Elliott Wave on Gold: 3 Rules, Fibonacci Targets, Real XAUUSD Trades

Transcript

Gold, August 2024. Price rose from this low to this high. Call it wave 1. Then it pulled back in three steps, and stopped a little past the 0.618 level. On 5 September, the hour chart broke its last lower high. That's the buy. The stop goes under the start of wave 1, because if price gets there, the whole count is wrong. The target is the 1.618 extension of wave 1. Gold got there on 24 September, in wave 5, for about two times the risk. This is Elliott Wave. You'll learn the five waves and the three, the hard rules, the guidelines, how to trade wave 3 and wave 5, stops, Fibonacci targets, degrees, a count that failed, and how pros test it.

Chapter one. Five waves, then three. Elliott Wave says a trend moves in five waves. Waves 1, 3 and 5 go with the trend. Waves 2 and 4 are rests against it. Together, that's called an impulse. After the five comes a correction in three waves, called A-B-C. Think of climbing a hill: push, rest, the big push, rest, the last push. Then you walk part of the way back down. Every wave is made of smaller waves, and every finished pattern becomes one wave of a bigger one. These sizes are called degrees. Corrections come in a few shapes. A zigzag is sharp and deep. A flat moves sideways. A triangle gets narrower, and usually shows up as wave 4 or wave B. Here's the honest problem: wave counts are subjective. Two traders can label the same chart in two different ways, and counts change often. So in this lesson, we use one fixed swing rule. A swing only counts when price turns at least 2% from its high or low, on hour candles. Labels go only on those swing points, so anyone can rebuild the same count. Here's what that rule found in August and September 2024. Wave 1. Wave 2, which was itself an A-B-C. Then wave 3, wave 4, and wave 5.

Chapter two. The three hard rules. Rule one. Wave 2 never goes beyond the start of wave 1. Here, wave 2 stayed above it by 33.5 points. Rule two. Wave 3 is never the shortest of waves 1, 3 and 5. It can be shorter than one of them, but never both. Here, wave 1 was the shortest, so the rule holds. Rule three. In a normal impulse, wave 4 doesn't overlap wave 1's territory. On the Fed decision day, wave 4 was one sharp drop across two hourly candles, and it stopped just 2.1 points above the top of wave 1. Break any rule, and the count is wrong. Not maybe wrong. Wrong. That's the most useful part of Elliott Wave: each rule gives you a price where your idea is dead. One exception: a diagonal, a wedge shaped five wave pattern where wave 4 can overlap wave 1. Use it rarely. Calling everything a diagonal is how traders rescue broken counts.

Chapter three. The guidelines: tendencies, not laws. Wave 2 often retraces 0.5 to 0.618 of wave 1. Here it went a little deeper, to 0.67. No rule broke. Wave 3 often extends, and is usually the longest wave. Not this time. Wave 5 was the longest, 1.35 times wave 1. On gold, fifth waves can run hard too. Wave 4 often retraces 0.236 to 0.382 of wave 3. Here it went to 0.44. And wave C was close to wave A in length: 0.96 of it. Then there's alternation. If wave 2 is slow and complex, wave 4 tends to be quick and simple. Here, wave 2 took more than two weeks and three legs. Wave 4 took two hourly candles. So break a guideline, and the count can still be fine. Break a rule, and it's not.

Chapter four. How to trade wave 3. Wave 3 is the move traders want, because it's often the strongest. The setup starts once wave 1 is confirmed. Draw Fibonacci from the start of wave 1 to its top. Now wait. Wave 2 must reach at least the 0.5 level, and it must stay above the start of wave 1. Here, wave 2 was an A-B-C. Wave C ended a little past 0.618, at about the length of wave A. That's what the end of a correction often looks like. The trigger comes on the hour chart: a close above the last lower high. That's a change of character. Buy on that close, at 01:00 New York, 05:00 UTC. The stop goes 5 points under the start of wave 1. That's the invalidation price. If gold trades there, rule one is broken, and wave 3 can't be happening. Targets come from Fibonacci extensions of wave 1, measured from the wave 2 low. The 1.0 extension first, then the 1.618. Gold reached the 1.618 on 24 September, and the stop was never touched. It took until wave 5 to get there: 134.5 points, for 67.7 points of risk. Notice the signature: a real wave 3 usually moves fast and breaks obvious highs. If your wave 3 looks weak, question the count.

