What is an Impulse Wave Pattern?

An impulse wave pattern is one technical trading term that signifies a robust move in the price of a financial asset overlapping with the primary direction of the Underlying trend. Frequently, it is used in discussing the Elliott Wave theory, which is a method to analyze and anticipate the movement of the financial Market price.

Technically, impulse wave refers to the upward movement in uptrends and downward movement in downtrends.

Explaining Impulse Waves

One of the interesting things about impulse wave patterns associated with the Elliot Wave theory is that they are not restricted to a specific period of time. This enables some of the waves to last for many hours, years, or decades.

Irrespective of the used time frame, impulse waves run in a similar direction as the trend. Furthermore, impulse waves comprise five different sub-waves that make net movement in a similar direction as the trend for the upcoming large degree.

This pattern is considered as the most common motive wave and can be spotted easily in the market. Similar to all the motive waves, it comes with five different sub-waves. While two of them are corrective waves, the remaining three are the motive-waves.

Moreover, it also has three different rules that help to define the formation. Basically, these are the unbreakable rules. In case any of these rules get violated, the structure will not be considered as the impulse wave, and you’d have to re-label it from the beginning.

Understanding Elliott Wave Theory

Formulated by RN Elliot, this theory was discovered in the 1930s on the Basis of Elliot’s study of stock charts covering varying time periods over the course of 75 years. Elliot designed this theory to offer insights into the possible future direction of large price movements in the equity market.

Later, this theory acquired adoption in the community of investors. Moreover, this wave theory can also be used along with additional Technical Analysis to find out possible opportunities. The theory works to ascertain the direction of market prices through impulse wave and corrective wave patterns study.

Impulse waves have five different smaller-degree waves net moving in the direction of the larger trend, and corrective waves are the ones that are made of three different smaller-degree waves that move in the opposite direction.