Wave A
Wave A is the first move in a corrective sequence labeled A-B-C. It establishes which direction the correction will travel. Getting Wave A right is the foundation for everything that follows in the corrective phase. Wave A can subdivide into either five waves or three waves, and this distinction matters enormously. If Wave A contains five sub-waves, you are likely looking at a zigzag correction, which tends to be sharp and deep. If Wave A contains only three sub-waves, a flat correction is more probable, which means the correction will be sideways and time-consuming. Many traders miss Wave A entirely because they are still positioned with the prior trend. They see the first decline as a normal pullback. By the time they recognize a correction is underway, they are already underwater. The internal structure of Wave A gives you an early edge in determining what type of correction is forming and how deep it might go.
After a five-wave rally in gold to $2,100, price drops to $1,980 in Wave A. You examine the internal structure and count five clear sub-waves within that decline. This tells you a zigzag correction is likely forming. You now expect Wave B to retrace 50-61.8% of Wave A (rallying back toward $2,050-$2,060) before Wave C drives price below $1,980. If Wave A had only three sub-waves, you would expect a flat correction with Wave B retracing closer to 100% of Wave A.