U.S. Dollar / Canadian DollarEducation
Elliott Corrective & Impulse Waves
Understanding Impulsive and Corrective Waves
We need to review some basics around price movement before moving into the exact mechanics of the Elliott Wave Theory. Each price chart has three basic types of price action phases. Elliott Wave (EW) price patterns are divided into: impulsive, corrective, and consolidation.
Impulsive waves (momentum/motive waves)
An impulsive wave is price movement that initiates progress in one direction, which is called the trend. Price usually moves more distance (in pips) and quicker (less time) when trending. This makes trending moves more appealing for trade setups. The waves are split into 5 impulsive waves with the trend and 3 corrective waves against the trend.
Corrective waves (correction)
Corrective waves are against the trend (price movements that are reactionary in relation to the previous trend-setting move). They essentially attempt to revert or undo the movement that was initiated by the preceding motive wave. Price usually moves less distance (in pips) and slower (more time), although fast corrections can occur as well (zigzags). This makes corrective moves less appealing for trade setups. If the trend is bullish, then the correction of the trend would be bearish. If the trend is bearish, then the correction of the trend would be bullish.
Main Elliott Wave Rules
The Elliott Wave Principle has three core rules. Your wave analysis must match these Elliott Wave rules, otherwise the wave count is incorrect.
1. Wave 2 never retraces more than 100% of wave 1.
2. Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3, and 5.
3. Wave 4 does not overlap with the price territory of wave 1, except in the rare case of a diagonal triangle formation.
Elliott waves will keep you trading on the right side of waves and not against the big banks and traders, keep your trading as easy as possible.
We need to review some basics around price movement before moving into the exact mechanics of the Elliott Wave Theory. Each price chart has three basic types of price action phases. Elliott Wave (EW) price patterns are divided into: impulsive, corrective, and consolidation.
Impulsive waves (momentum/motive waves)
An impulsive wave is price movement that initiates progress in one direction, which is called the trend. Price usually moves more distance (in pips) and quicker (less time) when trending. This makes trending moves more appealing for trade setups. The waves are split into 5 impulsive waves with the trend and 3 corrective waves against the trend.
Corrective waves (correction)
Corrective waves are against the trend (price movements that are reactionary in relation to the previous trend-setting move). They essentially attempt to revert or undo the movement that was initiated by the preceding motive wave. Price usually moves less distance (in pips) and slower (more time), although fast corrections can occur as well (zigzags). This makes corrective moves less appealing for trade setups. If the trend is bullish, then the correction of the trend would be bearish. If the trend is bearish, then the correction of the trend would be bullish.
Main Elliott Wave Rules
The Elliott Wave Principle has three core rules. Your wave analysis must match these Elliott Wave rules, otherwise the wave count is incorrect.
1. Wave 2 never retraces more than 100% of wave 1.
2. Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3, and 5.
3. Wave 4 does not overlap with the price territory of wave 1, except in the rare case of a diagonal triangle formation.
Elliott waves will keep you trading on the right side of waves and not against the big banks and traders, keep your trading as easy as possible.
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