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WHAT IS A FLAT CORRECTION? #RULES, GUIDELINE AND PATTERNS

flat correction

Do you want to learn how to trade by analyzing a crucial corrective pattern?

Despite its apparent simplicity, the flat correction, a three-wave structure marked A, B, and C, is fundamental to understanding market behavior. Here we will go over the fundamental patterns, principles, and standards that make the flat correction simple to understand.

Let’s examine the dynamics that shape this unique structure and improve our trading knowledge.

 

What Is a Flat Correction in Elliott Wave?

In the world of Elliott Wave, a flat correction is a three-part movement in which both Waves A and B showcase their corrective actions with three waves each. This pattern often exhibits clear performance during small zigzag corrections.

The sole motive pattern, Wave C, also takes center stage in this crucial financial performance. So, keep a watch on those three-wave sequences to figure out the flat corrective pattern!

 

In Short

What Are the Different Types of Flat Corrections?

Flat corrections come in quite a few types, each with its own market movement. The first pattern is the Regular Flat, characterized by a simple A-B-C pattern that upholds a balanced structure.

Then comes the Expanded Flat, in which Wave B exceeds Wave A‘s beginning point, resulting in an elongated corrective.

Finally, we have the Running Flat, which occurs when Wave C continues beyond the end of Wave A, adding an element of unpredictability to the market choreography. So, whether it’s a regular rhythm or a long performance, these flat correction types offer flair to the waves’ amazing movements.

Flat Corrections

Regular Flat

Expanded Flat

Running Flat

1. Regular Flat

A Regular Flat in Elliott wave is a market phenomenon consisting of three waves, A, B, and C. Waves A and B perform a three-wave routine, while Wave C has five waves. Wave B must finish between 78.6% and 90% of Wave A, but should end below 100%.

Regular Flat Wave Structure

Wave A and Wave B in a Regular Flat each have three sub-waves, making a 3-3-5 structure. Wave C, the final wave, culminates the pattern with its five sub-waves.

It is common for Wave B to retrace 78.6% to 90% of Wave A in a Regular flat. The pattern is characterized by its almost complete retracement as Wave B approaches but does not surpass the beginning of Wave A.

Here, the Regular Flat correction’s C-wave establishes a five-wave sequence, disrupting the previous stability. Wave C will finish the pattern after Wave A has finished, creating a small extension.

 

flat correction

REGULAR FLAT

In trading, identifying a Regular Flat allows traders to expect minimal price movement and prepare for probable reversals or consolidations. Recognizing this correction is crucial because it indicates a halt rather than a trend reversal, which guides smart entry and exits in the framework of Elliott Wave Theory.

Rules for Regular Flat patterns

Rule 1 # Wave B must retrace 78 to 90 percent of wave A.

Rule 2 # Wace C must terminate below wave A.

 

2. Expanded Flat

The Expanded Flat has the same number of sub-waves as a Regular Flat, with 3 waves in A and B and 5 waves in C. In Expanded Flat correction, wave B ends between the inverse of 161 percent of wave A.

Expanded Flat Wave Structure

Expanded Flats, like Regular Flats, have a 3-3-5 structure; in this case, Waves A and B each have three sub-waves, while Wave C has five. This framework guarantees that the corrective pattern will continue, but it also indicates that prices will expand even more.

The second wave, B, in an expanded flat is usually longer and more powerful than the first wave, A. It is characteristic of this pattern for Wave B to retrace anywhere from 100% to 161.8% of Wave A. This extension indicates greater momentum and usually misleads traders into believing the original trend will continue when, in fact, a correction is developing.

In an Expanded Flat correction, Wave C is usually very powerful, often exceeding Wave A’s end. This last five-wave sequence tends to push prices well past the end of Wave A. This makes the pattern more volatile and strengthens the structure‘s corrective nature.

 

flat correction

EXPANDED FLAT

Expanded Flats often develop in strong moving markets when the current trend needs a more difficult or prolonged corrective before continuing. Recognizing an Expanded Flat is critical for traders, as the greater-than-usual swings in Waves B and C may serve as key entry and exit positions within the overall trend.

