Perhaps one of the most important patterns Elliott ever discovered, double and triple combinations form all the time. Not only that they are important but they are quite common. Including on the Forex market. The currency pairs move in large swings. They’re affected by the various economic news. As such, retail traders face adverse conditions. Many come to the Forex market to ride a trend. That’s understandable. The problem is that trends do not form easily. Not even on this market.
Even though more than five trillion dollars exchange hands every day, the market spends most of the time in consolidation. To put things in perspective, it is estimated that over two-thirds of the time the market consolidates. When it does that, it forms mostly corrective waves. Elliott further splits corrective waves into simple and complex ones. Between the two, complex corrections predominate in the Forex market. Moreover, out of all possible complex corrections, double and triple combinations form the most.
Double Combinations with Elliott Waves Theory
Elliott found that corrective waves are either simple or complex. Because the market consolidates most of the times, complex corrections are the norm in the Forex market. Like the name suggests, a double combination has two simple corrections. They’re connected by an intervening wave, or connecting wave. This is the x-wave. The x-wave is always corrective in nature as well, either a simple or a complex correction.
As simple corrections, Elliott found three patterns: zigzag, flat and triangle. As a rule of thumb, a double combination can’t start with a triangle. Therefore, it can only start with a zigzag or a flat. However, most of the times it will end with a triangle.
Because it is a correction, even though a complex one, a double combination is labeled with letters. In fact, labeling it leaves no room for error. Traders simply label the first simple correction, then the x-wave, and then the second correction.
Proper labeling looks like this: a-b-c – x – a-b-c-d-e. The first a-b-c is either a zigzag or a flat, while the last correction is a triangle.
The last correction can also take the shape of a flat if the double combination starts with a zigzag. Or, a zigzag, if it starts with a flat. However, this is a rare pattern.
To complicate things even more, Elliott further divided the double combination patterns. He said that they can’t be retraced by a wave of the same degree. But, not all of them. The nature of the second simple correction tells us much about future price action. A running triangle at the end of the double combination is a pattern that indicates full retracement.
Triple Combinations with the Elliott Waves Theory
A triple combination is the most complex corrective wave with the Elliott Waves Theory. Any complex correction cannot have more than three simple corrections. Like the name suggests, the three corrections have two intervening waves or two x-waves. They represent the link between the two corrective waves. Almost always such a pattern ends with a triangle. Any kind of triangle can form here, and there’s no differentiation between triple combinations on the back of the last triangle.
The correct labeling of it is: (a-b-c)-x-(a-b-c)-x-(a-b-c-d-e). It’s easy to notice here the three individual simple corrections and the two connecting x-waves.
Again, no matter how many swings the market makes, any complex correction cannot have more than two intervening waves.
The Intervening X-Wave
Both in double and triple combinations, the key stays with the x-wave. To be more exact, with the x-wave’s retracement level. The rule says that the x-wave cannot retrace more than 61.8% of the first correction. This means traders literally measure the first correction’s length.
When doing that, they use the Fibonacci Retracement tool. Next, they drag the tool from the start of the first correction until its end. If the first correction is a flat pattern, the end of it matters, not the absolute low or high. Finally, they draw a line on the 61.8% retracement level. The x-wave shouldn’t end beyond that line.
Both double and triple combinations are complex corrections with a so-called small x-wave. The name comes from the inability of the x-wave to retrace more than 61.8%.
Elliott found other corrections that fit into this category, like double and triple flats and double and triple zigzags. However, they’re not so common like double and triple combinations.
As a curious fact, there’s a strong tendency for a triple combination to form as the entire leg of a contracting triangle. When this happens, most likely that leg is the longest one of the entire pattern.
Conclusion
When the market forms a corrective wave, most likely it will form a complex correction. Among complex corrections, the focus should be on double and triple combinations. The focus here stays one the x-wave. Traders should always check its retracement level.
The intervening/connecting x-wave is a correction on its own. In a double combination, there’s only one x-wave that connects the two simple corrections.
Obviously, in a triple combination, the three simple corrective waves are linked by two x-waves.
Elliott found other rules traders should look for when dealing with double or triple combinations. For example, the market has a strong tendency to respect Fibonacci ratios for the simple corrective waves part of a double or triple combination. Therefore, from the end of the x-wave, traders project first the 61.8% of the first corrective wave. That is the target for the first leg part of the second simple correction. Elliott named the process the waterfall effect. It has various other rules to follow.
If there’s a clue the market forms a double or a triple combination, that’s the triangle at the end of it. All eyes are on the b-d trend line at the end of it. When the price breaks it, the triangle ended. Together with it, the double or triple combination end too, and the next leg of the same or different degree starts.
