How much of 105→111 is retraced by 111→107?
Reveal the worked answer
About 66.7%.
Four of the preceding six points.
Technical Analysis · TA-04 · Core
Trading waves
How do you compare the quality of successive moves?
What you will learn and prerequisites
- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.
Read first: Market structure comes first
Markets often alternate directional pushes and corrections. This lesson uses descriptive waves, not a prophetic wave count. Measure progress, time and overlap rather than forcing every bar into a predetermined future sequence.
Understand the mechanism
An impulse tends to make net progress with less overlap; a correction retraces or rotates. A trend may remain upward while each push travels less distance and each correction consumes more. Compare similar timeframes and consider the volatility regime.
Walk through the process
Record start, end, duration and retracement for each wave. Fix endpoints by a declared method before evaluating performance. Ask what renewed strength would look like and what further deterioration would invalidate the trend.
Pause before deciding
Describe what the example actually establishes and what remains unknown. A technical observation supplies context, not an automatic options entry. Contract cost, horizon, liquidity and the consequence of failure still need to match the thesis. Record the contrary branch so a named pattern cannot become an excuse to ignore new evidence.
A worked example
The first up-wave is 100→108, then a correction to 105 returns 37.5%. The next rises 105→111 and corrects to 107, giving back 66.7%. The second push gains less and loses more of its progress. That is deteriorating quality even though 111 is a new high.
Trading waves—worked comparison
Vertical: Spot (USD)
Horizontal: Wave observation
1. Fictional example
Read the graph as a data table
| Wave observation | Fictional example |
|---|---|
| 1 | 100 |
| 2 | 108 |
| 3 | 105 |
| 4 | 111 |
| 5 | 107 |
What would invalidate the reading?
Selecting convenient endpoints after the fact can manufacture deterioration or strength. A larger dollar wave in a higher-volatility regime is not automatically better participation.
Check your understanding
Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.
What is the critical failure to avoid?
Reveal the worked answer
Selecting convenient endpoints after the fact can manufacture deterioration or strength. A larger dollar wave in a higher-volatility regime is not automatically better participation.
Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome.
Return to the question: How do you compare the quality of successive moves? State the observed facts, the assumptions and the failure condition separately.
Sources, assumptions and downloadable script
External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.
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