1. Wave 2 never retraces more than 100% of wave 1.
2. Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3 and 5.
3. Wave 4 does not overlap with the price territory of wave 1, except in the rare case of a diagonal triangle formation.

These three rules form the core of Elliott Wave analysis. The list above is probably much shorter and more straightforward than you might have thought. This direct approach is a part of the elegance of Elliott Wave Theory.

NOTE: It’s not uncommon for traders to misinterpret the second rule, thinking that it means that wave 3 must be the longest wave in an impulse. This is incorrect. The rule states that wave 3 must not be the shortest wave, which means it can be shorter than wave 1 or wave 5, but it cannot be shorter than both.

However, layered on top of those rules is a collection of specific patterns that occur in prices. Each of the patterns has an associated set of rules and guidelines that define the formation of the pattern. You can learn the essential rules and guidelines for each of those patterns and keep a convenient reference to them on WaveBasis by using the Interactive Wave Guide.