MODULE 2/CHAPTER 1 = HARMONIC PATTERNS € (1st) NinjaFx/Tech Analysts Trade Management: Entry, Stops, & Targets Entry: Limit order placed at D-completion point (127.2% of AB). Stop Placement: 10 pips +/+ X Targets: Target 1: 38.2% tof AD leg. When attained, vas to breakeven ce J J Target 2: 61.8% retracement of AD legPanne eA PHARNONIC ares BAT PATTERN ay IX ‘ / / Timeframes //MODULE 2/CHAPTER 1” HARMONIC PATTERNS € Tactics The tactics for the Bat Pattern are very similar to other well known advanced patterns like the Gartley or eu With the Bat Pattern we seek to identify 4 market moves and “3 major Fibonacci zones. Th that fulfill the pattern he combination of these moves forms the points (X.A.B,C,D)MODULE (CHAPTER L| =) HARMONIC PATTERNS € BAT PATTERN] Rules of Engagement Criteria 1 The Bat Pattern begins with a market movement / impulse leg that establishes our X and A points. Once the X and A points have been identified, we then look for our first criteria.MODULE 2/CHAPTER 1 HARMONIC PATTERNS € NOTES The AB move remains valid as /ong as there is at least a 50% retracement of XA and that it does not close above the 50% retracement of XA. B The B completion point (candle wick) can extend beyond the 50% retracement of XA as long as the candle does not close beyond the 50% retracement of XA.MODULE 2/CHAPTER 1] =) HARMONIC PATTERNS € BAT PATTERN Criteria 2 NinjaFx/Tech Analysts If criteria 1 has been meet, then look for criteria 2 The market forms the (C) completion point by fulfilling at least a 61.8% retracement of the AB leg.MODULEZICHAPTER ¢} HARMONIC PATTERNS € BAT PATTERN] NOTES The C point remains valid as long as there is at least a 61.8% retracement of AB and there Is not a candle close at or beyond the 88.6% retracement of AB. Ina valid BC move. there must be a candle close beyond the 61.8% value. Failure to achieve a candle close beyond the 61.8% invalidates the move (this would be considered a Fibonacci failure which has no relevance to this pattern).MODULE /CHAFTER’ ¢} HARMONIC PATTERNS € 168 BAT PATTERN] Criteria 3 If criteria 1 and 2 have been met, then look for criteria 3. 4 The market forms the (D) completion (entry point) by fulfilling a 161.8% extension of AB. * NOTES In a valid CD move, the 88.6 retracement of XA (D completion point) shows ratio confluence with| the 161.8% of AB. The D completion point cannot extend past X, this invalidates the patternMODULE 2IGHAPTERL’ HARMONIC PATTERNS € Entry: Limit order placed at D completion point (161.8% of AB). Stop Placement: 10 pips +/- X Target 1: 38.2% retracement of AD leg. When ? attained, stop moves to breakeven. 9 Target 2: 61.8% retracement of AD legMODULE 2/CHAPTER 1 «> HARMONIC PATTERNS € Tools 1 Retracements: Primaries Used (38 ASN he The Cypher pattern a 60 min chart and h: 127.2 & 141.4MODULE 2/CHAPTER 1 a HARMONIC PATTERNS € Cr) (CYPHER PATTERN] Tactics The tactics for the Cypher pattern are very similar to other well- known advance patterns like the Gartley or Butterfly. With the Cypher pattern we seek to identify 4 market moves and 3 major Fibonacci zones. The combination of these moves forms the 5 points (X,A,B,C.D) that fulfil the patternMODULEIGHAPTER. ¢} HARMONIC PATTERNS € (172) Rules of Engagement Fx/Tech Analysts Criteria 1 The Cypher pattern begins with a market movement / impulse leg that establishes our X and A points. Once the X and A points have been identified, we then look for our first criteria The market forms the (B) completion point by fulfiling at least a 38.2 retracement of the XA leg 5MODULE 2/CHAPTER 1 > HARMONIC PATTERNS € CYPHER PATTERN injaFx/Tech Analysts The AB move remains valid as long as there is at least a 38.2 retracement of XA and there is not a candle close beyond the 61.8 retracement of XA. The B completion point (candle wick) can extend beyond the 61.8 retracement of XA as long as the candle does not close beyond the 61.8 retracement of XAMODULE 2/CHAFTER 1) =} HARMONIC PATTERNS € Criteria 2 If criteria 1 has been met, then look for criteria 2 The market forms the (C) completion point by fulfilling at least a 127.2 extension of the XA legMODULE 2/CHAPTER a HARMONIC PATTERNS € (135) NOTES The C point remains valid as long as there.is at least a 127.2 extension of XA and there is not a candle close beyond the 141.4 extension of XA. v ° In a valid BC