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.

 

Impulse wave

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.

The initial price change that starts a trend is the first impulse wave in the sequence.

 

Retracement

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.

 

Uptrend chart

(Source – TradingView)

 

Notice how the impulse waves are upwards, just like the overall uptrend.

 

Downtrend

(Source – TradingView)

 

Again, the impulse waves are moving downwards within a downtrend.

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Why should you care about impulse waves?

  • If you would like to trade trends, you must identify a trend before you can trade it , and impulse waves form part of that structure.
  • Previous moves within the trend can provide an excellent estimate of future price action (in pips). This helps to set clear and objective profit targets.

Conclusion

Hopefully, you learned something from this basic explanation. If you have any questions, feel free to ask in the comments or on our Forum.

May the profits be with you.

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.

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Guy Seynaeve

Guy Seynaeve

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