Rule 1 (Wave 2)
Elliott Wave Theory glossary · Rule Of Alternation & Channeling Guidelines
Definition
Wave 2 cannot retrace more than 100% of Wave 1. Breach invalidates the impulse count.
Rule 1 (Wave 2) in plain English
This rule says Wave 2 (the first pullback) can give back a lot of Wave 1's gain, but never all of it. If price falls back past where Wave 1 began, then whatever you thought was Wave 1 clearly wasn't the start of a real upward sequence, so the count is dead and you start over. The intuition: a genuine new trend should leave some progress on the board after its first breather. It's like a rocket's first burst, if it sinks all the way back to the launchpad, it never really lifted off.
Also called: Wave 2
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