Rule no. 1: W3 isn’t the shortest impulse wave.

Rule no. 2: W2 doesn’t exceed the starting level of W1. (The Highest/Lowest level recorded on W2 must be lower or higher than that recorded on W1)

Rule no. 3: W4 doesn’t reach any of the W1 levels. (The prices recorded on W4 will always be higher or lower than those recorded on the first wave)


Situations that may occur in practice

• Sometimes W5 extends only to the end of W3 - phenomenon called truncation.
• Often, W5 breaks the trend line.
• W3 is usually sharp and expanded.
• W2 and W4 are often rejected from Fibonacci Retracement levels.