Impulsive Wave

Impulsive Wave

Impulsive Wave

If you trade binary options on regular basis, there are a lot of tools and methods you will be using in your analyses. Still, some things should definitely have advantage over others, no matter how you approach your trades. Elliott Wave Theory is definitely one such thing, and in this article the emphasis will be put on the so called impulsive wave, one of the most important terms related to the theory.

Impulsive Wave | Elliott Wave Theory

So, the impulsive wave is a term related to the Elliott Wave Theory. According to this theory, the movement of the stock market can be predicted by observing and identifying a repetitive pattern of waves. The market moves up in a series of five waves and down in a series of three waves (these waves are also known as the Elliott waves). In some cases, simple corrections and complex corrections should also be taken into account.

The impulsive wave is a five wave structure that has at least one extended wave. This extension refers to the longest wave in the five wave structure. It basically describes a strong move in a stock’s price coinciding with the main direction of the underlying trend.  If the waves 1, 3, and 5 are bullish (a price is moving to the upside), the second and the fourth wave will be bearish and vice versa. On the eve of the 1st, 3rd and 5th wave you can trade put option with a shorter expiration date. Let’s now see how to recognize an impulsive wave. Stay with us and learn more about this important analytical element.

Impulsive Wave | Identifying

There is no use of knowing what the impulsive wave is if you don’t know how to identify one. The crucial element in the structure you’re observing is the third wave. It’s almost always the longest one (the extended one). At that moment in time the price is moving very aggressively, which can bring you some big and quick profit. The most important thing here is to buy call options ahead or during the third wave or at the end of the fourth wave if the impulsive move is an uptrend. If the impulsive move is a downtrend, you will buy put options, of course.

If you have an impulsive wave in some daily chart, remember that the market will correct itself once the extended wave is completed. Naturally, this correction implies a move in the opposite direction.

Impulsive Wave | Conclusion

As we have already said at the beginning of this article, Elliott Wave Theory is one of the most important theories in the market analysis, and the impulsive wave is one of the most important elements of this theory. It can be very useful and can discover a lot of significant elements you can use when making trading decisions. Learn how to recognize and interpret the impulsive wave and improve your trading!

CHECK OUT OUR LIST OF TRUSTED BROKERS HERE


FURTHER READING:

1. Responsible Excellence Pays! (Fussler, Claude-2004)
2. The Master Swing Trader: Tools And Techniques To Profit From Outstanding Short-Term Trading Opportunities (A. Farley, 2000)
3. The Little Book Of Behavioral Investing: How Not To Be Your Worst Enemy (J. Montier, 2010)
4. The Forex Options Course: A Self-Study Guide to Trading Currency Options (A Cofnas – 2008)
5. The Ultimate Trading Guide (J. Hill, G. Pruitt, L. Hill, 2010)

Author's overall rating:
Author: Ben Prescott
Updated:

RISK DISCLAIMER
BinaryOptionsTrading-Review.com has taken reasonable measures to ensure the accuracy of the information in the website, however, does not guarantee it. The data exhibited in this website is not necessarily always real-time or completely accurate; this includes market analysis, forecasts, signals, assets’ price quotes and charts. Readers should not treat any opinion expressed by the authors of BinaryOptionsTrading-Review.com as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of their current opinion. The risks involved in trading binary options are high and may not be suitable for all traders. BinaryOptionsTrading-Review.com doesn't retain responsibility for any losses readers might face as a result of using the information presented in this website. This website is owned by Next Media Corp.
In accordance with FTC guidelines, BinaryOptionsTrading-Review.com has financial relationships with some of the products and services mentioned on this website. BinaryOptionsTrading-Review.com may be compensated if consumers choose to click links in our content and ultimately sign up for mentioned products.