the hAnDbook oF teChnICAl AnAlysIs10.22.3 Fibonacci ratio analysis of Corrective waves
in a triangle pattern
Waves that make up a triangle pattern also tend to exhibit ratio relationships with
each other. Figure 10.89 depicts a series of converging waves within a symmetrical
triangle pattern. It is not uncommon for subsequent alternate waves to be a factor
of 0.618 shorter than the preceding wave. Refer to Figure 10.89 for an idealized
version of this contraction ratio relationship.
In Figure 10.90, we observe this wave contraction on the EURUSD weekly
chart, between December 2000 and September 2001. It is interesting to note that
the ratio of wave heights AB to CD is approximately 1.608, which is about 1.1
percent off the idealized contraction ratio of 1.618.
Figure 10.87 Probable Ratio Retracement Values of Wave 1 in an Equivalent Ratio
Format.
Figure 10.88 Probable Ratio Retracement Values for Wave 4, Based on the Size of
the Entire Price Range.