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Corrective waves are three-wave structures that move in the opposite direction to an impulsive (or motive) wave. Such corrections can either be simple or complex, and they tend to form more often than impulsive waves. Out of the whole 1-2-3-4-5 and a-b-c sequence that defines a cycle, the second and the fourth waves, together with waves a, b and c are corrective in nature.

The corrective wave normally has three distinct price movements – two in the direction of the main correction (a and c) and one against it (b).

Wave A: Corrections are typically harder to identify than impulse moves. In wave A of a bear market, the fundamental news is usually still positive. Most analysts see the drop as a correction in a still-active bull market. Some technical indicators that accompany wave A include increased volume, rising implied volatility in the forex markets.

Wave B: Prices reverse higher, which many see as a resumption of the now long-gone bull market. Those familiar with classical technical analysis may see the peak as the right shoulder of a head and shoulders reversal pattern. The volume during wave B should be lower than in wave A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative.

Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond.

Elliott found that corrective waves can be either simple or complex. If the market forms a simple correction, the move to follow must confirm it. If the simple correction