Elliott Wave Theory is a powerful tool I use to understand market structure and build trading plans with confidence. In this post, I’ll walk you through how I’m applying it to the current setup in XAU/USD (Gold) on the 1-hour chart, and how I develop a trading plan around it.
🌀 The Current Structure: A 5-Wave Impulse in Progress
Based on the chart, I believe gold is in the middle of completing a classic 5-wave impulsive move. We’ve already seen the completion of Wave 1 and Wave 3—and we’re now likely in the midst of a Wave 4 correction.
🔍 How Do I Know This?
There are several clues:
Wave 3 is extended, meaning it’s longer than both Wave 1 and the expected Wave 5.
Inside Wave 3, Wave 2 was a sideways flat, and Wave 4 was a sharp zigzag.
This follows the Guideline of Alternation, which states that if one correction is sharp, the next tends to be sideways.
These characteristics give me confidence in my wave count.
💡 Why I Love Trading Wave 5
Wave 5 is my favorite wave to trade because it offers a high-probability opportunity when the structure is clear and confirmed. Here’s how I approach it:
📉 Step 1: Define the Invalidation Level
According to Elliott Wave rules, Wave 4 cannot enter the price territory of Wave 1. This gives me a hard stop loss zone—if price dips below that, the count is invalid, and I step aside.
🎯 Step 2: Determine the Target (Take Profit)
When Wave 3 is extended, Wave 5 usually relates to Wave 1, and I consider three common Fibonacci targets:
61.8%
100%
161.8%
Since the 100% extension of Wave 1 is the most typical scenario, that’s where I’ll tentatively place my take profit.
🛠️ Step 3: Plan the Entry
Now that I have both my stop (below Wave 1) and my take profit (100% of Wave 1), I plan my entry.
Here’s how:
Wave 4 often retraces to the 38.2% Fibonacci level of Wave 3—which is where I begin looking for support.
This level also coincides with the termination point of the previous Wave 4, adding further support per Elliott guidelines.
If price enters that support zone and I see a complete corrective structure (flat or triangle), that’s my green light to enter.
If all the above conditions are met, I’ll post a follow-up with my exact entry strategy.
🧠 Final Thoughts: Flexibility Is Key
While this plan is structured, the market is dynamic. Patterns evolve. Counts can shift. The key is to stay objective, recognize when the scenario changes, and adapt quickly.
Elliott Wave trading is not about perfection, but about anticipation, risk control, and reacting intelligently as price unfolds.
🌀 The Current Structure: A 5-Wave Impulse in Progress
Based on the chart, I believe gold is in the middle of completing a classic 5-wave impulsive move. We’ve already seen the completion of Wave 1 and Wave 3—and we’re now likely in the midst of a Wave 4 correction.
🔍 How Do I Know This?
There are several clues:
Wave 3 is extended, meaning it’s longer than both Wave 1 and the expected Wave 5.
Inside Wave 3, Wave 2 was a sideways flat, and Wave 4 was a sharp zigzag.
This follows the Guideline of Alternation, which states that if one correction is sharp, the next tends to be sideways.
These characteristics give me confidence in my wave count.
💡 Why I Love Trading Wave 5
Wave 5 is my favorite wave to trade because it offers a high-probability opportunity when the structure is clear and confirmed. Here’s how I approach it:
📉 Step 1: Define the Invalidation Level
According to Elliott Wave rules, Wave 4 cannot enter the price territory of Wave 1. This gives me a hard stop loss zone—if price dips below that, the count is invalid, and I step aside.
🎯 Step 2: Determine the Target (Take Profit)
When Wave 3 is extended, Wave 5 usually relates to Wave 1, and I consider three common Fibonacci targets:
61.8%
100%
161.8%
Since the 100% extension of Wave 1 is the most typical scenario, that’s where I’ll tentatively place my take profit.
🛠️ Step 3: Plan the Entry
Now that I have both my stop (below Wave 1) and my take profit (100% of Wave 1), I plan my entry.
Here’s how:
Wave 4 often retraces to the 38.2% Fibonacci level of Wave 3—which is where I begin looking for support.
This level also coincides with the termination point of the previous Wave 4, adding further support per Elliott guidelines.
If price enters that support zone and I see a complete corrective structure (flat or triangle), that’s my green light to enter.
If all the above conditions are met, I’ll post a follow-up with my exact entry strategy.
🧠 Final Thoughts: Flexibility Is Key
While this plan is structured, the market is dynamic. Patterns evolve. Counts can shift. The key is to stay objective, recognize when the scenario changes, and adapt quickly.
Elliott Wave trading is not about perfection, but about anticipation, risk control, and reacting intelligently as price unfolds.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.