Free Charts

Elliott Wave Entries in Trending Trades

When a market trends strongly, entries become a critical factor: being too early might lead to drawdowns if the correction extends, while being too late may mean minimal profit. Elliott Wave analysis provides several robust entry strategies, each with its own advantages, nuances, and risk profiles.

14.1. Wave 2 Pullback Entry

• Rationale: After an initial wave 1 upmove, wave 2 typically retraces 50–61.8% of wave 1. Entering near the end of wave 2 positions you for wave 3, often the most powerful wave in a bullish trend.
• Execution:
1. Label wave 1 on a timeframe consistent with your trading horizon (e.g., 4-hour or daily).
2. Watch for wave 2 to form an A-B-C or a zigzag pattern.
3. Align Fibonacci retracements with wave 1’s length to identify a 50–61.8% zone.
4. Look for reversal candlesticks, momentum divergence, or volume uptick at that zone.
5. Enter long as price confirms wave 2’s termination (e.g., breaks minor wave B’s high in wave 2’s final leg).
• Stop Placement: Just below wave 2’s final low. If wave 2 extends further (perhaps forming a complex W-X-Y), your stop ensures minimal damage.
• Upside Potential: Wave 3 often travels at least 1.618× wave 1, providing an excellent risk/reward ratio.

14.2. Wave 3 Re-Entry or Mid-Trend Position

• Rationale: Wave 3 can exceed expectations, so even if you missed the wave 2 entry, you can jump aboard mid-trend when micro wave ii or wave iv forms a small correction.
• Execution:
1. On a smaller timeframe, identify sub-waves within wave 3. Micro wave (ii) or micro wave (iv) might be mild corrections (10–38% of the prior micro impulse).
2. Enter once the micro correction shows a reversal candle or momentum bounce.
3. Confirm wave labeling so you don’t confuse micro wave (ii) with a bigger wave 4.
• Stop Placement: Under the micro corrective low. This is tighter but riskier if wave 3 unexpectedly ends.
• Upside Potential: If wave 3 still has distance to go (especially if it’s an extended wave 3), the reward can be substantial.

14.3. Wave 4 Dip (or Rally in a Downtrend)

• Rationale: Wave 4 typically corrects wave 3’s strong move. Although wave 4 can be sideways (flat, triangle) or deeper, it often provides a second chance to catch wave 5.
• Execution:
1. Ensure wave 3 is done (look for momentum divergence, wave 3 hitting a known Fibonacci extension, etc.).
2. Let wave 4 form. If it’s a triangle, you might wait for a breakout from wave D/E. If it’s a flat, watch wave B and wave C swings.
3. Enter as wave 4 completes, often indicated by a break above wave B or wave E line in a triangle.
• Stop Placement: Below wave 4’s final pivot.
• Upside Potential: Wave 5 can be profitable but often smaller than wave 3. If you see signs of wave 5 extension, you may get another robust leg.

14.4. Breakout Above Key Wave Highs

• Rationale: Many trend traders prefer simpler breakout entries—waiting for wave B’s high (in a correction) or wave 1’s high (after wave 2) to be taken out. This method is more “momentum-oriented.”
• Execution:
1. If wave labeling suggests wave 2 or wave 4 is concluding, identify wave B or wave D’s top.
2. Place a buy stop order slightly above that pivot, letting the market confirm the breakout.
3. Once triggered, manage the trade using wave 3 or wave 5 projections.
• Stop Placement: Just below the breakout pivot or the final wave low.
• Upside Potential: Trend breakouts can accelerate swiftly if wave 3 or wave 5 takes off. The main risk is a “false break” if the correction wasn’t truly over.

14.5. Multi-Timeframe Alignment

• Rationale: Ensuring the wave entry on a 1-hour chart aligns with a bigger daily or 4-hour wave count drastically increases success odds.
• Execution:
1. Suppose the daily chart suggests wave 2 is finishing. Then on the 1-hour chart, you label a final A-B-C.
2. Enter as wave C breaks micro wave B’s high on the 1-hour.
3. This synergy between daily wave labeling and 1-hour triggers helps refine timing.
• Stop Placement: The smaller timeframe’s wave C bottom, consistent with daily wave invalidation.
• Upside Potential: If you’re correct, you catch wave 3 on both daily and 1-hour degrees, possibly enjoying a large trend move.

14.6. Advanced Tactics: Scaling and Pyramid Approaches

• Scaling In
• If you’re confident wave 3 will be extended, you can enter partial positions at wave 2’s end, add more on minor wave (ii), and so on. This approach amplifies gains if the trend truly roars but requires deft stop management to avoid overexposure.
• Scaling Out
• If wave 3 surpasses 1.618× wave 1, you might take partial profits. If the wave count suggests wave 3 may run further or wave 5 could be extended, keep some position open.

14.7. Avoiding Over-Trading During Corrections

• Rationale: Wave 2 or wave 4 can occasionally morph into complex patterns (W-X-Y combos). Attempting repeated entries might lead to whipsaw losses.
• Execution:
1. Identify if wave 2 or wave 4 is straightforward (zigzag/flat) or likely turning complex (multiple sub-waves forming).
2. Wait for decisive wave completion signals (like wave B’s pivot broken) before re-entering.
• Stop Placement: Keep it wide enough to account for minor wave expansions if complexity arises.
• Upside Potential: By waiting for clarity, you reduce false starts, maximizing wave 3 or wave 5 gains.