Corrective Waves:

Corrections can generally be classified as simple or complex; simple refers to zigzag corrections, while complex refers to other types of corrections. Whether simple or complex, in an a-b-c three-wave correction, Wave B must consist of three sub-waves, and Wave C must consist of five sub-waves. Wave A can consist of either three or five sub-waves. If Wave A consists of five sub-waves, it is likely a zigzag correction. If it consists of three sub-waves, it is most likely a flat, irregular, or triangle correction.

Simple Correction:

Once the five-wave sequence of Wave A is completed, the retracement of Wave B typically does not exceed 62% of the length of Wave A. Only in rare cases may Wave B retrace up to 75%. Since Wave C exhibits characteristics similar to a third wave, it is highly suitable for trading. If the retracement of Wave B falls between 50% and 62% of the length of Wave A, one can look for dormant alignments and enter positions to trade Wave C. The trading method for Wave C is the same as for any five-wave sequence.

Complex Correction:

There are three types of complex corrections: flat corrections, irregular corrections, and triangle corrections.

In a flat correction, each wave is nearly equal in (price) length. If Wave B exceeds the endpoint of the preceding impulse wave, it may develop into an irregular correction.

A triangle correction is a five-wave corrective pattern. It usually occurs in the penultimate wave of a sequence—either Wave 4 or Wave B. If a triangle correction occurs in Wave 4, prices typically break out in the direction of Wave 3 after the correction ends. If it occurs in Wave B, prices usually break out in the direction of Wave A after the correction ends.

Resolving Ambiguities in Elliott Waves:

My research in the early 1980s revealed that if you add the area of Wave 1 to the area of Wave 2, the sum often equals the area of Wave 3 or maintains a Fibonacci ratio (typically 62%). Then, subtracting the area of Wave 4 from the area of Wave 3, the difference usually equals the area of Wave 5 or maintains a Fibonacci ratio.

Combining MFI with Elliott Waves:

After years of research, we found that MFI behaves differently across various Elliott Waves.

Wave 3 has the highest average MFI value, while Waves 1 and 5 have smaller averages. At the end of Wave 5, a divergence often appears between price and the average MFI.

Although the price at the end of Wave 5 is higher than at the end of Wave 3, the average MFI of Wave 5 is lower, creating a divergence. This divergence serves as a reliable indicator for the end of an impulse wave and signals an impending trend change. If we can confirm a set of parameters, we can trade based on them or develop an indicator to identify differences in market facilitation across waves. MFI indeed serves this purpose, making it a real-time momentum indicator.