12. Bypassing
The equality of the waves
The Wave includes several valuable suggestions, one of which is the tendency of waves to the equation. In particular, the five-wave sequence of two waves of the moving type always strive to achieve the same length. Typically, such an indication is applied to two unstretched waves when the wave, which is not involved in this "competition", serves as the extension. First and foremost, it concerns those cases where the extension is the third wave. The most common wave equation is established in proportion to the ratio of 1:0.618, but often is achieved and the absolute equality of the waves.
When comparing the waves, after developing the Intermediate (Intermediate) level of the wave should be considered the price ratio as the ratio of the percentages. For example, when studying the motion of the extended wave III, developing within the Main (Cycle) wave level in the 1942-1966 years., We have identified a number of characteristic features. First of all, it should be noted that the wave [1] Primary (Primary) level in 49 months has overcome as much as 120 points, while the wave [5] has gained only 80% of the level of his "rivals" for 40 months, having moved forward only 438 points (see Fig. 5-3). This situation is fundamentally different from the third wave of the primary level, which for 126 months, achieved a substantial increase (324%).
In cases where the wave development occurs in the Intermediate (Intermediate) or lower levels of the wave, the equality of prices can be defined as a percentage, as well as in linear terms. For example, the wave of a total of 47 hours was able to score 35.24 points, and it opponentka, wave 5, for the same period of time has advanced only 34.4 points. This phenomenon was noted at the end of 1976.
Application of waves on a graph
In his studies, Hamilton Bolton has always paid special attention to the preparation of time schedules that reflect the characteristics of the market price at the end of time period. The same tactic used by Elliott himself, who in his "Law of the waves" presented to the public hourly charts of stock prices, dating back to late February - early March 1938. Today, any self-respecting analyst who in his research is guided by the Law Elliott considers the construction of a sensible exercise time index changes DJIA. It is known that such changes are always published by such respectable publications as The Wall Street Journal and Barron's. Construction time schedules - is a simple task that can handle even the student, so its implementation will require only a few minutes. The graphs presented in the form of exchange of histograms is quite instructive and easy to understand, but can often introduce analysts astray. This phenomenon is due to the fact that the exchange histograms show the majority of variations occurring in close proximity of the segment and not within his time frame.
To construct all the graphs should be used only reliable quantitative data, since otherwise the information presented in graphical form, is unsuitable for drawing the right conclusions. "Price discovery" and "intra-theoretical" values, which are published for the Dow, in fact, represent the results of statistical studies and can not be considered as indicators of the importance of these indices in certain intervals. Thus, these statistical quantities can be classified as a kind of aggregate price discovery taking place at points in time, regardless of time of day when the day was marked by low or extreme price of each stock in the index.
The main challenge for the classification of the waves, is to determine the exact location of the price in a sequence of values of the stock market. In cases where the calculation of the waves is not difficult, but it is in fast markets or rapid pulse waves, charting, usually performed without any difficulties. For the analysis of all subwaves in such situations is better to plot with a small increment. At the same time, if the development of the market is different, or listless during the variability inherent in the wave correction, it is likely that the structure of the wave structure is more complex and intricate. To construct the graphs in such cases it is recommended to use a large discretion, which will allow to generalize a particular wave motion in a certain shape and illustrate the development of the wave model.
With the correct interpretation of the Wave Principle can not only build informative graphics, but also to make a reliable forecast of lateral movement. But do not forget that even in the presence of relevant knowledge to enter the analyst may be confusing complexity and sluggishness of the wave motion, which often take place in the stock markets. The best option in this case would be a distraction from the problems of the market. Indeed, the situation on the market a certain way does not depend on the desires of the expert. In addition, it is difficult to find a reasonable opportunity to relax, than no movement in the market.
