The Three Elements of Wave Theory: Shape, Ratio, and Time

Flowing water theory, which believes that the fluidity of waves can form a coherent whole, is the key to wave theory. Therefore, the wave theory is more suitable for collective forces such as stock indexes, gold, and foreign exchange to dominate, rather than a few market makers or varieties controlled by the main force.

Waves are mainly composed of driving waves and correction waves superimposed on each other.

Driving waves are divided into:

① Leading oblique triangle (wedge) wave 1 or wave A, 5-3-5-3-5 

② Ending oblique triangle (wedge), five waves or C waves, 3-3-3-3

Corrective waves are mainly divided into two types: simple and multiple.

Sawtooth is divided into: single sawtooth, double sawtooth, triple sawtooth. The sawtooth adjustment space is larger and the range is larger.

The triangle adjustment is divided into: the rising horizontal line is above, and the falling horizontal line is below.

(AUDUSD, 30 minutes, ascending horizontal line is on top)

(USDCAD, 30 minutes, descending horizontal line below)

Three principles of shape: the retracement of the second wave does not exceed the starting point of the first wave, the third wave is never the shortest wave, and the retracement of the fourth wave does not cross the top of the first wave.

Retracement ratio: wave 4 retraces to 0.382 or 50% of wave 3, wave 2 retraces to 0.618 of wave 1. Range trading, range adjustment, retracement is 1. Multiple: 3 waves = 1 wave*1.618*2=3.236 .

The interval retraces to the top and low, and the trend retraces the golden section. Draw the Fibonacci sequence in the direction of the trend.

Waves 1, 3, 5, the extended wave and the remaining waves form a golden ratio, and the proportion of the extended wave is 0.618.

The relationship between time and proportion is equivalent. The triangles are mostly in the four waves and B waves, and the second and fourth waves appear alternately.

In the wave theory, the greatest significance of five waves lies in the "continuation" of the information it conveys, and the three waves mean "termination".

The essence of the wave theory: wherever the main line goes, after the adjustment is over, it will go there (where it comes and goes, trade with the trend, trade with the trend). Candle charts are trading signals and cannot be used as a strategy.