The Analytical Engine
The Elliott Wave Methodology & Precision Rules.
Elliott Wave Theory is not mystical prediction. When stripped of vague subjective hand-waving, it is a mathematical grammar of crowd psychology and capital flows.
The Foundation
The Three Inviolable Rules
Wave 2 Never Retraces > 100%
Wave 2 can never move beyond the starting point of Wave 1. If price pierces the low of Wave 1, the count is objectively disproven instantly.
Wave 3 is Never the Shortest
Among motive waves (1, 3, and 5), Wave 3 can never be the shortest in net price distance. In equity markets, it is frequently the extended wave.
Wave 4 Never Overlaps Wave 1
In a standard impulse, Wave 4 price territory cannot overlap with Wave 1 price extremes. If an overlap occurs, the move must be reclassified as a diagonal.
The Invalidation Principle
Most technical analysts change their thesis after price moves against them. At Future Wave Analysis, our entire methodology hinges on defining the Invalidation Level prior to entry. If price breaches an invalidation price, the primary scenario is discarded without emotional hesitation.
Fibonacci Geometry
Standard Wave Ratios Applied
| Wave Segment | Standard Fibonacci Projection / Retracement | Typical Market Characteristics |
|---|---|---|
| Wave 2 | 50.0% – 61.8% of Wave 1 | Sharp, deep correction testing structural support |
| Wave 3 | 161.8% – 261.8% of Wave 1 | Broad volume expansion, gaps, momentum continuation |
| Wave 4 | 38.2% of Wave 3 | Time-consuming sideways consolidation or triangle |
| Wave 5 | 61.8% of Wave 1 or equality with Wave 1 | Divergence on oscillators, narrowing market breadth |