move, there must be a candle close beyond the A value. Failure to achieve a candle close beyond A invalidates the move (this would be considered a double top / bottom which has no relevance to this pattern).MODULE 2/CHAPTER 1” a HARMONIC PATTERNS € Criteria 3 If criteria 1 and 2:-has been met, then look for criteria 3. The market forms the (D) completion (entry point) by fulfilling a 78.6 retracement of the distance XC. Ina valid BO-move, the 78.6 retracement of XC (D completion point) must exceed the distance of CBMODULE 2/CHAPTER 1 HARMONIC PATTERNS € (m) Trade Management: Entry, Stops, & Targets \jaFx/Tech Analysts Entry: CYPHER PATTERN Limit order placed at the D completion point (78.6 of XC). Stop Placement: 10 pips +/- X. Target 1: 38,2 retracement of CD leg. When attained, stops move to breakeven Target 2: 61.8 retracement of CD leg.MODULE 2/CHAPTER 1) HARMONIC PATTERNS € (i) BUTTERFLY PATTERN] The Butterfly Pattern The Butterfly pattern is certainly one of the favorite extension patterns. This particular setup is one that at! lows at market reversal points. The formations and complet to occur at major tops and bottoms, and they can also be time frames. It is not uncommon t more than one ButMODULE 2/CHAPTER 1 a HARMONIC PATTERNS € BUTTERFLY PATTERN The risk/reward profile is very favorable with this pattern. The best patterns tend to turn immediately at or near the completion point. It is one of the few patterns that.can truly find tops and bottoms. This pattern is not 100 percent, though, and stop-loss orders must be used When this one fails it usually fails in a big way. Almost two decades and thousands of Butterfly patterns later, it can be said that it is one of the most profitable trading patterns with the proper use of stop-loss ordersMODULE 2/CHAPTER 1 =) HARMONIC PATTERNS € BUTTERFLY PATTERN| BUTTERFLY PATTERN DESCRIPTION The Butterfly pattern is best described as an extension pattern. Itis also a failed Gartley pattern where the D completion point completes above the X. Remember that a Gartley pattern is considered a failed pattern if this occurs, but with this failure a Butterfly pattern may be forming. The extension of the AD swing and the CD leg can be thought of as a stretched rubber band It is at these points that the market becomes overbought or oversold and a reversal can occur. Even if a full reversal does not take place, the trader can still profit on this pattern by exiting on retracements of the CD leg or the AD swingMODULE 2/CHAPTER 1 =) HARMONIC PATTERNS € BUTTERFLY PATTERNMODULE 2/GHAFTER HARMONIC PATTERNS € BUTTERFLY PATTERN Fx/Tech Analysts BUTTERFLY PATTERN STRUCTURE The Butterfly pattern should be a very symmetrical pattern in its formation and structure. As with the Gartley “222” pattern, the Butterfly pattern is formed with four legs. The difference is that the last leg (the CD leg) of the Butterfly pattern will extend beyond the X point and will move toward the 1.272 or 1.618 expansion of XA. The BC leg will also be an extension, but the completion point is generally determined by the XA swing.MODULE 2/CHAPTER = HARMONIC PATTERNS € but the pattern will be negated if it goes beyond X The AB leg of the pattern will usually be at the .618 or the .786 retracement levels. The pattern also is valid if this retracement is at the 382 or .50. This retracement of the AB leg can go further than the .786. One clue that a Butterfly pattern may be forming is if the first retracement, the AB, goes to the .786 retracement level or furtherMODULE 2/CHAPTER 1 =) HARMONIC PATTERNS € BUTTERFLY PATTERN What invalidates this pattern: 1. Absence of an AB=CD within the AD swing. This pattern must contain an AB=CD. 2. An extension move beyond the 2.618 of XA. The 1.618 expansion is generally the maximum risk. 3. B point above (for a sell pattern) or below the X point (for a buy pattern). 