Projection and Retracement Ratios

Projection and Retracement Ratios

Background

The power of Elliott Wave comes into its own when retracement and projection ratios are employed to generate targets for the anticipated moves implied by the wave structure. Commonly Fibonacci ratios are used, but I have found that harmonic ratios derived from the square root of two are also a very useful tool to have at your disposal.

I have always been intrigued by the natural beauty of Fibonacci ratios and the manner they slot nicely into the bindings of life. Indeed, these ratios are the key factors in qualifying the modifications to the impulsive wave structure. Given the often-quoted statement that markets adhere to these ratios, I stand by the impulsive modifications through the repetitive nature of certain ratios in various parts of the wave structure. It was these which convinced me that the original impulsive structure offered by R. N. Elliott is actually incorrect.

Let me first introduce Fibonacci, for any reader who is encountering this for the first time.