Neo wave is developed by Glenn Neely which is an advanced concept of Elliott Wave. There are a few new patterns that Neely discovered and these newly found patterns have been occurring more often across the equity markets.
The diametric pattern is a very common pattern that we observe more often on the charts. A Diametric is a seven-legged corrective pattern and is labelled as A-B-C-D-E-F-G.
Each of these legs is itself corrective and not impulsive. Diametric itself has two variations – Diamond shaped or Bow – Tie structure.
In simple terms, it can be a contracting triangle connecting an expanding triangle or an expanding triangle connected with a contracting triangle pattern. Look at the chart of Nifty on 30 minutes time frame.
Another important characteristic of a diametric pattern is that wave E tends towards equality with wave C in terms of price and/or time, wave F tends towards equality with wave B and wave G tends towards equality with wave A.
However, on Nifty it is not very often to see wave G = wave A and on many occasions, it is only 38.2 percent to 50 percent of wave A. Completion of wave G is confirmed once we see a faster retracement and a close below the starting point of wave G.
For successful trading using Elliott wave or Neo wave, it is very important to understand the pattern under formation.
Once the pattern is near completion the accuracy will be very high. We will discuss the two-stage confirmation technique that virtually guarantees the trending move is over and a counter-trend move has started in the subsequent articles.
Many Elliotticians try to pre-empt a pattern and jump into the trade before it is completely formed, which results in poor accuracy.
It is therefore important to be patient and wait for a clear trade setup with good risk reward for a scientific way of trading!
The author is Founder & CEO, Waves Strategy Advisors.
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