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Wave extension

In Elliott Wave, when one impulse wave stretches far beyond the others and subdivides into its own five-wave sequence.

Usually wave three extends, and in commodities wave five often does. An extended wave contains a complete five-wave structure of its own, which means the same price action can be counted as three waves or nine depending on the degree you are looking at.

Extensions are where Fibonacci projections get attached: a common guideline is that wave three reaches 1.618 times wave one, measured with fibonacci-extension levels.

Extensions are also the main reason counts are so unstable. Any wave that goes further than expected can be reclassified as an extension, and any wave that stops short can be reclassified as a truncation. That flexibility is convenient for explanation and fatal for prediction.

Related: impulse-wave, elliott-wave-theory, fibonacci-extension, elliott-wave-criticism, corrective-wave

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Fibonacci retracement levels across one swingA rally from a swing low to a swing high with horizontal lines drawn at fixed percentages of that move, and a later pullback that turns around on the 61.8 per cent line.FIBONACCI RETRACEMENT OF ONE SWING0% swing high23.6%38.2%50%61.8%78.6%100% swing lowpullback holds hereIllustrative swing. The levels are fixed fractions of the move from low to high.
Fibonacci retracement levels. Take one move from a swing low to a swing high and mark off fixed fractions of it — 23.6, 38.2, 50, 61.8 and 78.6 per cent. Traders watch those lines to see how much of the move a pullback gives back; here it stalls at 61.8 per cent.

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