Trading Quotes

An ending diagonal is a special type of wave that occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast". A very small percentage of ending diagonals appear in the C wave position of A-B-C formations. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement.A rising diagonal is bearish and is usually followed by a sharp decline retracing at least back to the level where it began. A falling diagonal by the same token is bullish, usually giving rise to an upward thrust.  [2001] - Robert Prechter

Occasionally zigzags will occur twice, or at most, three times in succession, particularly when the first zigzag falls short of a normal target. In these cases, each zigzag is separated by an intervening "three," producing what is called a double zigzag or triple zigzag. These formations are analogous to the extension of an impulse wave but are less common. [2001] - Robert Prechter

Although upon extremely rare occasions a second wave in an impulse appears to take the form of a triangle, triangles nearly always occur in positions prior to the final actionary wave in the pattern of one larger degree, i.e., as wave four in an impulse, wave B in an A-B-C, or the final wave X in a double or triple zig-zag or combination. [2001] - Robert Prechter

Depth of Corrective Waves: Corrections, especially when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus. On occasion, flat corrections or triangles, particularly those following extensions, will barely fail to reach into the fourth wave area. Zigzags, on occasion, will cut deeply and move down into the area of the second wave of lesser degree, although this almost exclusively occurs when the zigzags are themselves second waves. "Double bottoms" are sometimes formed in this manner. [2001] - Robert Prechter

Behavior Following Fifth Wave Extensions: When the fifth wave of an advance is an extension, the ensuing correction will be sharp and find support at the level of the low of wave two of the extension. Sometimes the correction will end there. [2001] - Robert Prechter

Two of the motive waves in a five-wave sequence will tend toward equality in time and magnitude. This is generally true of the two non-extended waves when one wave is an extension, and it is especially true if the third wave is the extension. If perfect equality is lacking, a .618 multiple is the next likely relationship. When waves are larger than Intermediate degree, the price relationships usually must be stated in percentage terms. When the waves are of Intermediate degree or less, the price equality can usually be stated in arithmetic terms, since the percentage lengths will also be nearly equivalent. [2001] - Robert Prechter

The correct method for tracking the stock market is to use semilogarithmic chart paper, since the market's history is sensibly related only on a percentage basis. The investor is concerned with percentage gain or loss, not the number of points traveled in a market average. Arithmetic scale is quite acceptable for tracking hourly waves. Channeling techniques work acceptably well on arithmetic scale with shorter term moves. [2001] - Robert Prechter

When wave three ends, connect the points labeled "1" and "3," then draw a parallel line touching the point labeled "2." This construction provides an estimated boundary for wave four. If the fourth wave ends at a point not touching the parallel, you must reconstruct the channel in order to estimate the boundary for wave five. First connect the ends of waves two and four. If waves one and three are normal, the upper parallel most accurately forecasts the end of wave five when drawn touching the peak of wave three. If wave three is abnormally strong, almost vertical, then a parallel to the baseline that touches the top of wave one is then more useful. [2001] - Robert Prechter

If a fifth wave approaches its upper trendline on declining volume, it is an indication that the end of the wave will meet or fall short of it. If volume is heavy as the fifth wave approaches its upper trendline, it indicates a possible penetration of the upper line, which Elliott called "throw-over." Near the point of throw-over, a fourth wave of small degree may trend sideways immediately below the parallel, allowing the fifth then to break it in a final gust of volume. [2001] - Robert Prechter

Sharp corrections tend more often to retrace 61.8% or 50% of the previous wave, particularly when they occur as wave 2 of an impulse wave, wave B of a larger zigzag, or wave X in a multiple zigzag. Sideways corrections tend more often to retrace 38.2% of the previous impulse wave, particularly when they occur as wave 4. [2001] - Robert Prechter

The target for a retracement following a fifth wave often is doubly indicated by the end of the preceding fourth wave and the .382 retracement point. [2001] - Robert Prechter

The famous "head and shoulders" pattern can be discerned in a normal Elliott top, while a head and shoulders pattern that "doesn't work out" might involve an expanded flat correction under Elliott. [2001] - Robert Prechter

Since 1995, people operating strictly as fundamental investors have not done as well as investors who also consider the technical side of the market. Both technical as well as fundamental skills were important to survive the ups and downs of the world of investing. The Wall Street Journal is primarily a paper written for technical investors, and not necessarily for fundamental investors. George Soros is often recognized as one of the best technical investors. [2000] - Robert T. Kiyosaki

My trading approach involves five different perspectives: 1. Momentum. 2. Change in the speed of current momentum. 3. Appearance of an initiating fractal. 4. Zonal influences. 5. Balance Line differentials. [1998] - Bill Williams

Because momentum always changes direction before price, we say the AO is like reading tomorrow's Wall Street Journal. [1998] - Bill Williams

A divergence is created in an up move when the Price is higher than it was at the most recent Price peak and the Momentum (as measured by the 5/34 AO histogram) is lower than the Momentum peak that was at the last Price peak. Most markets tend to turn on a double divergence. A double divergence in an up market requires a Price peak followed by a higher Price peak (first divergence), and that higher peak is followed by a still higher Price peak. The Momentum is highest on the first Price peak, lower on the second Price peak, and still lower on the third Price peak. If the market doesn't turn on a double divergence, it will most likely turn on a triple divergence. Only perhaps once or twice a year will you see a quadruple divergence. [1998] - Bill Williams

While analyzing the Elliot wave, we must have a minimum of 100 bars and a maximum of 140 bars. [1995] - Bill Williams

The Elliott sequence consists of a basic rhythm of "fives" corrected by "threes." This sequence remains constant no matter what degree of wave is being analyzed. This wave rhythm is observable as long as there is a minimum amount of trading volume. As a rule of thumb, we use a minimum average of 20 ticks per time period, although the Elliott sequence can often be seen in a shorter period market with much less volume--for example, the one-minute chart. [1995] - Bill Williams

After a 5-wave sequence is complete, it will usually become a wave of "larger degree," or a wave contributing to a larger wave. The complete movement of waves 1 through 5 will complete the next higher tier of wave sequences. Therefore, the movement from wave 1 to wave 5 completes a wave 1, a wave 3, or a wave 5, and the a-b-c sequence completes either a wave 2 or a wave 4. [1995] - Bill Williams

Dow Theory covered trends extensively, breaking them down into three categories. The first is the primary trend, which lasts from a few months to many years and represents the dominant market direction. The secondary trend is a price movement that can last from a few weeks to a few months and is defined as a corrective stage for a market. Daily fluctuations, or the short-term trend, last from a few hours to a few days--rarely longer than a week--and represent very short-term reactions and corrections that often are brought about by fundamental developments or scheduled news releases. [1932] - Robert Rhea