Basic knowledge about Elliott – Diagonal Wave pattern

Have you ever seen an unusual impulse cycle? It is different from the basic knowledge of Elliott that we mentioned in the previous article. Because it has another piece of the puzzle embedded, which is known as the Diagonal Elliott wave pattern. So what’s so special about it and how to recognize it? Does it follow the same rules as the impulse wave? To answer those questions, let’s dig deeper.

The Diagonal wave is a special case of the Impulse wave. But it violates the 3rd rule (wave 4 violates the price zone of wave 1). The Diagonal wave is divided into 2 types, Ending Diagonal and Leading Diagonal.

Ending Diagonal (ED) Elliott wave pattern

The Ending Diagonal is a master wave pattern that usually occurs in the last waves of a wave level such as wave 5 or wave C. It should not be confused with corrective triangle patterns.

The Ending Diagonal wave pattern is a relatively rare phenomenon for large wave levels. They usually appear on lower wave levels on intraday charts. Often followed by an Ending Diagonal pattern is a sharp change in market trend.

Rules

• Waves 1, 3, and 5 of the Ending Diagonal pattern always follow the pattern of the Zigzag (ZZ) family.
• Wave 2 can follow any corrective pattern except for corrective triangle patterns like Contracting Triangle (CT) and Expanding Triangle (ET).
• Wave 2 is never longer than wave 1 in price.
• Wave 3 is always larger than wave 2 in price.
• Wave 4 can follow any corrective pattern.
• Waves 2 and 4 must share the same price area, which means they must cross each other.
• Wave 5 must be at least 50% of wave 4 in price.
• Wave 3 is not the shortest wave in price when compared to waves 1 and 5.
• The Ending Diagonal wave pattern has 2 forms, Ending Diagonal Contracting and Ending Diagonal Expanding.

With the Ending Diagonal Contracting pattern, the two trend lines connecting the endpoints of wave 1 with wave 3 and wave 2 with wave 4 tend to converge.

With the Ending Diagonal Expanding pattern, the two trend lines connecting the endpoints of wave 1 with wave 3 and wave 2 with wave 4 tend to diverge.

Leading Diagonal (LD) Elliott wave pattern

The Leading Diagonal diagonal wave pattern is a master wave pattern that usually occurs at the beginning of a wave level like wave 1 or A or in other words it is within wave 1 or A. It should not be confused with corrective triangle patterns. The difference between this pattern and the Ending Diagonal pattern is that waves 1, 3, and 5 have an internal wave structure of 5 waves, not 3 waves like the Ending Diagonal pattern.

Like the Ending Diagonal wave pattern, the Leading Diagonal wave pattern is a relatively rare phenomenon for large wave levels. It usually occurs at lower wave levels on intraday charts. Often followed by a Leading Diagonal pattern is a sharp change in market trend.

Rules

• Wave 1 of the Leading Diagonal pattern follows the Impulse (IM) or Leading Diagonal (LD) pattern.
• Wave 2 can follow any corrective pattern except for corrective triangle patterns like Contracting Triangle (CT) and Expanding Triangle (ET).
• Wave 2 is never longer than wave 1 in price.
• Wave 3 of the Leading Diagonal pattern follows the Impulse pattern.
• Wave 3 is always larger than wave 2 in price.
• Wave 4 can follow any corrective pattern.
• Waves 2 and 4 must share the same price area, that is, they must cross each other.
• Wave 5 of the Leading Diagonal pattern follows the Impulse or Ending Diagonal pattern.
• Wave 5 must be at least 50% of wave 4 in price.
• Wave 3 is not the shortest wave in price when compared to waves 1 and 5.

The Leading Diagonal wave pattern has two forms, Leading Diagonal Contracting and Leading Diagonal Expanding.

With the Leading Diagonal Contracting pattern, the two trend lines connecting the endpoints of wave 1 with wave 3 and wave 2 with wave 4 tend to converge.

With the Leading Diagonal Expanding pattern, the two trend lines connecting the endpoints of wave 1 with wave 3 and wave 2 with wave 4 tend to diverge.

Hope you will gain a lot of useful knowledge in the process of trading with the Diagonal wave patterns.

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