4. C above or below the A point 5. Failure of D to extend beyond X: D must extend beyond X to be a Butterfly pattern PLAN YOUR TRADE, TRADE YOUR PLANMODULE 2IGHAPTER Le} HARMONIC PATTERNS € BUTTERFLY PATTERN Itis not unusual to see smaller “ab=cd" patterns within one of the main legs; for example, a small ab=cd may be seen within the larger AB=CD formation of the AD swingMODULE ZICHAPTER1” }) HARMONIC PATTERNS BUTTERFLY PATTERN IMPORTANT CHARACTERISTICS OF THE BUTTERFLY PATTERN There are several characteristics that should be studied when learning this pattern that will help the trader to identify acceptable risk-toreward setups and valid patterns. Risk-Free Trade The first exit on this trade is at the .618 level of the AD; After taking the first exit, the stop-loss order is moved up to breakeven The second exit in this trade is at the 1.272 extension of the ADMODULE 2/CHAPTER 1. =} HARMONIC PATTERNS € BUTTERFLY PATTERN] TRADING THE BUTTERFLY PATTERN This Butterfly sell pattern completes at the 1.272 Stop placed below the estimated 1.618 range of XA Vv When trading any pattem, the risk in the trade must always be acceptable. Ifit is not, the trader must pass on the trade and find a setup that is acceptable in terms of risk.MODULE 2/CHAPTER 1 a HARMONIC PATTERNS € (188) BUTTERFLY PATTERN] DETAILS Tools Fibonacci Retracements: Primary used 78 Fibonacci Extensions: Primary used 127.2MODULE 2/CHAPTER 1 BUTTERFLY PATTERN Timeframe > HARMONIC PATTERNS € DETAILS The Butterfly Pattern was discovered by Bryce Gilmore as a swing / position trading strategy. It can be identified on virtually on any timeframe. Tactics The tactics for the Butterfly Pattern are very similar to other well known advanced patterns like the Bat or Crab. With the Butterfly Pattern we seek to identify 4 market moves and 3 major Fibonacci zones. The combination of these moves forms the points (X,A,B,C,D) that fulfill the pattern.MODULE 2/CHAPTER 1’ =} HARMONIC PATTERNS € BUTTERFLY PATTERN] DETAILS Rules of Engagement Criteria 1 The Butterfly Pattern begins with a market move / impulse leg that establishes our X and A points. Once the X and A points have been identified, we then look for our first criteria.MODULE 2/CHAPTER 1 BUTTERFLY PATTERN > HARMONIC PATTERNS € 191 DETAILS The market forms (B) completion point by fulfilling at least a 78.6% retracement of the XA leg. NOTE The AB move remains valid as long as there is at least a 78.6% retracement of XA and that it does not close below/above the 88.6% : - aMODULE 2/CHAPTER 1 =) HARMONIC PATTERNS € (192) BUTTERFLY PATTERN| DETAILS Rules of Engagement The market forms the (C) completion point by fulfilling at least a 38.2% retracement of the AB leg. Criteria 2 Ifcriteria 1 has been meet, then look for criteria 2MODULE 2/CHAPTER 1 = HARMONIC PATTERNS € TERN] DETAILS NOTES The C point remains valid as long as there is at least a 38.2% retracement of AB and there is not a candle close at or beyond the 50% retracement of AB. eo In a valid BC move, there must be a candle close beyond the 38.2% value. Failure to achieve a candle close beyond the 38.2% invalidates the move (this would be considered a Fibonacci failure which has no relevance to this pattern).MODULE 2/CHAPTER 1 =) HARMONIC PATTERNS € BUTTERFLY PATTERN] DETAILS Rules of Engagement Criteria 3 If criteria 1 and 2 have been met, then look for criteria 3. The market forms the (D) completion (entry point) by fulfilling a 127.2% extension of XA. NOTE In a valid CD move, the 127.2% retracement of XA (D completion point) shows ratio confluence with the 161.8% of B. The D completion point must extend past X.MODULE 2IGHEPTER Le} HARMONIC PATTERNS € BUTTERFLY PATTERN] DETAILS * Trade Management: Entry, Stops, & Targets Entry: Limit order placed at D completion point (127.2% of XA). Stop Placement: 10 pips +/- 138.2% of XA Target 1: 38.2% retracement of AD leg. When attained, stop moves to breakeven. Target 2: 61.8% retracement of AD leg.MODULE 2/CHAPTER 1 = HARMONIC PATTERNS € Fibonacci Retracements: Primary used 61'8, Fibonacci Extensions: Primary used 161 8 The Crab Pattern was discovered by Scott Carney as a swing / position trading strategy. It can be identified on virtually on any timeframe. TimeframeMODULE 2/CHAPTER 1 = HARMONIC PATTERNS € (87) Tactics The tactics for the Crab Pattern are very similar to other well-known advanced patterns like the Bat or Butterfly. With the Crab Pattern we seek to identify 4 market moves and 3 major Fibonacci zones. The combination of these moves forms the points (X,4.B,C.D) that fulfill the pattern,MODULE 2/CHAPTER 1 =) HARMONIC PATTERNS € (192) Rules of Engagement Criteria 1 The Crab Pattern begins with a market move / impulse leg that establishes our X and A points. Once the X and A points have been identified, we then look for our first criteria. A The market forms (B) completion point by fulfilling at least a 61.8% retracement of the XA legMODULE 2/CHAPTER 1} HARMONIC PATTERNS € CRAB PATTERN] NOTES: The AB move remains valid as long as there is at least a 61. 