3rd Wave Rule
3 Wave Rule
Rule: Do not enter in the 3rd wave or beyond of a move.
Market moves typically occur in 3 to 5 waves. The object of day trading a stocks move is to catch the most probable part of the move (not to gamble on extreme or unusual moves).
A upward trend is a new high, followed by a pull back, usually around half way back or many times back to the previous high, then a move to a new high and so on.