Wave Extensions

Extensions

in Elliot wave theory Wave extension refers to a type of price action in financial markets that exhibits a greater degree of trend intensity and momentum than is generally expected.

According to Elliot wave theory Financial markets move in a series of motive and corrective waves. A motive wave is a five-wave pattern that moves in the direction of the current trend. While a corrective wave is a three-wave pattern that moves against the trend.

When a motive wave shows a larger than expected level of price movement along the general length of that wave. These are referred to as expanding waves, in Elliott wave terminology. A broadening wave generally consists of five sub-waves. It happens with waves 1,3,5, usually appearing in the third wave which is the longest and most powerful wave. and in the fifth wave sometimes Expansion in the first wave is the least common. and sometimes the waves expand will occur at the same time in two waves But expanding does not occur at the same time all three waves between 1,3,5. This broadening wave generally results in significant price movement in the direction of the prevailing trend.

The relationship of the expanding wave with the Fibonacci ratios is most likely the third wave. is the shortest wave and is usually the longest wave Rich in news and fundamentals pushing the third wave to expand must at least exceed the end of one wave We will find a sequence of relations with one wave, namely Wave three is often longer than wave one as 161.8,261.8, or as an extreme expansion, usually equal to 423.6.

If wave 3 is an extended wave, wave 1 and wave 5 tend to be equal, but if wave 5 extends, it is usually 1.618 x the length from the start of wave 1. to the end of wave 3 And in the case of wave 1 expanding, there is a tendency that the length of wave 3 and wave 5 combined will be equal to .618 x length of wave 1.

Expanding waves are important in Elliott Wave analysis as they can help traders and analysts identify possible turning points in the market, and expanding waves may be followed by corrections that are more significant than expected. It gives traders the opportunity to enter or exit positions.

Kittiampon Somboonsod, CEWA