Elliott Impulse Wave (Bearish) / 5-Wave Impulse (Bearish)
General reference values based on Elliott Wave Theory. Actual success rates vary significantly depending on market conditions, timeframe, and instrument.
The fundamental pattern of Elliott Wave Theory, consisting of 5 waves (1-2-3-4-5) in the downtrend direction. Odd waves (1, 3, 5) are bearish impulse waves in the trend direction, while even waves (2, 4) are bullish corrective waves against the trend. The internal structure is 5-3-5-3-5. Wave 3 is typically the longest, often accompanied by panic selling with the highest volume. In a bearish impulse, the five waves progressively make lower lows, completing at Wave 5's bottom.
Enter short after confirming a reversal at Wave 2's peak. Or enter on confirmation of Wave 3's downward breakout. The ideal entry point is where Wave 2 retraces 61.8-78.6% of Wave 1. Bearish candlestick patterns (shooting star, engulfing) at Wave 2's peak increase reliability.
Wave 3 target: 1.618 times Wave 1 extension downward. Wave 5 target: equal to Wave 1, or 0.618 times the range of Waves 1-3. If Wave 3 is extended, Wave 5 tends to equal Wave 1. Overall target: also reference 2.618-4.236 times Wave 1 extension downward.
Place a stop-loss slightly above Wave 1's starting point. For Wave 2 entries, set above the wave origin (0). For Wave 3 entries, set slightly above Wave 1's bottom. Ensure a minimum risk-reward ratio of 1:2.
Ideally, volume peaks at Wave 3, often accompanied by panic selling. Volume at Wave 5 is usually lower than Wave 3 (divergence). Volume tends to decrease during Wave 2 and Wave 4 corrections. Volume-price divergence is an important signal for predicting Wave 5's completion (selling climax).