Rules for Expanded Flat patterns

Rule 1 # Wave B must break the starting point of wave A.

Rule 2 # Wave C must terminate below wave A.

 

3. Running Flat

The Running Flat is the same as the Expanded Flat of the structure, with waves A and B having three waves and Wave C having five waves. In the Running Flat pattern, Wave C must end within the end point of wave A.

Running Flat Wave Structure

As with the Regular and Expanded Flats, the Running Flat has a 3-3-5 structure. Waves A and B each have three sub-waves, while Wave C has five. There is a significant variance in the behavior of Wave C, but this structure nevertheless offers a robust foundation.

In the Running Flat, Wave B extends more assertively, often retracing beyond 100% of Wave A, just like in the Expanded Flat. This big retracement may seem to end the correction, but Wave C will move forward.

Unlike the Expanded Flat, Wave C in a Running Flat ends within the price range of Wave A rather than beyond it. This indicates that Wave C does not reach Wave A’s low or high point (depending on trend direction), resulting in a shorter pattern completion.

 

flat correction

RUNNING FLAT

In strong trends, the Running Flat is a useful indication since it indicates the correction is small and the main trend will probably continue. Recognizing a Running Flat allows traders to anticipate tiny corrective swings and prepare for the trend’s resumption, resulting in well-timed entry points within the trend’s overall momentum.

Rules for Running Flat patterns

Rule 1 # Wave B must break the starting point of wave A.

Rule 2 # Wave B cannot cross the inverse of 161% of wave A.

Rule 3 # Wave C must conclude within wave A.

 

What Is the Difference Between a Running Flat and an Expanded Flat?

Running Flat PatternExpanded Flat Pattern
Wave C concludes at the end point of Wave A.Wave C extends beyond the end point of Wave A.
It manifests in robustly trending markets with minimal correction.Shows higher volatility and deeper retracement.
Wave B retraces beyond 100% of Wave A but less than 161.8%.Wave B often retraces up to 161.8% of Wave A.
Signals shallow correction before trend continuation.The market signals a deeper correction before resuming the trend.

 

What Is the Difference Between Zigzag and Flat Correction?

WaveZigzag Correction Flat Correction
CharacteristicsWave A and Wave C are motive waves with strong directional moves.Waves A and B are corrective waves, each consisting of three sub-waves.
PatternWave B typically initiates a three-wave pattern, which serves as a corrective slowdown against the trend.Wave C is a motive wave, showing stronger directional movement than Waves A and B.
StructureThe correction produces a clean, three-wave creation known as A, B, and C.It creates a complicated, sideways three-wave pattern with the labels A, B, and C.
Market BehaviorOften signals a stronger corrective move.It indicates a consolidation phase, suggesting a pause rather than a strong reversal.

 

Final Thoughts

Finally, comprehending the complexities of Flat Corrections in Elliott Wave Theory reveals a useful tool for navigating market patterns. Understanding the rules, principles, and specific patterns of Flat Corrections enables traders to forecast and profit from probable market swings. So, ride the waves wisely, prepared to negotiate the ever-changing currents of financial markets.

FAQs

In Elliott Wave Theory, Wave A and Wave C form a three-wave pattern in a flat correction. Wave A represents the initial movement, typically three sub-waves. Wave C, the final move, is the decisive motive wave, consisting of five sub-waves. Together, they complete the correction, defining the ultimate resolution.

Yes, Wave 4 in Elliott Wave Theory can be a flat correction, as it is part of the larger Elliott Wave sequence and often exhibits corrective patterns. The flat correction typically consists of three waves: A, B, and C. Waves A and B are corrective, while Wave C is a motive wave. This flat correction serves as a temporary interruption before the market continues with the larger Elliott Wave pattern.

Disclaimer

This post is just for informative purposes and does not constitute financial advice. Trading and investing involve risk, and past performance does not guarantee future results. Before making an investing or trading choice, readers should undertake their own research and evaluate their own circumstances. The author and platform accept no responsibility for any financial losses or damages stemming from the use of this material. Receive personalized advice from a qualified financial advisor.

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