Chartered Market Technician (CMT) Practice Exam

The Elliott Wave Theory subdivides a corrective wave into how many subwaves?

1. One

2. Two

3. Three

4. Four

The correct answer is: Three

The Elliott Wave Theory suggests that corrective waves, which counter the prevailing trend, are typically subdivided into three subwaves. This structure is crucial for understanding market cycles and price movements. Corrective patterns often have a more complex arrangement compared to impulse waves, which consist of five subwaves. By dividing the corrective wave into three parts, it reflects the nature of a corrective phase, where the market is moving against the dominant trend before potentially resuming that trend. This three-subwave structure allows for greater flexibility and adaptability when analyzing market trends, as corrective waves can take various forms, such as zigzags or flats. Recognizing that a corrective wave consists of three subwaves is essential for traders and analysts when employing the Elliott Wave Theory in their market analysis.