8% retracement of XA and that it does not close above/below the 78.6%.MODULE 2/CHAFTER 1, = HARMONIC PATTERNS € (210) CRAB PATTERN] Rules of Engagement Criteria 2 If criteria 1 has been meet, then look for criteria 2. / The market forms the (C) completion point by fulfilling at least a 50% retracement of the AB leg.MODULE 2/CHAPTERL’ «)} HARMONIC PATTERNS € (CRAB PATTERN The C point remains valid as long as there is at least a 50% retracement of AB and there is not a candle close at or beyond the 61.8% retracement of AB. In a valid BC move, there must be a candle close beyond the 50% value Failure to achieve a candle close beyond the 50% invalidates the move (this would be considered a Fibonacci failure which has no relevance to this pattern)MODULE 2ICHAPTER HARMONIC PATTERNS € CRAB PATTERN] Criteria 3 If criteria 1 and 2 have been met, then look for criteria 3. The market forms the (D) completion (entry point) by fulfilling a 161.8% extension of XA.MODULE 2/CHAPTER 1’) HARMONIC PATTERNS € CRAB PATTERN} Trade Management: Entry, Stops, & Targets[ NinjaFx/Tech Analysts | Entry: Limit order placed at D completion point (127.2% of XA) Stop Placement: 10 pips +/- 200% of XA. Target 1: 38.2% retracement of AD leg. When attained, stop moves to breakeven. Target 2: 61.8% retracement of AD legMODULE 2/CHAPTER 1) HARMONIC PATTERNS € THE SHARK PATTERN NinjaFx/Tech Analysts Tools Fibonacci Retracement; Primary used 50 and 61.8 Fibonacci Extensions: Primary used 113, 161 and 224 Timeframe It can be identified on virtually on any timeframe.MODULE 2/CHAPTER 1 THE SHARK PATTERN > HARMONIC PATTERNS € 205 Rules of Engagement: Criteria 1 The market forms (B) completion point by fulfilling at least a 50% retracement of the XA leg The AB move remains valid as jong as it does not close above/below the 61.8%MODULE 2/CHAFTER 1 = HARMONIC PATTERNS € [THE SHARK PATTERN] Rules of Engagement: Criteria 2 pletion point by fulfilling @ AB leg ° The AB move remains valid as long as it does not close above/below the 127%MODULE 2/CHAPTER 1 =) HARMONIC PATTERNS € THE SHARK PATTERN] Rules of Engagement: Criteria 3 The market forms the (D) completion point by fulfilling at least a 161% Extension of the BC leg The CD move remains valid as long as it does not close above/below the 224% extMODULE 2/CHAPTERT” HARMONIC PATTERNS € THE SHARK PATTERN] trade management: Entry, Stops, & Targets Entry: Limit order placed at D completion point at 161% extension Stop Placement: +/-10 pips below the 224% Target 1: Target 2: Target 3: 50% CD 61.8% CD 100% CDMODULE 2/CHAFTER 1 = HARMONIC PATTERNS € 209MODULE 2/CHAFTER 1} HARMONIC PATTERNS € THE THREE DRIVES PATTERN] hist onives earteRw pescrierion The Three Drives pattern is simple in its structure and should be easy to visually identify on a chart in any time frame, It consists of three evenly spaced tops in an uptrend or three evenly spaced bottoms in a downtrend The Three Drives pattern also contains. an AB=CD. Itis generally found at tops or bottoms andiis the final push up or down before a teversal takes place. It should also be noted that the pattern does not always signal a major reversal—it may be the end of a swing in the trend and a correction will take: place rather than a full reversal If itis @ correction, itis likely that an AB=CD pattem or retracement pattern will form following the third drive. Itis important to watch the reaction of the correction pattern for clues if the correction pattern fails, then the trader may suspect the trend is over Itis not uncommon with reversals to see very sharp moves up or down from this patternMODULE 2/CHAPTER |) HARMONIC PATTERNS € 2tt) THE THREE DRIVES PATTERN THREE DRIVES PATTERN STRUCTURE The drives (tops and bottoms) of the pattern are numbered 1, 2, and 3 Each drive is consecutively higher or lower than the last—consecutively higher in a Three Drives to the top pattern and consecutively lower in a Three Drives to the bottom pattern. The distance from the top or bottom of drive 1 to the top or bottom of drive 2 should be a 1.272 or 1.618 extension, and it is the