Definition
Ralph Elliott proposed that markets move in an impulse of five waves in the direction of the trend, then a correction of three waves labeled A, B and C. Its fixed rules: wave 2 never retraces all of wave 1, wave 3 is never the shortest of waves 1, 3 and 5, and wave 4 does not overlap the price territory of wave 1.
Watch out for
Counting waves is subjective: two analysts can label the same chart differently, and a count can be revised after the fact. Treat it as one lens, not a forecast.