Hello all, Before I talk about identifying impulse and correction I hope you are well and are enjoying your trades. It doesn’t matter what strategy you are using. I hope you are working hard in strengthening your strategy and not only depending on signals.
I am not saying signals are bad but what I know is that you can get a good signal and still lose money. This is simply because you don’t know how to mange your trades after entering. You may end up giving all your profit back to the market or taking your profits too early.
These two most common mistakes are well explained in psychology books because the market is at all times driven by fear and greed. Greed makes people hold on to bad trades while fear makes people get out of good trades too early.
Now to my topic on how to identify impulse and corrections. First lets look at the meaning of an impulse.
Impulse : In trading an impulse is defined as the strong move in a currencies/stock’s price coinciding with the main direction of the underlying trend.
Now lets look at what the correction is
Correction: In trading a correction can be defined at the weak move in the trend. It is at this point that it is difficult for us to determine the real direction of the market since it is often moving sideways.
Now after we have looked at the meanings of this two terms, It is important for us to state that the market moves in this two ways. The market makes an impulse then makes a correction before making the impulse again. The impulse that comes after the correction can either be the continuation of the trend or the reversal of the trend itself.
It is important that we look at the corrections and identify what types of patterns the corrections are forming. Remember only the corrections form the patterns.
We have spent time before and looked at the different patterns that we look at before entering trades. The article on the patterns can be found on posts that were before.
From the picture above, we can be able to see that the impulse always occurs after a correction. And of course the correction always appears after an impulse.
Most traders have no problem identifying the impulse but find it hard when the correction is about to complete. For us to identify the end of a correction we normally use a few indicators . But always wait for impulse on lower time frames before entering any trade. Both the impulse and correction can be seen in all time frames from one month to the lowest time frames i.e. 1 minute charts.
Please look at your charts and try and identify both the impulse and correction. Please feel free to send your questions to our face book pages https://www.facebook.com/freeforexcoach/
or my personal page https://www.facebook.com/kaliqassetmanagers/?modal=admin_todo_tour
I will be happy to help you out where there are challenges.
“Practise is the thing you do that will make you good”