zigzags, Flats and Triangles but there is never more than one Zigzag in combination and so these are horizontal in nature. Examples of both types are shown in the figures below. You can learn more about Elliot Waves for free in Fxstay Forex school.