Alternation is an element of the Elliott Wave Theory and is a nature’s law. As the same way that bull market alternates with the bear market, corrective waves alternate between them. In this article, we’ll talk about the alternation principle and how it works.
The Basic Concept
The alternation is a nature’s law that we can consider it as valid. For example, the Moon alternates in four phases, the day alternate in two stages. Also, human activities alternate, for example, the bull market alternates with the bear market. From the Elliott Wave Theory, we know that it has five waves, 1, 3, and 5 are motive waves; and 2, and 4 are corrective waves.
Simple and Complex Correction
Before to continue with the alternation, we have to introduce a new concept: the simple and complex corrective structure. A simple correction is a zigzag, flat, or irregular flat structure. A complex corrective formation is a triangle or a combination between simple corrections. Further, we can find combinations between a triangle with simple structures.
The Alternation Law
The alternation says that: if wave 2 is a simple correction, wave 4 will be complex. In the contrarian case, if wave 2 is complex, wave 4 will be simple.
The following chart corresponds to the Gold Futures 1-hour chart. We observe in the bearish sequence started on April 10, 2019, when the price found sellers at $1,314.7 and ended at $1,267.9.
In this entire movement, we observe the alternation between the corrective waves. In the first place, wave 2 is a simple corrective structure composed of three waves. The second correction, wave 4, is complex, in this case, compounded by five legs.
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