rules from SC Trader
The pattern incorporates 5 points within the structure (X, A, B, C, D), the starting point of the structure (0) can be the beginning of any extended price move. However, the initial point X must possess a specific alignment with respect to the A and B point.
The X, A , B formation of the structure is usually some type of impulse move. The XA projection that defines the B point can not exceed a 1.618. Any extension greater than a 1.618 will negate the structure, as
smaller impulse moves are preferred. Again, this is the failed wave 3 or wave 5 – in terms – that establishes the rest of the structure.
The BC leg is the longest price length of the structure and must be at least a of the AB length but it must not exceed 2.24. This tight range of 1.618-2.24 is a defining element of the structure.If the 1.618 minimum limit is not reached, the structure is not a valid .
After the BC leg has reversed from that zone, the is measured from the B point to the C point. In addition, the Reciprocal is projected from the C point (an equivalent length of the AB leg) to compliment the Potential Reversal Zone (PRZ).