Impulse and corrective waves are an integral part of the upward and downward trends.
Impulse waves — is a movement in the direction with the main trend.
In the upward trend, each movement from up from the bottom is an impulse wave. In the descending trend every decline from top to the bottom.
Compared with corrections, impulse waves are linear and predictable. They are also easier than corrective waves in terms of their forming and definition.
That is why all traders, especially beginners, are recommended to trade using the direction of the main trend, there is also a saying “trend is your friend”.
This rule works equally on any timeframe.
How corrections are formed
Corrective wave, or correction — is a movement against the main trend. They are formed if traders, trading the direction of the main trend, close their positions.
Let’s check out a downward trend. The market is sliding down following an impulse wave. Then at a certain point, the market starts to slow down:
Why did it happen?
Shocking news: not everyone holds the position until the last gasp of the trend. Traders who have traded down, begin to take profits from previously opened positions. The market is slowing down, the movement is becoming less aggressive.
Traders, who have still no profits in previously opened positions thin: “Why haven't I closed? Why should I hold a position? If you close it right now, there is no need to hope that the market will continue to decline, and maybe this is the beginning of a correction?”
They also close their positions, the probability of the upward movement of the market is growing. Traders who know how to trade against the trend, see it. They still say about such people: “They enter with corrective waves”. For such traders, the slowdown of the impulse wave serves as a signal to enter the market. They open a deal to buy and push the price up, despite the downward trend.
The corrective wave is formed.
What the author wanted to say:
- The market has nonlinear motion.
- The corrective wave is formed after each impulse wave.
- Corrective waves are less predictable, their structure is more complicated, and in order to predict the depth of the correction, high trading skills are required.
- At the initial stage, it is not recommended trying to trade using correction. You should think about it if you trade confidently using impulse waves. Most newbies if they try to trade using corrective waves, lose money.
- Corrections generate emotional deals. Traders are tempted to violate the logic of their trading plan under the influence of the desire to make money on each market movement. Such transactions, in the long run, destroy funds of the trader.
And now — let’s apply what you've learned:
In the service, find both impulse waves and correction, using past data. Practice on different coins.
Keep in touch with other traders in our chat - share your experience, ask questions and learn.
10% discount on promo code “USERNEW”
We wish you all the best!