Impulse Wave in Elliot Wave Theory
Impulse Wave In Elliot Wave Theory, Mister Elliot states that prices in the market will move into wave patterns 5-3 or commonly referred to as 5-3 Wave. For the first wave is called the 5-Wave pattern which consists of 5 (five) wave patterns and is called the Impulse Wave and the second wave is called the 3-Wave pattern which consists of 3 (three) wave patterns and is called Corrective Wave .
In the first wave (Impulse Wave) pattern the price will experience a wave movement 1-2-3-4-5 Wave. For 1-3-5 wave patterns called motives and 2-4 wave patterns are called corrective . And here is an example of the Elliot Wave pattern for the first wave (Impulse Wave).
Once we know how the form of Elliot Wave is now time to discuss each of the Wave patterns or waves (1-2-3-4-5). As previously explained that this Elliot Wave pattern is not only applicable to stock price movements but also applies to forex trading , oil, gas, and other trade.
In this pattern the stock price starts to rise due to a small number of traders who feel that the stock price is very cheap and this is the right time to make a buy order which causes the stock price to rise.
In this second wave they are traders who have bought shares previously thought that the stock price is too expensive (overvalued) so they have to sell it so that the stock price will be corrected down but not to the previous lowest price level because more traders hold the order position ( buy)
Keep in mind that this wave is the longest and strongest wave because it attracts investors and traders who have not had time to buy. They are curious and immediately scramble to own the shares. So that the stock price soared strongly beyond the first wave level and said that the stock price has broken high.
Many traders do take profit or take profits because they feel that the shares they buy are too expensive (overvalued). But there are still many traders who hold these stocks, especially traders who buy when the third wave is formed.
The fifth wave is formed because many traders are interested in this stock who then buy it so that the stock price goes up again (at this time many euphoria celebrated the rise in stock prices). And one of the signs of this wave is formed, there is usually a media that seems to favor this stock and say that those who do not buy it are people who lose. And keep in mind that this time the stock is said to be actually expensive. And an experienced trader will definitely sell his shares and wait for a buy signal again.
Now after the Impulse Wave is formed, the next wave formed is the ABC (Corrective Wave) wave to correct the previous stock price. And the discussion of this topic will be written in the next post.