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Elliott Waves – Types of Flat Patterns

Flats are corrective structures that are labelled with letters: a-b-c. The first two waves in a flat pattern are corrective, so they are three-wave structures, while the c wave is always an impulsive wave. Because of this, a classical flat structure is a 3–3–5 one. Waves a and b can be either simple or complex corrections, while the c wave is a five-wave structure with either a third, first or fifth-wave extension. The key to interpreting a flat pattern lies with the b-wave, though. Based on the retracement level of the b-wave into the territory of the previous a-wave, we have many types of flats. They are divided into three main categories, each of which has more than two types of flats that fit into it.

The Key Remains with the B-Wave.

As you should know by now from other articles in our Forex Trading Academy, a flat always has the b-wave retracing more than 61.8% of the previous a-wave. In order to find out exactly where that level is, one should take a Fibonacci Retracement tool and drag it from the start of the a-wave to the end of it. Moreover, there are other levels to be considered as well, and they can be added to a Fibonacci tool. To add a level, the Fibonacci tool should be selected, then the Levels tab should be used to add the desired value. We are interested in adding the 80% and 123.6% retracements. These are the other Fibonacci levels that matter for a flat pattern, as covered in the article dedicated to the Fibonacci retracement tool.

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Flats with a Weak B-Wave

flats1Flats that fall into this category have a b-wave that is unable to retrace more than 80% of the previous a-wave. The b-wave retracement is therefore a weak one due to the relatively small size of the b-wave. Flats with weak b-waves are further divided based on the length of the c-wave that follows. In this situation, there are three possible lengths for the c-wave, or for the only impulsive wave in a flat pattern:

Flats with Normal B-Waves

flats21In this category are included some flat patterns that have the b-wave moderately strong, in the sense that it almost completely retraces  the previous a-wave. It is important to consider only the end of the b-wave as the place to interpret the retracement level, and not the highest of the lowest point in the pattern. If the b-wave retraces between 80% and 100%, there are three possible types of flats as well, based on the same interpretation of the length of the c-wave:

Flats with a Strong B-Wave

flats3These are the most confusing type of flat patterns, as both bulls and bears are stopped. Imagine the following scenario: In this pattern, the b-wave completely retraces the a-wave, only for the c-wave to follow and completely retrace the b-wave as well. In this way, initial bears are stopped, as they place the stop loss at the start of the a-wave, while bulls that bought the b-wave will be stopped as well by the c-wave that follows. As was the case with the previous two categories, based on the length of the c-wave, there are different types of flats that fit here:

Knowing what type of flat the market is forming is vital for the overall interpretation of Elliott Waves theory. There are situations when it is not possible for a specific pattern to form unless it contains a specific type of flat. One can therefore trade such a pattern with quite some confidence. Of all the three types of corrective wave (flats, zigzags, and triangles), flats are the most numerous, and the most complicated. The following article will be dedicated to the types of the zigzags that exist, and how to interpret them based on both the retracement level of the b-wave and the length of the c-wave to follow.

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Types of Flat Patterns
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