After the completion of Wave 3, the oscillator will pull back as Wave 4 retraces. The histogram will drop below the signal line, indicating that this is not an appropriate time to establish new long positions. Here, we will introduce a very important consideration. Although the 5/34/5 MACD is an accurate indicator for identifying Elliott Waves, you must first understand how this indicator works. It must measure Elliott Waves of a certain degree. This raises a question: Which degree of Elliott Wave is it measuring? Our research shows that for the most accurate measurement, the wave sequence under consideration should consist of 100 to 140 bars. If the wave sequence has fewer than 100 bars, the MACD is measuring a higher-degree Elliott Wave. If the wave sequence has more than 140 bars, the MACD is measuring a lower-degree Elliott Wave.  

Only when you observe the wave sequence (containing 100-140 bars) within the appropriate time frame can you determine whether the conditions for the end of Wave 4 have been met—in other words, whether the oscillator has crossed the zero line. It is crucial to note that when the oscillator crosses the zero line after the peak of Wave 3, this represents the minimum condition for the end of Wave 4. Unless the oscillator crosses the zero line, Wave 4 is not considered complete, and it is still too early to trade Wave 1.  

To more precisely determine the end of Wave 4, you can analyze the a-b-c wave sequence or a triangular correction within it. Additionally, you can use the "Five Magic Bullets" to verify the lower-degree wave sequence in the final wave (Wave c or Wave e in a triangular correction). Another approach to measuring the end of Wave 4 is by applying Fibonacci ratios to time. First, measure the time distance between the end of Wave 1 and the end of Wave 3. Multiply this time distance by two Fibonacci ratios—1.38 and 1.62—and use these products to define a "target time distance." Second, starting from the end of Wave 2, the end of Wave 4 will typically fall within this "target time distance." By combining all these considerations, you can accurately estimate the end of Wave 4—both in time and price. Then, you can establish a low-risk position to trade Wave 5.