Elliott Waves Theory – Double Three Running Patterns
One of the most common running patterns, if not the most common on, is the double three running. Such a pattern is appearing most of the times as the 2nd wave in an impulsive move and the 3rd wave to follow in such a case is always the extended one. Not only that price to follow should be minimum 161.8% when compared with the length of the first wave, but it should have little or no retracements. It means that it is very likely that for the third wave, the whole five waves structure of a lower degree, this time, will have a running correction as well. The name of this correction tells us much about what to expect, in the sense that the word “double” is telling us a complex correction is about to form. This complex correction, because of its running nature, should have a large x-wave, so look for it to stretch beyond 61.8% when compared with the previous corrective wave. Most of the times the x-wave will actually retrace the whole previous correction and some more and will be either a double or a triple zigzag, or a combination of some sort. In any case, the x-wave will trick many people into thinking the third wave already started. This is a crucial mistake.
Trading a Double Three Running Pattern
There are two things to keep in mind when trading a double three running pattern, both of them equally important: the x-wave and the triangle that ends the pattern. The x-wave gives us the early sign that such a pattern might form, while the triangle, in the end, offers the add-on to a trade that should already be in place. A double three running pattern is very similar to a double combination, a concept that will be covered here on Forex Trading Academy a bit later. The only difference between the two is, as mentioned at the start of this article, the length of the x-wave. In the case of a double combination, we’re talking about an x-wave that is a short one, while a double three running pattern is having a large x-wave. Other than that, all things are the same: two corrections connected by an x-wave.
Enter when the 61.8% Retracement is Exceeded
The way to trade the double three running pattern depends very much on the move prior to it. That move must be a five waves structure, and therefore it can only be the 1st wave of an impulsive move of a bigger degree or the a-wave of a zigzag of a bigger degree. It doesn’t really matter though what the previous count is as long as it must be an impulsive wave. Therefore, the first thing to watch before deciding if a correction is a double three running is to make sure the move prior to it is an impulsive wave. If the answer is affirmative, then that impulsive wave must be corrected. This is the role of the first correction or the first part of the overall double three running pattern. Keep in mind that at this moment of time we have no idea if the market is forming a running correction or not, all we know is the fact that a five waves structure has been followed by a correction. The next thing to do is to see if the move that follows the correction is retracing more than 61.8% out of it. If yes, it is an early sign of a possible running correction of a bigger degree and a first trade should be taken by the time the retracement goes more than 80%. The take profit for the trade should be left open as we need to find out first the exact end of the double three running pattern before calculating the possible extension. As for the stop loss, this one must be at the end of the first corrective phase of the double three running.
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Add a New Trade When the B-D Trend Line is Broken
The focus should shift now to the second corrective phase of the double three running pattern and this one is almost always a triangle. The x-wave should be an aggressive correction, it should stretch beyond the end of the previous impulsive wave, and it should be quite a fast move relative to the previous one. A triangle is defined by the a-c and b-d trend lines that are being drawn from the end of those respective waves and the key stays with the moment the b-d trend line is broken. When this is happening it means the triangle is completed. However, according to the logical process described here, when the triangle is broken it means that the overall double three running is completed as well. This gives us the end of either the 2nd wave in the impulsive wave of a bigger degree or the b-wave I in the zigzag of a bigger degree. A second trade should be taken by the time the b-d trend line is broken and, if the b-d trend line is visible before the triangle’s break, a pending order can be used, just to be sure the trade is not missed. The take profit should be derived from the length of the first impulsive wave, or the five-waves structure that was prior to the double three running. By measuring that five-waves structure with a Fibonacci tool and finding out the 161.8%, we have an educated guess about the minimum distance price will travel for the third or c-wave to follow the double three running. This distance should be projected from the end of the triangle that completed the double three running and the end of it should be the take profit for both trades currently open. So powerful are these running corrections, that most of the times price is exceeding the 161.8% level and goes even into 261.8% or more. The 161.8% is the minimum distance to be traveled in order for the third wave to be an extended wave. In the case that the double three running was actually the b-wave of a zigzag, the c-wave to follow should end around 161.8% level, even though an extension is not necessary in this case.
Other educational materials
- Different Fibonacci Levels Important When Trading with Elliott
- Trading Different Types of Extended Waves
- Placing Pending Orders When Trading with Elliott
- How to Trade 2nd and 4th Waves
- The All-Important B Wave Retracement
- What Are Corrective Waves?
Recommended further readings
- Encyclopedia of chart patterns (Vol. 225) Bulkowski, T. N. (2011). John Wiley & Sons.
- Primary commodity prices, manufactured goods prices, and the terms of trade of developing countries: what the long run shows. Grilli, E.R. and Yang, M.C., 1988. The World Bank Economic Review, 2(1), pp.1-47.