same for the top or bottom of drive 2 to drive 3. It is important to remember that the market may fall a bit short of these levels or may go just a bit farther. The important thing is to watch for a symmetrical pattern to form.MODULE 2/CHAPTER 1 THE THREE DRIVES PATTERN There may also be an extension number of 1.272 or 1.618 measuring from drive 1 to A and completing at drive 3, 3D Itaret HARMONIC PATTERNS € NinjaFx/Tech Analysts The retracements at points A and C, which form the AB=CD, should be a Fibonacci retracement, ideally at the .618 or the .786. ,. formed, it is again asi These drives should apr Drives symmetrical to and jump out. If the trader has to ce the pattern, it is probably not a Three pattern.MODULE 2/CHAPTER 1) HARMONIC PATTERNS € 213 THE THREE DRIVES PATTERN Five items to watch for that would invalidate this pattern are: 1. Drive 1 above or below drive 2 (above in a sell pattern or below in a buy pattern). 2. Drive 2 above or below drive 3 (above in a sell pattern or below in a buy pattern) 3. C below A (for a sell pattern) or above A (for a buy pattern). B should not be above D (for a sell pattern) or below D (for a buy pattern). 4. Extensions that extend past the 1.618 as the Three Drives pattem is forming will usually result in a failed pattern 5. Large price gaps that appear as this pattern is forming in the direction of the established trend, especially toward the completion of drive 3, are a sign that the pattern is not valid and the trader should wait for further confirmation of a top or bottom or the formation of another pattern.MODULE2IGHAPTERL’ HARMONIC PATTERNS € THE THREE DRIVES PATTERN There should also be time symmetry from point A to drive 2 and from point C to drive 3, in that it should take each of these legs approximately the same number of time bars to form.MODULE 2/CHAFTER 1 =) HARMONIC PATTERNS € (218) [THE THREE DRIVES PATTERN] PORTANT CHARACTERISTICS. The Three Drives pattern is similar fo the Butterfly pattern in that itis very symmetrical, There are three areas of symmetry to study and learn to identify and trade this pattern successfully. 1. Price symmetry. Symmetry of price should be equal in the formation of the legs from A to drive 2 and from C to drive 3. 2. Time symmetry. The Three Drives pattern will have near-perfect symmetry where the upswings or downswings consist of clase to the same number of time bars. If the time bars are not exactly the same, they should be close to a Fibonacci ratio that can be calculated by dividing the number of time bars in each leg—for example, five time bars in the AB and eight time bars in the CD (6+ 8 = 625). 3. Visual symmetry. The pattern should be aesthetically pleasing to the eye. Three Drives patterns that are asymmetrical or that are forced should be viewed with suspicion. By force, we are referring to the market technician trying to force the pattern where it does not exist based on the elements outlined in the pattern structure section of this chapter. If it doesn’t look symmetrical, itis probably not validMODULE 2/CHAFTERL) } HARMONIC PATTERNS [THE THREE DRIVES PATTERN PSYCHOLOGY OF THE THREE DRIVES PATTERN All patterns are formed by crowd psychology, and itis interesting and educational to study what forms any particular pattern. The Three Drives pattern is slightly different in its psychology, as it has three tops or bottoms that must form to complete the pattern, compared to most patterns with one (or occasionally two in the cases of double bottoms and tops). Itis a natural phenomenon that bulls are the most bullish at the tops of markets and bears the most bearish at the bottom. When this occurs there is typically an unusual amount of news that accompanies these tops and bottoms in favor of the excess bullishness or bearishness. The Three Drives pattern goes through an extended process of bringing in new buyers or short sellers too early at tops with successive waves and new sellers at lows or new buyers who are too early. The pattern generally makes the final wave as the last buyer has bought at the top and the last seller has sold at the bottomMODULE2IGHAPTER 1’) HARMONIC PATTERNS € (217) THE THREE DRIVES PATTERN This is the time when the market will appear absolutely the most bullish or most bearish. The last push up or down to form the last gasp in the market