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Here I am wondering which is the first leg and which is the second leg?
Is the first leg here is the starting point from the open to point A?
and the second leg from point B to Point C?
Also why it says that the first leg down starts from Point A since it is the bottom of the first leg and that leg already begin from the beginning of the chart formation.
As Al states in the first sentence of the paragraph "unfortunately the traditional nomenclature is confusing." So your confusion is understandable.
Here, Al is discussing 3 different ways to label a 2 legged move:
1: By numbering the "waves" 1,2,3 as in Elliot wave theory. These are labeled on the chart.
2: Using the ABC nomenclature which is also labeled on the chart.
3: AB = CD nomenclature which is not labeled on the chart.
So to answer your questions:
"Is the first leg here is the starting point from the open to point A?
and the second leg from point B to Point C?"
Yes.
"Also why it says that the first leg down starts from Point A since it is the bottom of the first leg and that leg already begin from the beginning of the chart formation."
When Al says that the first leg begins with A and ends at B he is referring to the AB = CD nomenclature, not the "A" that is labeled on the chart. He also states that point "B" in the AB=CD nomenclature is the same as the point 1 in elliot wave theory and point "A" in the ABC labeling system. So the first leg ends at the point "A" that is labeled on the chart.
Hope that helps clear up any confusion.
In this image, I have named the legs. Please view the chart.
So, According to elliot wave theory it is certain that
ab is Wave 1 (which is also A leg in Al's ABC labeling system)
bc is Wave 2 ( which is also B leg in Al's ABC labeling system)
cd is Wave 3 ( which is also C leg Al's ABC labeling system)
Al says ' Some traders who are looking for a measured move will look for a reversal back up after the second leg reaches about the same size as first leg.'
that means when ab = cd (approx) correct?
These technicians often call the pattern AB = CD move. (If Al is not referring to the A,B,C that is labeled in the chart, Is it fair to imagine that he is refering to ab=cd move that i have on the chart?)
When he says the first leg down begins with point A, this actually means it begins at a according to elliot theory correct?
And When he says the second leg begins with point C, this actually means it begins at c according to elliot theory correct?
Traditional nomenclature is confusing because according to Al's labeling system, point A is A in the ABC move. (the first leg down on the Al's ABC move)
But according to Elliot wave theory labeling system, point a is actually the beginning point of the leg as I have labeled in chart.
If my explanation is incorrect please help me understand this as in simple terms as you can. Although Al says in the books that he does not use this theory for nomenclature I was just trying to understand.
Thank you @salco
The purpose of this section of Al's book is to differentiate how Al labels his charts compared to Elliot theory and to advocate that his method is simpler and more useful, that which I agree.
There are entire books written on Elliot Wave Theory, but one of the essential elements is the idea that markets tend to advance in 5 waves and correct in 3 waves for a total of 8 waves (and it is not a coincidence that 3, 5, and 8 are Fibonacci numbers as this is the mathematical basis for much of Elliot wave theory). The advancing waves are numbered 1 to 5 and the correcting waves are labeled a, b and c. As you can see here in a bull trend:
You would expect the inverse of this chart in a bear trend.
The chart that you posted from Al's book is labeling the move both as an ABC correction of a Bull trend and simultaneously as the first 3 waves of a of Bear trend. This is part of the ambiguity and confusion that Al is trying to point out. He also mentions later on that "Some corrections go for a third or even a fourth leg." Wedge pullbacks (pullbacks with three legs) are extremely common. Another reason to avoid thinking of corrections as simply "ABC" moves with only two legs.
AB = CD is a separate technical concept and is distinct from the ABC correction. It is often used to describe a situation where you are expecting some type of measured move such as a Leg 1 = Leg 2 move.
Al recommends avoiding the AB = CD labeling since it is inconsistent with the more common ABC labeling.
Instead of labeling waves with numbers and letters Al simply counts legs or pushes. In his second book he introduces the high/low 1,2,3,4 labeling system which is also discussed in the video course.
