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A Complete Guide to Impulsive wave in Trading

Published by Ali Muhammad


An impulsive wave in technical analysis is forming a series of high momentum candlesticks due to filling institutional orders in the market. In less time, the price will cover more distance in a bullish or bearish direction.

The impulsive waves indicate the footprints of market makers. These waves show the presence of institutional traders in a specific price range. And we can use these footprints in several ways to do a high-probability technical analysis.

In this post, I will explain the impulsive wave thoroughly in technical analysis. So you can use it to do technical analysis.

How to identify the impulsive wave in trading?

To identify the impulsive wave, you need to find high-momentum candlesticks on the chart. High momentum means candlesticks with big bodies and wicks compared to the previous few candlesticks.

An impulsive wave is a series of those high momentum candlesticks. Look at the image below. I have highlighted the impulsive wave.

There are two types of impulsive waves depending on the direction of the market trend

  • Bullish impulsive wave
  • Bearish impulsive wave
bullish impulsive wave

Bullish impulsive wave

When a series of bullish candlesticks form on the chart, then a bullish impulsive wave forms. It happens during the bearish trend.

Bearish impulsive wave

When a series of bearish candlesticks form on the chart, a bearish impulsive wave forms. Such type of wave forms during the bullish trend.

bearish impulsive wave

High timeframe momentum candlestick

Besides identifying a series of candlesticks, a higher timeframe analysis strategy can also be used to find the impulsive wave.

The important thing here is that a high-momentum candlestick on a higher timeframe represents a series of high-momentum candlesticks on a lower timeframe.

To follow this technique, open the daily timeframe and find the high momentum candlestick on the daily timeframe. Then open the lower timeframe like M15 and M30. You’ll see an impulsive wave on the lower timeframe.

For a bullish impulsive wave, find the big green candlestick on a daily timeframe, while finding the big red candlestick on a daily timeframe for a bearish impulsive wave.

high momentum candlestick

I hope now you’ll be able to find the impulsive wave accurately.

What does the impulsive wave tell the retail traders?

The main reason for the formation of the impulsive wave is the orders of institutional traders and banks. When the orders of market makers fill, then impulsive wave forms. These waves create an imbalance in the market. After the imbalance, the price will try to balance the market. That’s why after an impulsive wave, a retracement wave forms.

As retail traders, our primary focus is to trade the impulsive wave. Because profit is hidden in trading with the trend or the market makers, if you follow methods of retail traders like fancy mathematical indicators, you’ll end up trading in the loss.

That’s why I highly recommend you learn the reason behind every price movement on the chart.

Natural facts in technical analysis

You should also apply natural laws to the market in price action trading. These laws will help you to forecast the market.

For example, there are two major types of waves in trading, impulsive wave and retracement wave. The natural law is that a retracement wave will form after an impulsive wave. While retracement wave, the impulsive wave will form. And this process continues.

You should remember this market pattern. So while analysing the market, when you see a retracement wave, then forecast an impulsive wave. Look at the image below for a better understanding of this pattern.

impulsive and retracement wave

What type of information does the impulsive wave provide?

It gives the following information in technical analysis

  • Balance and imbalance price range
  • Key level breakout
  • Footprints of market makers
  • Formation of retracement after impulsive wave

Key level breakout is the break of major support, resistance level, or a trendline. Because a valid breakout mostly happens with an impulsive wave in a short time and a high momentum candlestick on the higher timeframe. It also tells us that retracement is about to form. Because after an impulsive wave, a retracement wave will form. So if your strategy is based on a ranging market structure, then you can apply your strategy after the impulsive wave.

How to trade the impulsive wave?

The most straightforward way to trade is by identifying chart patterns like flag patterns. In the flag pattern, it will form after the flag’s formation. In the same way, after a trendline or major support and resistance, the impulsive wave will form.

You must understand that the impulsive wave is the most basic concept of price action trading. You cannot become a profitable trader by just learning this wave. But you need to learn these concepts to become a better trader that can forecast the market accurately. You should add confluences in trading to make a high-probability trading setup.

The bottom line

I have explained many things about the impulsive wave. Now it is your turn. you’ll have to open the candlestick chart and start practising this wave by backtesting. If you ignore this after reading the above points, you’ll also forget it after a few days.

Please don’t forget to ask in the comments if you have any questions.

Do you want to get success in Trading?

Here's the Roadmap:

1. Learn supply and demand from the cheat sheet here
2. Get access the Supply & Demand Indicator here
3. Understand the fair value gap here
4. Use the set and forget strategy here
5. Follow the risk management plan here

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