Third wave extensions


In an impulsive move, at least one of the waves (legs) should be extended. Under the Elliott Waves Theory extension is considered to be any move that goes beyond 161.8% level when compared with the previous wave. And it should be taken by the pip.

Luckily today all trading platforms have the Fibonacci retracement and expansion tools included, so it is way easier to measure waves and/or to look for potential expansion levels and targets. Just choose the Fibonacci expansion tool from the Insert tab on the Metatrader platform and click the top of the first wave, then the end of it, and then the end of the second wave, and the tool will do the job showing you where the 161.8% level should come.

It is most common for the third wave to be extended, and this is why I choose to present you first this case. The typical extension is 161.8% but this is not a target in itself, it is only to confirm you that the move is extended and you have a possible impulse in front of your eyes. It can go further than that level, reaching even 261.8% and even 461.8% expansion levels when compared with the first wave.

Like mentioned earlier, when you have a third wave that is extended 161.8% out of the first wave, than you should look as a possible target for the fifth wave to be the same length when compared with the first one.

This sub chapter will show you a classical example of a third wave expansion, what to look for and how to measure it, and much more.

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