Elliott Wave on the CMT Exam
Elliott Wave Theory appears on CMT Level 1 (Theory & History) and Level 2 (advanced application). It builds on Dow Theory and uses Fibonacci ratios extensively.
For the full curriculum map, see the CMT exam guide 2026.
The 5-3 Wave Pattern
Impulse Waves (1-2-3-4-5)
Five waves in the direction of the main trend:
- Waves 1, 3, 5: Motive (trend direction)
- Waves 2, 4: Corrective (counter-trend)
- Wave 3: Usually the longest and strongest (never the shortest)
Corrective Waves (A-B-C)
Three waves against the main trend:
- Wave A: Initial counter-trend move
- Wave B: Partial retracement of A
- Wave C: Final push against the trend
Three Cardinal Rules
These rules cannot be broken — if violated, the wave count is wrong:
- Wave 2 never retraces more than 100% of Wave 1
- Wave 3 is never the shortest of waves 1, 3, and 5
- Wave 4 never overlaps the price territory of Wave 1 (in non-leveraged markets)
Wave Relationships & Fibonacci
| Relationship | Common Ratio |
|---|---|
| Wave 2 retraces Wave 1 | 50–61.8% |
| Wave 3 extends Wave 1 | 161.8% |
| Wave 4 retraces Wave 3 | 38.2% |
| Wave 5 equals Wave 1 | 100% or 61.8% |
| Wave C equals Wave A | 100% or 161.8% |
Corrective Pattern Types
- Zigzag (5-3-5): Sharp correction
- Flat (3-3-5): Sideways correction
- Triangle (3-3-3-3-3): Converging correction (see triangle patterns)
- Complex: Combinations of the above
Practical Wave Counting Tips
- Start with the big picture — identify the primary wave degree
- Wave 3 often has the highest volume
- Use indicators to confirm wave endings (RSI divergence at Wave 5)
- Practice on multiple time frames
- When in doubt, simplify — don't force a count
Continue with chart patterns and the complete study guide.
Elliott Wave 5-3 Pattern — Impulse & Corrective Waves
5 waves in the direction of the trend, followed by 3 corrective waves