Our rule only uses pullbacks into a fixed area: the , a buy zone based on Elliott wave rules – a help for your own review, not a recommendation. The zone lies between 61.8% and 78.6% of wave 1, measured down from the high – these are . Once the daily low touches the zone, the rule’s trigger is a candle close above the last ; the rule’s entry follows at the next open.
How it is calculated
Take the start and the high of wave 1; the range is the high minus the start. Top of the zone = high minus 61.8% of the range, bottom = high minus 78.6%. Example: start 100, high 120, range 20 → buy zone 104.28–107.64. If high and start are more than a factor of 3 apart, the rule calculates with ratios instead of distances (logarithmic).
What else the rule requires
The wave 1 high only counts as confirmed after a pullback of at least 3 , a swing high after at least 1 ATR. The swing high must have formed and been confirmed after the first touch of the zone. If a candle closes above it and still below the wave 1 high, the trigger is met – if the duration and length of wave 2 () fit. The is only a display.
When the setup is over
If the daily high rises above the wave 1 high before the entry, the setup is over – the rule does not use breakouts. If the price closes below the start of wave 1, the count was wrong. If the entry day already opens at the wave 1 high, at the first target or at or below the stop, there is no entry. There is at most one entry per setup.
The entry is usually above the zone
The rule’s entry only comes after the swing high is broken. By then the price is usually already above the zone – in a sample of the rule, the entry price was almost always above the top. The zone shows where wave 2 may turn, not the entry price. This makes the distance to the stop larger than with an entry inside the zone.
Model example: how a setup unfolds
Wave 1 rises from 100.00 (Day 4) to 150.00 (Day 18); the high is confirmed on Day 21. This gives the buy zone 110.70–119.10. On Day 27 the daily low touches the zone (116.90), wave 2 ends at 114.00 (Day 28). The swing high 123.80 (Day 31) is confirmed on Day 32. On Day 34 the price closes above it at 124.60; the rule’s entry follows on Day 35 at the open, 124.90 – 4.9% above the top.
- Stop Stop (stop-loss)The price at which a position is closed to limit the loss. Here it lies below the start of wave 1, with a buffer of half an ATR.Example: Start of wave 1 at 100, ATR 2 → stop at 99.More in the Academy: Lesson stop and risk98.00
- Buy zone Elliott buy zoneBuy zone based on Elliott wave rules: the area the price has to pull back into after a rise (wave 1) before the rule checks an entry. It lies between 61.8% and 78.6% of the rise, measured from the high. Not advice from us, but a help for your own review.Example: Rise from 100 to 120 → buy zone 104.28–107.64.More in the Academy: Lesson buy zone and Fibonacci110.70–119.10
- Rule’s entry Day 35 (open)124.90
- Targets TP1 / TP2 Target 1 and Target 2 (TP1, TP2)The targets (take profit, TP) are at 161.8% (TP1) and 685.4% (TP2) of the length of wave 1, measured from the end of wave 2. At TP1 the rule plans a partial exit (a quarter); the rest runs to TP2, to its trailing stop or to the time exit.Example: Low 100, high 120, wave 2 ends at 105 → TP1 137.36, TP2 242.08.More in the Academy: Lesson trade management194.90 / 456.70
Model numbers, not real prices. Zone, targets and stop calculated with the constants of the current rule. An example for understanding, not a forecast and not investment advice. Real buy zones in the screener