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Impulse Patterns

A trend signals the main direction in which prices are moving; corrections move either against the main trend or sideways. In Elliott wave terminology, these are called impulse waves and correction waves.

This is the basic motive pattern of the Elliott wave principle. This pattern illustrates how price moves not in a straight line but in a series of rises and retracements.

An impulse wave generally consists of five waves: three in the direction of the trend (waves 1, 3, and 5) and two against the trend (waves 2 and 4). The five wave phase has the following rules that govern its shape. They are listed here.

  1. The phase is composed of five waves, three advancing (1, 3, 5) and two counter trend waves, 2 and 4.
  2. One of the waves, 1, 3, or 5, will often (but not always) be much longer (extended) than the other two.
  3. The waves of Impulse pattern can head up or down. That means they can indicate corrections too.
  4. Wave 2 never moves beyond the start of wave 1.
  5. Wave 3 is never the shortest wave.

  1. Wave 4 never overlaps the end of wave 1.
  2. Waves 2 and 4 tend to alternate in form. If wave 2 is a zigzag, wave 4 will be a flat, for example.
  3. The phase aligns with the trend of one higher degree.

Characteristics

Impulse Waves The impulse pattern consists of five waves. The five waves can be in either direction, up or down. An example is shown to the left. The first wave is usually a weak rally with only a small percentage of the traders participating. Once Wave 1 is over, they sell the market on Wave 2. The sell-off in Wave 2 is very vicious. Wave 2 will finally end without making new lows and the market will start to turn around for another rally. Price moves in a rise-retrace pattern that is similar to an incoming tide. Notice in the chart to the left that the impulse waves, 1, 3, and 5 travel farther than the corrective waves 2 and 4. This behavior leads to a rising price trend.

Reference the figure to the left Three of the waves, 1, 3, and 5, move in the direction of the trend of one higher degree (the numbers 1 through 5). This is similar to an ocean’s tide. If you are looking at a ripple, one higher degree would be the wave. One higher degree from a wave would be the tide. Counter trend moves 2 and 4 interrupt the movement of the main thrust.

The orientation of the basic 5 wave cycle need not be one of a rising price trend. As described above, the 5 wave cycle obeys the direction of the trend of one higher degree. If one gives a closer look on the charts they will find out, each segment of a wave is composed of 5 smaller segments, not 3 as in an ABC correction.

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