is almost like a game of hot potato, and the market has just passed the last hot potato to the last market participant before it changes direction. As the market then changes direction, each new low below the latest swing low in an uptrend now has more bulls trapped. Conversely, each new high above the previous swing low has more bears trapped. This in itself can add fuel to a rally or decline. Usually it is not until a new trend is well under way that the news media will also change directionMODULE 2/CHAPTER” =} HARMONIC PATTERNS € THE THREE DRIVES PATTERN TRADING THE THREE DRIVES PATTERN 41. Trade setup a Three Drives buy pattern that is a correction in a trend‘MODULE 2/CHATER 1) HARMONIC PATTERNS (1) THE THREE DRIVES PATTERN ‘The completion pont on the Three Drives __This was determined by the previous 1.618 from drive buy pattern shown is at the 1.618 level. 4 to drive 2, which is repeated from drive 2 to drive 3 Risk-Free Trade The first profit target is equal to the risk, and the stop can be moved up to just below the most recent swing low The assumption is that with the stop just below the most recent low, the market would be telling us that this pattern is a failed pattern at that point. 2. Trade setup a Three Drives buy pattern that is a reversal: Risk-Free Trade The first profit objective is equal to the initial risk; The initial stop-loss is moved to one tick above the swing low once the first exit is reached; The second profit objective is at the .618 retracement (Once this objective is reached the stop can be trailed to protect profits); The trader at this point wants to monitor the market for further upside and to determine the best level for the third exit.MODULE 2/CHAPTER2’ — Y ELLIOTT WAVE THEORY € ECTIOTEBASICS Foundation of Elliott Wave Theory Basic Wave Pattems Learning Wave Characteristics Objects = introduction of Mathematical Applications Three Essential Rules Labeling of Waves Quiz OTR Support[MODULE (CHAPTER 2) ELLIOTT WAVE THEORY € (1) FOUNDATION OF ELLIOTT WAVE THEORY Ralph Nelson Elliott developed the Elliott Wave Theory in the 1930's by studying various market indices spanning over a 75-year period. He discovered that ‘stock markets, thought to behave in a somewhat chaotic manner, in fact, did not They traded in repetitive cycles, which he discovered were the emotions of investors as a cause of outside influences, or predominant psychology of the masses at the time. Elliott stated that the upward and downward swings of the mass psychology always showed up in the same Ralph Nelson Elliott repetitive patterns, which were then divided into patterns he termed “waves.”MODULE 2/CHAPTER 2g ELLIOTT WAVE THEORY € (zz) Subsequently, many other Elliott Wave theorists have applied his principles to markets other than stocks, such as Forex and commodities, with great success This is to say that the theory is transferable to virtually all traded markets. Ralph Nelson Elliott‘MODULE Z/CHAPTER 2g ELLIOTT WAVE THEORY € (a) The Wave Principle (1938) + Also known as the Elliott Wave Principle + Tied collective human behavior pattems to the Fibonacci sequence or golden ratio. Elliott Wave Supplement (1953) + ByA Hamilton Bolton Elliott Wave Principle (1978) + By AJ. Frost and Richard PrechterMODULE 2IGHAPTER2” ELLIOTT WAVE THEORY € MARKET CYCLE * 134 Complete Market CycleMODULE 2/CHAPTER2” = w ELLIOTT WAVE THEORY (a8) p CORRECTIVE IMPULSIVEMODULE 2/CHAPTER 2° ELLIOTT WAVE THEORY € 226 Fractals (frak'tels) Noun. Self-similar patterns composed of smaller copies of themselves ad infinitum. = Often associated with recursive operations = Repeating the process indefinitelyMODULE Z/CHAPTER 2, ELLIOTT WAVE THEORY € (221) FOUNDATION OF ELLIOTT WAVE THEORY = Market movements reflect mass human psychology. These movements form patterns that predict market behavior. When market behavior looks similar to various scales of resolution, it is said to be fractal. Elliott Waves are fractal with waves embedded within waves, within waves, within waves, etc.MODULE 2/GHAPTER 2° ELLIOTT WAVE THEORY & FRACTAL NATURE OF WAVES NinePTech Analysts The fractal nature of markets means that patterns repeat themselves in different time frames. Waves of any degree in any series are made up of waves of a lesser degree.MODULE 2/CHAPTER2” ELLIOTT WAVE THEORY € FRACTAL NATURE OF WAVES ©