If you have ever come across Elliot wave theory, you might have heard about these two words, ‘Impulsive moves’ and ‘Corrective moves’. I’m not a great fan of other aspects of the EW theory, but Impulsive moves and corrective moves forms some foundation of my trading. Let me introduce some theory behind these two. Don’t some complicated rocket science. They are pretty straight forward.
1) Characters of Impulsive moves/swings :-
2) Characters of Corrective moves/swings:-
1) Characters of Impulsive moves/swings :-
- Strong and powerful.
- Quick
- These swings are made up of candles with relatively larger bodies.
- The candles in the swing are overly bullish/ bearish. ie. most of the candles in the swing are of the same color.
- These swings generally breaks the recent swing high/low.
2) Characters of Corrective moves/swings:-
- Slow in pace
- These swings are made up of candles with relatively smaller bodies
- Not overly bullish/bearish. Sometimes we can see same color weak candles, and sometimes we see a mixture of bullish and bearish candles.
- These swings generally just retraces some portion of the previous impulse move.
There is nothing new I have explained till now as you might have already come across these concepts by now. The real question is, how can we use this information in our trading?
1) Defining a trend:-
- An impulsive move, followed by a corrective move and which is followed by another impulsive move. The trend is in the direction of that impulsive move.
- An impulsive-impulsive combination or a corrective-corrective combination generally ends up as a range. Check the trend structure when you see these combinations, because trying to trade the ranges thinking that it is a trend is the reason behind most of the failures in day trading.
