Hello Traders. Welcome to Chapter 3.3, where we talk further about a different form of corrective waves, the Flat and Expanded correction. In chapter 3.3 I discuss the last of the types of flat corrections! Here, we will also dissect the contracting triangle, also known as the symmetrical triangle by many traders.
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction , Expanded Flat
3.3 Running Flat, Contracting Triangle
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
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Running Flat
The is the last type flat correction: the running flat variation. It is the least common one, but has the same 3-3-5 structure. This one is hard to spot because a rising wedge is usually considered bearish for many and the last wave is where you will find the confirmation. For these, you want to trade the breakout.
Rules:
• Wave B ends above the beginning of wave A
• Wave C ends higher than the end of wave A
• Usually wave C is the same length as wave A.
→ This kind of correction happen in really strong and fast markets, especially Bitcoin. The fast and high push of wave B and the short wave C are signs of a strong primary trend.
A parallel channel regularly marks the low of
wave C, marked by the yellow lines!
Contracting Triangle
Triangles represent a balance and even pressure of buyers and sellers within the market. They contain five overlapping waves with a 3-3-3-3-3 structure. The contracting triangle represents the most frequently appearing.
Rules:
• Triangles have 5 Waves: A-B-C-D-E
• All of the waves are corrective
• Upper line is declining, lower line is rising
• Wave E frequently overshoots the trendline and can also be a triangle
• Triangles only occur as a Wave 4/B/X/Y
• Never as a Wave 2/A
❗Triangles represent a continuation pattern for the dominant trend. Remember, continuation patterns are the main trend!