Elliott Waves Theory – The Difference Between Double and Triple Threes in Trading with Elliott
One of the last complex corrections presented here on our Forex Trading Academy project are the double and triple three patterns. These patterns are considered to be rare ones, but they do form on the Forex market. Out of the places where they may appear, they have a predilection to form as 2nd waves in impulsive moves, and not that often, as b-waves in zigzags. No matter if a 2nd or a b-wave, the move to follow should be a powerful one. As a rule of thumb, the longer the double or the triple three patterns take to form, the more aggressive move to follow next. What makes a double and a triple three pattern, and how are they different than other patterns discovered by Elliott?
Defining a Double and Triple Three Pattern
Both these patterns fall into the category of complex corrections with a large x-wave. So far we’ve treated only the running corrections as corrections in this category, and this article comes to complement the ones dedicated to running corrections. A large x-wave means that the intervening wave will retrace more than 61.8% into the territory of the previous correction. This retracement level should be considered as the minimum one, in the sense that the x-wave can go and easily reverse the whole previous correction, without the overall pattern to fall into a running correction category.
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Spotting a Double Three Pattern
A double three pattern is characterized by all the segments in the pattern being almost equal. To have this effect, the x-wave should be included in this category as well. Moreover, it means that we can only look for flat patterns for both corrections that form prior and after the x-wave. In a way, such a pattern is resembling a double flat pattern, with the only difference being the fact that the x-wave is retracing more than 61.8% into the territory of the first correction. However, when compared with the double flat pattern, a double three has no channeling component. Even in the case of a double flat, the channeling component is different than what channeling in general means.An important role in trading a double three is having the time frame the pattern is forming on. If it is forming on a bigger time frame, like daily, weekly or monthly time frames, then the market is basically taking a lot of time to consolidate and it is not wise to take a trade based on the move that should follow such a consolidation. The reason for this comes from the fact that swaps are going to be paid all this time and swaps are mostly negative. As a quick reminder as what a swap is, this is the difference between the interest rates of the currencies that make up a currency pair, and at the end of a trading day, providing the trades are not closed, a small amount is being deducted or added to the trade. Paying a negative swap when trading a double three on the bigger time frames can prove to be an extremely expensive thing to do, and therefore it should be avoided. This represents just a small trick to trading the Forex market in general. To complicate things even further, there is the possibility that, instead of the second flat pattern in the double three, the market is forming a triangle. This would make the overall pattern be even more time consuming as the triangle has five segments, and all of them are corrective ones as well.
What Makes a Triple Three Pattern?
Like the name suggests, a triple three pattern is having no less than three corrective waves, connected by two large x-waves. The same principle should apply here as well: all segments of the triple three pattern are almost equal in price. If the double three was supposed to be time-consuming, you can imagine the time taken for a triple three pattern to form. A lot of patience is required, but the goal is to trade the move that follows such a pattern. As mentioned earlier, the more the pattern is consolidating, the more powerful the move that follows is going to be. Therefore, both double and triple threes are forming as the 2nd wave in an impulsive move, as the 3rd wave, in this case, will be the one that is extended. A triple three pattern can end with a triangle as well, and this is the most complex pattern that can form on the horizontal. It implies that the first two corrective waves are flat patterns, the two x-waves are retracing more than 61.8% of the previous flat, and the last segment is a triangle. To complicate things even further, imagine that the triangle has another triangle, of a lower degree, for the e-wave. This will result in the overall pattern to have no less than seventeen (17!) segments: six segments corresponding to the first two flat patterns, two segments for the two x-waves, four segments for the first four waves in the triangle, and five segments as the e-wave of the triangle. A proper labeling of a triple three that ends with a triangle should look like this: abc-x-abc-x-abcde. The last e-wave should be a triangle on its own, of a lower degree, that should be labeled with a-b-c-d-e. The third wave that follows such a pattern should be even bigger than the one that follows a double three one and is traveling way beyond the 161.8% extension needed in an impulsive structure. The same thing is valid for the fifth wave, in the case that the double and triple three is the b-wave of a zigzag. In this instance, the most likely case is that the zigzag would be an elongated pattern, due to the size of the c-wave. With these two patterns, complex corrections with Elliott Waves theory are covered completely and the only things that we still need to do are to take a closer look at the types of the impulsive waves Elliott discovered. It is only normal to come back to where the whole theory started: a five waves structure, corrected with a three waves one.
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- Trading with the Cloud – Use Ichimoku Cloud to Spot Reversals
- Forex Market Terminology
- Profit from Forex Trading Using Different Trading Styles
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Recommended further readings
- Theoretical notes on trade problems. Samuelson, P.A., 1964. The Review of Economics and Statistics, pp.145-154.
- Financing alternative development through double bottom line private equity funds & a real estate social investment framework Levy, J. E. (2005). (Doctoral dissertation, Massachusetts Institute of Technology).