As shown in the diagram, the principle of the wave theory indicates that the space from the starting point to point 1 is often the same size as the space from point 2 to point 3 and from point 4 to point 5. However, one thing must be remembered: whether in the stock market or in the cryptocurrency market, whether in a bullish trend or a bearish trend, the third wave, which is the movement from point 2 to point 3, is often the one with the largest increase or the largest decrease. Even if this wave is not the one with the largest increase or decrease, it cannot be the one with the smallest increase or decrease.
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On the left side, there is an upward trend, and on the right side, there is a downward trend. In the process of the left-side movement rising from the starting point to point 5, the highest point, there are 3 upward movements and 2 corrective movements. Among them, the 1st, 3rd, and 5th waves are upward movements, while the 2nd and 4th waves are corrective movements, which together make up the 5 waves that Elliott referred to. In the process of the right-side movement declining from the starting point to point 5, the lowest point, there are also 3 downward movements and 2 corrective movements. Among them, the 1st, 3rd, and 5th waves are downward movements, while the 2nd and 4th waves are corrective movements. Essentially, the magnitude of the 3 upward movements is roughly similar to that of the 3 downward movements.