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Trends move in five waves and correct in three: the rules that make a count valid, and how traders use it.
Ralph Nelson Elliott proposed in the 1930s that markets move in repeating patterns: a trend unfolds in five waves (1 to 5, with 1, 3 and 5 in the trend's direction) and is corrected in three (A, B and C). The same patterns appear at every scale, from minutes to decades. Frost and Prechter's 1978 book made it widely known.
Three rules are never broken in a valid count: wave 2 never retraces beyond the start of wave 1; wave 3 is never the shortest of waves 1, 3 and 5; and wave 4 never enters wave 1's price territory. Guidelines (not rules) include wave 3 often being the longest, around 1.618 times wave 1, and waves 2 and 4 alternating in form. Corrections come in a few shapes: zigzags (5-3-5), flats (3-3-5) and triangles.
For education only, not financial advice.