A complex correction in Elliott Waves Theory consists of two or three simple corrective waves connected by one or two intermediary waves. Double or triple combinations are various combinations of simple corrective waves connected by one or two x-waves, respectively.
As we know from the previous articles, simple corrective waves in Elliott Waves Theory can be:
- a flat,
- a zigzag, or
- a triangle.
One important rule to keep in mind is that no complex correction can start with a triangle; any other combination is possible. A complex correction can take on the following forms:
- flat – x-wave – triangle,
- zigzag – x-wave – flat,
- flat – x-wave – flat,
- zigzag – x-wave – zigzag – x-wave – triangle, etc.
We won’t list them all here, but they can be combined in every way possible, keeping in mind that:
- a complex correction must never start with a triangle; and
- there is a maximum of two x-waves connecting three simple corrections.
We will now take another look at the example we used in a previous article to discuss the concept of the x-wave. The difference this time is that we will build a so-called triple combination. As the name suggests, a triple combination has three simple corrective waves connected by two x-waves.
In complex corrections, the length of the x-wave is essential. For example, in double and triple combinations, double and triple zigzags, and double and triple flats, the x-wave is “small”, meaning it retraces less than 61.8% of the previous correction. In other cases, complex corrections have a large x-wave, which retraces more than the 61.8% level. In any case, a triple combination has two small x-waves, and the second one may unfold as shown below:
Elliott found that a complex correction almost always ends with a triangle. According to this rule, the pattern following the second x-wave or the third simple correction will almost always be a triangle.
In this example, we used a horizontal contracting triangle, but it could be any type of triangular formation:
- irregular triangle
- expanding triangle
- non-limiting triangle
- running triangle
This is crucial to understanding the concept behind the Elliott Waves Theory. It is especially important when trading the currency market due to complex market swings and high-volatility driven by trading algorithms. Keep in mind that this theory combines everything until the appropriate path is revealed.
- Complex corrections have a minimum one and a maximum two x-waves.
- Complex corrections never start with a triangle.
- Complex corrections are combinations of simple corrections connected with x-waves.
- There is a maximum of 3 simple corrections in any given complex correction.