One of the most accurate methods of monitoring the market situation is considered to be use on a semi-logarithmic plots of the grid. It is not for everybody knows that the ratio of the historical data is best done on a percentage basis. With this approach, investors are guided not by the number of items that are for one time or another has overcome a market index, and profit or loss, calculated as a percentage. For example, back in 1980 the DJIA 10 points were less than 1% of the movement, while in the early 20s of the twentieth century, the same ten items were expressed in 10% of the entire movement.
Semi-log scale is very useful in the construction of graphs showing the development of the market over long time periods, where this difference is particularly noticeable. To observe the time the waves can be used and a linear scale, as in short periods of time, methods of forming channels are working very effectively. For example, the promotion of 300 points, fixed for one hour at a value of DJIA in 5000, little different from the percentage representation of the same magnitude in the promotion of DJIA in 6000.
The method of forming channels
At the time, Elliott when considering the parallel exchange lines drew attention to the fact that these structural elements often serve as the upper and lower boundaries of impulse waves. Therefore, the construction of the parallel exchange rate schedules should draw a line in advance. This greatly simplifies the definition of the target destination of waves and will prepare the main options for the further development of wave motion.
The initial method of constructing channels is quite simple. To form a channel must be at least three points. In Fig. 8.2 graphically illustrates the algorithm for all activities associated with creating a channel for the pulse. In order to fulfill its construction, it is necessary to connect the dots, labeled "1" and "3", and then draw a parallel through the point "2". The result of such manipulation and the creation of the proposed boundaries will be a wave 4. If after all the trunks wave 4 will end at a point which lies on a parallel line, you must rebuild the channel to properly identify the boundaries of wave 5. To do this, connect the end of wave 2 and 4. In the case of wave 1 and 3 will be the standard, the most reliable prediction end of wave 5 will give the first parallel line drawn through the extreme of wave 3 (see Fig. 2-9).
In some situations, wave 3 is strong enough to create a near-vertical wave structure, so often a parallel line drawn from its summit, is almost majestic heights. Practice shows that in these situations is advisable to conduct a parallel to the base line across the top of wave 1. One example of such a method of forming the channel is shown in Fig. 6-12, which shows the trend in prices for gold bullion in the period from August 1976 to March 1977. In addition, it should be noted that in some cases it makes sense to build both the potential boundaries. As a rule, is a dual channel is used for the formation accurate labeling of waves and determine the parameters of the wave at the considered levels in the presence of the wave of controversial situations.
Throws (Throw-over)
Often, both in the parallel channels, and in the converging lines of triangles observed the approach of the fifth wave to its upper limit in terms of the incident. This phenomenon indicates that the completion of the waves can touch line or on the contrary does not reach it. For a sufficiently large amount of convergence of wave 5 with its own upper guide talks about a possible breakout of the upper line. In his works, Elliott classify this phenomenon as a "roll» (throw-over).
Throws Like all wave structures have a number of characteristic features. Thus, in particular near the point of breaking wave 4, which is located one level below, may develop lateral movement, thereby giving its position in the implementation of the fifth wave of the final rush.
In some cases, a sign of shots directed upward (throw-overs), serves as the preceding "failure» («throw-under»). Typically, such a gap is formed inside the wave 4, but sometimes its formation is observed in the second subwave located within a wave 5. This algorithm is of cast vividly illustrated in Fig. 2-10, taken from the famous book "The Law of the waves." Typically, in such cases there is a sudden reversal of movement in the opposite direction, which is below the channel.
Throws with the properties described there as a growing and in a falling market. In his writings, Elliott emphasized that the shots which development takes place at the senior levels of the wave can interfere with the proper definition of the waves of the lower level. This property is due to the fact that the formation of channels shots at a lower level in some cases can make up for the rapid advances by the end of wave 5.
Other entries on the topic:
Lesson 2: The Subtleties of the full cycle
Lesson 7: Plane correction (3-3-5)
Lesson 8: Horizontal triangles
Lesson 9: Combinations such as corrective
Lesson 10: Direction of alternation
Lesson 11: Analyzing and forecasting the development of corrective waves
Lesson 13: Additional information
Lesson 14: Personality as one of the characteristics of wave