Chapter five. Wave 5, and the end of a correction. The same logic works for wave 5. Wave 4 must stay out of wave 1's territory, so the stop goes under the top of wave 1. A common target is wave 5 equal to wave 1, measured from the wave 4 low. Fifth waves can also end early, so many traders take profit sooner. Here, the hour chart only gave its trigger on 20 September, when price was already above the top of wave 3. The stop was 65.2 points away, and the target only 43.1. That's less than 1R of room. A pro skips this trade, even though it worked. Good trades come from good risk, not luck. And the end of a correction? You've already traded one: the wave 3 buy came at the end of wave C. After a full five waves, expect an A-B-C of unknown depth, and wait for a trigger at its end.

Chapter six. Degrees and timeframes. Zoom out to the daily chart. The five waves we counted were only one part of a bigger rise. After wave 5, gold pulled back into 10 October, then went on to a new high on 30 October. A finished five on the four hour chart can be just wave 1 or wave 3 on the daily. So count on a higher timeframe, and time the entry on a lower one. Here, the count came from the swings, and the trigger from the hour chart. And expect the count to change. Each new swing can move the labels. Always keep a main count and a second count, each with its own invalidation price. And on gold, big news can pack several waves into one candle. Don't trust small counts around major data.

Chapter seven. When it fails. June 2025. Gold rose from the 9 June low to a spike at the Sunday open on 15 June. By our swing rule, that's wave 1. Wave 2 pulled back past 0.618. Then on 23 June, the hour chart broke its last lower high. The same buy, by the same rule. Price never got back to the wave 1 high. On 27 June it fell under the start of wave 1. Rule one was broken, so the count was wrong, and the stop was hit. Now the most common mistake. The trader thinks: maybe it's an expanded flat, maybe a bigger wave 2. And they move the stop. That's forcing the count. Gold kept falling, to the next swing low on 29 June. The rule was the stop. Exit first, and count again later.

Chapter eight. The pro level. Pros grade every wave trade. Is the count built from clear swings, and do all three rules hold? Is the entry a real trigger, like a close beyond structure, and not just a Fibonacci line? Is there at least one and a half times the risk to the target? Does the higher timeframe agree, and is there big news in the way? All yes: normal size. One weak point: half size. More: skip it. Now the test. We ran the exact wave 3 rule from chapter four on every 2% swing in our hour data, from June 2024 to November 2026. It gave 28 trades. Only 9 reached the 1.618 target first. The other 19 were stopped, because the count was wrong. Even the trades with at least one and a half times the risk of room were no better: 6 of 21 reached the target first. So Elliott Wave is weak at predicting, and strong at defining risk. Let the rules set your stop, and prove any wave plan in your own journal first.

Chapter nine. Should you take this trade? Any no, and you skip it. Is your count built from clear swings, with all three rules holding? If not, skip. Did wave 2 or wave 4 reach its Fibonacci zone, and give a real trigger? If not, wait. Is the stop at the invalidation price? If not, skip. Is there at least one and a half times the risk to the target? If not, skip. Any big news before the target? Then stand aside. If not, write down the entry, the stop, the target, and the price where the count is wrong.

Let's recap. Trends move in five waves, and corrections in three. Wave counts are subjective, so use one fixed swing rule. Three rules: wave 2 stays above the start of wave 1, wave 3 is never the shortest, and wave 4 stays out of wave 1's territory. Enter after wave 2 holds, put the stop at the invalidation price, and target the Fibonacci extensions. When a rule breaks, get out. The full written guide is on xauusdglobal.com. Subscribe for the next lesson, and come trade with us in the XAUUSD Global community. It's free during early access.