mastering elliot waves. Rules of observation (labeling as m_)Before trying to guess how far a wave is going to retrace we want to understand how to label a wave properly. End goal: different waves will have different expected retracement values.
Start:
The labeling of waves centralizes around getting an m1 wave, and stretching out your chart so that the m1 wave is positioned at a 45 degree angle. The other parts of the chart we will then consider in relativity to this m1 wave. I don't fully understand the best wave to pick for m1, so I'm just going with the one that it looks like will give me the easiest time with the 45 degree angle and other labeling procedures. This is known as the rule of proportion.
There is some wiggle room in how close does a wave have to get to the perfect 45 degree angle we are looking for, but also, if the rest of the chart is being apportioned according to the selected m1 then I have no problem just going ahead and making it an exact 45. There is some detail I haven't explained here, but I will keep it in the back of my mind going forward and try to explain better as I come to understand it. If this paragraph gave you any confusion you can ignore at no detriment.
Bringing your attention back to m1, we are most concerned about whether price has broken, or is breaking the highs and lows established by m1. When price does so, we are prepared to label m0, or m2, respectively. m0 is for past price action, m2 is for future price action, again, relative to m1.
If you follow the light-blue path on the chart you will notice that sometimes the m-waves are composed of multiple pointy parts. If they are not creating new highs/lows relative to m1, we aren't giving it an m-designation.
My working understanding at this point is as follows:
- searching for an identifiable monowave that is somewhat close to the right side of the chart
- warping axes so that selected monowave (m1) is angled at 45 degrees.
- designating past and future waves that break highs and lows with m-labels.
- actively ignoring (thereby not giving m-designation) to jitters in price that do not break previous highs and lows.
