Now, as you truly specified our major task is correctly identify waves itself. When you will get some skills and become a skilled hand in EW, you will be able to recognize what wave currently develops and what kind of position you should take. But these three rules have to be unbroken. Here some additional specification that very often take place, but followed statements are not so untouchable as those 3-rules: 1. Remember about Truncation of 5th wave. Sometimes its high/low could be lower/higher of the third wave on bull/bear market. It happens due to overbought/oversold condition that is very often happens during 5th wave; 2. Usually wave 3 is most extended, strong and sharp. Although, as we’ve said waves 1 and 5 also could be extended; 3. Waves 2 and 4 typically retrace to Fibonacci retracement levels of waves 1 and 3 correspondingly; 4. If we draw parallel channel, based on starting points of waves 3 and 5 – then the extreme of the 5 wave very often exceed upper/lower border of this channel on bull/bear market. Ok, here is your chart – Weekly EUR/USD. I’ve chosen a simple piece of it, so you can clearly see the waves: See – larger numbers are waves of larger degree. You can see how 3d large wave consists of 5-wave pattern, so as 5th large one. Both of them are rather extended by the way. Also you can see the Truncation of smaller 5th wave right at the top around all time high of EUR/USD – 1.60. Pipruit: Cool! Commander in Pips: Yes, looks nice, but also not as perfect as on schematic pictures. As we said – sometimes it’s very difficult to mark the waves correctly. But since you will dive in it – your skills will be better and better. So, let’s talk about how to trade them… P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.