you to determine whether you are in impulsive or corrective price action.
This is important to know the depth and breath and trend the move might make.
Thus you can increase profits and lower risk of entry at the correct place.
Sometimes, of course, a primary and alternate analysis can lead to
the same direction. Anyway, Huge rule #1 is that wave 2 cannot retrace more
that 100% of wave 1 ---- #2 Wave 4 can not enter the price range of wave 1 (that's a
big one because it immediately tells you if you're dealing with corrective or
impulsive price action. #3 Wave 3 can not be the shortest wave in an impulsive
move(which means it is no longer impulsive but corrective)These 3 rules tell
you whether you are dealing with a trending move or counter trend correction or
even a trend change.
If you're interested: http://www.elliottwave.com/
These folks have been the leaders for somewhere around 40 years now.
And have a lot of free stuff when you sign up for the myEWI club. Especially
the 10 lesson EW tutorial. They have the track record that proves they know
what they are doing.
Best wishes in your trading !!!!!!!!!!!