I have just summarized some basic principles of Elliott waves that many people often overlook when counting waves. This Elliott wave counting method is quite useful for identifying the right entry points, especially when the market is experiencing strong volatility.

The most important thing is to remember these three fundamental rules, which must never be violated under any circumstances. First, wave 2 can never retrace more than 100% of wave 1 — this is a mandatory condition to validate an Elliott wave. Second, wave 3 cannot be the shortest among the three impulse waves (waves 1, 3, and 5) — it is usually the strongest wave or at least equal in length to wave 1 or wave 5. Third, wave 4 must not touch the price zone of wave 1, meaning the peak of wave 1 and the trough of wave 4 must not overlap.

I find that adhering to these three rules helps filter out truly reliable Elliott wave signals. When you count waves, you need to continuously check whether these conditions are satisfied. If any rule is violated, it’s very likely that you have miscounted or have not yet identified the start point of the Elliott cycle.

This approach is especially useful when analyzing BTC, ETH, or other assets with high volatility. If you want to optimize your entry timing, make sure you fully understand these three basic Elliott wave principles. Wishing you success in wave counting and in finding the best trading opportunities.