## Thursday, May 17, 2012

### Chapter 2 ~ Motive Waves

As you’ve learned in chapter 1 motive waves consist of five waves and are labeled 1-2-3-4-5. They trend in the same direction as the wave of one larger degree.

There are two types of motive waves: impulses and diagonals. Three rules hold true for both types:

• Wave 2 never retraces more than 100 % of wave 1
• Wave 3 is never the shortest wave
• Wave 4 never retraces more than 100 % of wave 3

2.1 Impulse

The impulse is the most common motive wave and subdivides into five waves. Waves 1, 3, and 5 are motives themselves. Moreover, wave 4 doesn't enter the price territory of wave 1.

Wave 3 of an impulse is always an impulse itself. Waves 1 and 5 usually are impulses as well but can also be diagonals which we'll look at in the next section. Waves 2 and 4 can be any type of correction (see chapter 3).

Example #1:

A very nice example of an impulse which occurred during the 03-07 bull market.

Example #2:

Another nice example of an impulse. The subwaves of waves 3 and 5 might be a bit tricky to identify but the whole five-wave-structure should be very obvious.

Example #3:

The start of the financial crisis.

Example #4:

The big crash in 2008 was part of an impulse which started already a few months earlier.

Diagonal

A diagonal is similar to an impulse with the exception that wave 4 does enter the price territory of wave 1. Moreover, wave 1 is longer than wave 3 and wave 3 is longer than wave 5. As a result, diagonals take on the shape of a wedge.

Ending Diagonal

Ending diagonals terminate an impulse of one larger degree and occur in the fifth wave position. They form a wedge and each subwave subdivides into three waves. Sometimes ending diagonals also occur in the C wave position to complete a correction.

Example #1:

Example #2:

Leading diagonals appear at the start of an impulse and occur in the first wave position. They differ from ending diagonals in that the actionary waves 1, 3, and 5 sometimes subdivide into five waves. Sometimes leading diagonals also occur in the A wave position at the start of a correction.

Example #1:

Wave 1 of the impulse I showed you in Example #2 in the impulse section is a leading diagonal.

Key notes:
• Two types of motives: impulses and diagonals
• Three rules apply for both types (see above)
• Diagonals differ from impulses in that wave 4 enters the price territory of wave 1
• Two types of diagonals: leading and ending

In the next chapter you'll learn the different types of corrective waves.

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Exercises

Exercise #1:

Try to label this impulse:

Suggested solution

Exercise #2:

Another impulse:

Suggested solution

Exercise #3:

Suggested solution

Exercise #4:

Suggested solution

Exercise #5:

Suggested solution

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