# Basics of Elliot Waves.

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NSE:NIFTY   Nifty 50 Index

1. Today, we will discuss the basic market movement structure, elliotically. A recent comment on one of my ideas published pointed (indirectly) towards the need for a basic understanding of Elliot Waves for the general trading public.

2. The market moves in consistent impulsive and corrective structures. Waves 1, 2, 3, 4, and 5 together form the 1st Impulsive structure of the market. Waves A, B, and C together form the next Corrective structure of the market.
What is an Impulsive Structure? These are patterns that occur in the direction of the trend. A movement consisting of 5 smaller cycle waves and following certain set rules/guidelines set by Elliot; Wave 2 never retraces more than 100%, Wave 3 is never the shortest, & Wave 4 does not enter the price territory of Wave 1. The 3rd rule is at times compromised and that should be up for discussion some other day. More rules exist but are not required for the basic understanding of the markets.
What is a Corrective Structure? We will put this very vaguely. Whatever is not impulsive, is corrective, in laymen's terms.

3. Let's address the Impulsive structure.
Waves 1, 3, and 5 are impulsive waves within the impulsive structure. Waves 2 and 4 of this impulsive structure stand to be corrective. Waves 1, 3, and 5 consist of 5 waves each. Waves 2 and 4 consist of 3 waves each.

4. Now we'll address the next Corrective structure. Wave A and C of this structure are impulsive whereas Wave B is of corrective nature.
Waves in the corrective structure are very interesting. Wave A can at times consist of 5 waves as well as 3, even though impulsive, and can also be a diagonal. Wave B can sometimes contain 5 waves, when in a form of a triangle, even though corrective. Wave C always has only 5 waves and can be a diagonal as well. The corrective waves are a whole lot more complicated and require a vigorous understanding of the structures.

5. Every wave structure is part of a larger wave structure on a larger timeframe. 5 impulsive, 3 corrective waves of the smallest cycle; which will form Waves 1 and 2 of a larger cycle. Then these two waves along with 3, 4, 5, and the next correction set, will form the 1st and 2nd waves of an even larger cycle. This is how our final wave structure (basic) would look like.

The world moves in harmony with progression and recession. And so do the markets. All they need is an observer. Be one.

Happy observing!

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Market's Mechanic.

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