What Are Impulse Waves In Technical Analysis?
Market trends are formed by a series of with-trend and countertrend price moves. Understanding the terminology used when describing price action is vital for anybody starting in the Forex market.
The initial price change that starts a trend is the first impulse wave in the sequence.
A market move against the direction of the underlying trend.
Impulse waves are most commonly used when describing Elliot wave theory, but we will look at how they form part of trend structure in this article.
If you want to learn more about retracements, check out Retracements In Forex Trading.
Visualizing impulse waves
Technical analysis is all about making decisions based on what you see on your chart, so I would be wasting your time if I didn’t show what you should be looking for.
Impulse waves in an uptrend diagram
Impulse waves in a downtrend diagram
Needless to say, price action in the market will never be as clean as a diagram. Here are a couple of examples from real charts.
(Source – TradingView)
Notice how the impulse waves are upwards, just like the overall uptrend.
Why should you care about impulse waves?
Trading Impulse Waves FAQ
A price move in the same direction as the overall trend. This would be a bullish move within an uptrend or a bearish move in a downtrend.
Look for any market movement that continues the underlying trend. In an uptrend, this would be a move above the previous high. In a downtrend, this would be a move below the previous low.
Corrections are temporary moves against the overall trend of the market.
Usually, the market will correct (retrace) and then continue trending.