Unlike Motive Waves, Corrective Waves are typically made of a three-wave structure. They are often formed by a smaller Corrective Wave occurring between two smaller Motive Waves. The three waves are often named A, B, and C.
When compared to Motive Waves, Corrective Waves tend to be smaller because they move against the bigger trend. In some cases, such a counter-trend struggle can also make Corrective Waves much harder to identify as they can vary significantly in length and complexity.
According to Prechter, the most important rule to keep in mind regarding Corrective Waves is that they are never made of five waves.
Does Elliott Wave work?
There is an ongoing debate regarding the efficiency of the Elliott waves. Some say that the success rate of the Elliott Wave principle is heavily dependent on the traders' ability to precisely divide the market movements into trends and corrections.
In practice, the waves may be drawn in several ways, without necessarily breaking Elliot's rules. This means that drawing the waves correctly is far from a simple task. Not only because it requires practice, but also due to the high level of subjectivity involved.
Accordingly, critics argue that the Elliott Wave Theory isn't a legitimate theory due to its highly subjective nature, and relies on a loosely defined set of rules. Still, there are thousands of successful investors and traders that have managed to apply Elliott's principles in a profitable manner.Interestingly, there is a growing number of traders combining the Elliott Wave Theory with technical indicators to increase their success rate and reduce risks.