The concept of the x-wave is often misunderstood in Elliott Waves Theory. Elliott’s intention was to create a logical process to explain market moves; all of them! He started by dividing moves into impulsive and corrective moves, but there is much more to the Elliott Waves Theory. There are various types of corrective waves, that form far more often than impulsive waves, and the key to understanding them is the x-wave.

Introducing the X-Wave

Even the name should tell you this is always a corrective wave. Why? Well, it is labelled with a letter and, as we know, Elliott used letters to label corrective waves and numbers to label impulsive waves.

The x-wave is a connective wave; a wave that connects two simple corrections. Think of the x-wave as links in a chain, connecting simple corrections in such a way that it defines the complex correction.

The x-wave tells us the nature of the complex correction. As a corrective wave on its own, the x-wave can also be simple or complex. For example, the x-wave can be a flat pattern, a zigzag, a triangle, or a complex correction in itself (albeit one of a smaller degree). Focus on the count in the magenta colour in the below example.

The different colours on the image above show different cycles within the Elliott Waves Theory. In this case, the x-wave in magenta connects two simple corrections:

  • An elongated flat pattern is the initial correction, labelled a-b-c, in magenta.
  • A zigzag is the following correction, also labelled a-b-c, in magenta.

The connecting x-wave is a flat of a small degree. Or, a flat that belongs to a cycle one degree smaller (illustrated here with green letters). So, we have a flat and a zigzag, with the x-wave acting as a connection between the two. The entire pattern is a complex correction and multiple types of corrections like this exist. In this case, the x-wave is a simple corrective wave, a flat pattern.

However, as mentioned earlier, it can also be a complex correction. What if it were a complex correction? In that case, after the green a-b-c, an x-wave of the same degree would follow, and then another simple correction (flat, zigzag or triangle).

Trading with Elliott Theory can sometimes be a complicated and time-consuming process. However, if followed correctly, investors may gain insight into the most likely outcome for future price action. And in the end, this is what really matters when trading financial markets: to be right.

Main Takeaways:

  • The x-wave is always a corrective wave.
  • The x-wave can be a simple or a complex correction.
  • Corrective waves are more numerous than impulsive waves.
  • The x-wave acts as an intervening wave between two simple corrections.