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The Ending Diagonal


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#1
Nouf

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This pattern is seen in the 5th wave of an impulse wave or in the wave C of a ABC correction, most non Elliott traders see them as wedges, or Bearish rising wedge or Bullish declining wedge

Then are a great pattern and found at the end of a trend generally in a 5th wave

You can check for divergences on the RSI to confirm a slowing of momentum to suggest the trend is slowing and getting ready to reverse

The expected reaction from an Ending Diagonal is an aggressive reversal, as price action narrows to a point where a break-out tends to be an aggressive reversal

The initial target is the point of origin, but a confirmation point is a reversal past the prior 4th wave of the pattern, and impulse price action is expected as its generally considered a reversal pattern, and one i actually like trading, as i the reliability is very high on a reversal

Like all patterns there is never a 100% success rate, but patterns like triangles and Ending Diagonal if you can spot them tend to have a high success rate provided you know how to trade them

As an Ending Diagonal is deemed a terminal move to a trend in a 5th wave or wave C position, once you get confirmation of a break of the 4th wave of the pattern then the stop is placed at the terminal ending to the pattern

However if you can actually count 5 smaller waves, then a rebound in a correction in 3 waves, already you have a setup, so you can control risk

With a bit of practice and knowing where to enter to control risk, they are a great low risk pattern

As they generally converge in a contracting nature, the 1st wave is the longest then the 3rd wave is shorter, and the 5th wave even shorter

Wave 5 MUST never be longer than the 3rd wave

In rare cases, the 3rd wave can be slightly longer than the 1st wave,(unorthodox) and its generally accepted if the rest of the pattern meets the rest of the criteria for the pattern, but the 5th MUST never be longer that 3rd wave

There also has to be overlap between waves 2 & 4, that is the exception to the rule of the overlap rule where wave 4 can not overlap wave 1, it can in an Ending Diagonal

Like triangles they are made up of 5 waves but internally 3 waves in each individual wave so 5 x 3, and in a wedge shape depending on the direction of the trend

Sometimes on the 5th wave, actually pushes a bit higher than the trend line that connects the 1st & 3rd waves, this is called "over- throw"

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