Fifth wave extensions are tricky moves market makes to a trader because of the feeling one gets that the move will never end. The difference between the third and the fifth wave extensions is that whereas the third wave extensions look for 161.% out of the first wave, the fifth wave extension relates the 161.8% out of the longest wave between the previous two, and this is usually the third wave. So, the expansion tool should be applied on the third wave and look for the target for the fifth wave to come as 161.8% out of that wave.
Usually this fifth wave extensions are extremely violent as even the most bearish bear, if I may say so, will wave second thoughts on such a move to the upside. It is so strong and powerful, and it can be met on a c wave correction, and under this scenario it is being followed by a sharp reversal, leaving everybody scratching their heads about what just happened.
The recording that comes with this sub chapter will show you a fifth wave extension on the gbpusd, showing you that the recent move we had started from end of last year from the 1.63 level and ending at the recent lows at 1.4830 area is an impulse with a fifth wave extension.
I choose to show you the extensions in this order, third wave, fifth wave, and then the first wave extension,s, as this is the most common order for them to be met on markets.
Next sub chapter will deal with the first wave extensions, pretty rare but yet important when identified.