Basic knowledge about Elliott – Impulse Wave

Basic knowledge about Elliott – Impulse Wave

To become a professional trader with the Elliott wave, it is imperative that you know its basics. If you want to make a profit, you need to know which is the impulse wave and which is the retracement wave to execute your trades before the waves are forming to get the largest possible profit range. In this article, I will introduce the Impulse wave in detail, which is the most important wave in Elliott’s theory.

What is Elliott Impulse Wave?

Impulse waves are price actions that follow the current major trend. In an uptrend, impulse waves are waves that push the price higher than the previous high. On the contrary, in a downtrend, impulse waves push the price lower, making the following lows lower than the previous ones.

Impulsive waves are often created by a set of long candles with large bodies (may be accompanied by large volume), especially in terms of time. The impulse wave is formed and runs at a faster speed than the correction.

Impulse wave pattern (denoted IM) is a basic Elliott wave pattern. It consists of 5 waves, of which 3 are moving in the direction of the main trend and 2 are corrective waves that are moving against the main trend. Each wave is marked at the endpoint and numbered from 1 to 5.

Elliott impulse wave pattern
Elliott impulse wave pattern

Important rules of Impulse waves in Elliott

  • Wave 1 itself should be an Impulse (IM) or a Leading Diagonal (LD) wave pattern.
  • Wave 2 can be any corrective pattern except a Contracting Triangle (CT) or Expanding Triangle (ET).
  • Wave 2 cannot retrace more than 100% of wave 1.
  • Wave 3 should be an Impulse (IM) pattern and must be longer than wave 2 in price.
  • Wave 4 can be any corrective wave pattern.
  • Waves 2 and 4 do not have a price crossover.
  • Wave 5 should be an Impulse (IM) or Ending Diagonal (ED) pattern, at least 70% of the length of wave 4 according to price.
  • In waves 1, 3, 5, each of them can expand. Then it will be the longest wave compared to the other 2 waves.
  • Wave 5 may not cross the end of wave 3. When it is irregular, it is also known as Failure or Truncated 5th.

Variations of Elliott Impulse Wave Pattern

The Elliott Wave Extensions (Impulse Extension) occur in a motive wave where waves 1, 3, or 5 can extend and last longer than the other waves. The most common extension pattern is the extension of wave 3 (Extension3) when the wave 1 and 5 tend to be equal. If wave 1 extends, it’s called Extension1. If wave 5 extends, it’s called Extension5. These two patterns are less common than the Extension3. And the special thing is that the exteding wave phenomenon also appears in the extending wave itself.

Appearing locations:

Impulse Extension pattern appears at waves 1, 3, 5 and waves A, C belong to the correction process.

Wave One Extension pattern

Wave One Extension pattern
Wave One Extension pattern

Rules:

  • Wave One Extension pattern consists of 9 waves. Each wave is almost similar in shape and development time.
  • If an extension occurs in wave 1, then waves 3 and 5 will be normal.
  • Wave 1 extends in an Impulse (IM) or Leading Diagonal (LD) pattern.
  • Sometimes there is a case of 2 extensions with wave 1 (Double Extension) when wave 1 extends 2 times including 13 waves (only in rare cases, there are 3 extensions with wave 1 – Triple extension will have 17 waves).
    Wave One Double Extension pattern
    Wave One Double Extension pattern

Wave Three Extension pattern

Wave Three Extension pattern
Wave Three Extension pattern

Rules:

  • The Wave Three Extension consists of 9 waves, each of which is similar in shape and development time.
  • If an extension occurs in wave 3, then waves 1 and 5 will be normal waves.
  • Wave 4 must not overlap the price area with wave 1.
  • Wave 3 is never the shortest wave.
  • Wave 3 extends according to the Impulse (IM) pattern.

Sometimes there is a case of double extension with wave 3 when wave 3 extends 2 times including 13 waves (in a rare case, there are 3 extensions with wave 3 – Triple Extension will have 17 waves).

Wave Three Double Extension pattern
Wave Three Double Extension pattern

Wave Five Extension pattern

Wave Five Extension pattern
Wave Five Extension pattern

Rules:

  • The extended 5 wave consists of 9 waves, each of which is similar in shape and development time.
  • If an extension occurs in wave 5, then waves 1 and 3 will be normal waves.
  • Wave 4 must not overlap the price area with wave 1.
  • Wave 5 extends in an Impulse (IM) or Ending Diagonal (ED) pattern.
  • Sometimes there is a case of 2 expansions with wave 5 (Double Extension) when wave 5 expands 2 times including 13 waves (especially in rare cases, there are 3 extensions with wave 5 – Triple Extension will have 17 waves).
Wave Five Double Extension pattern
Wave Five Double Extension pattern

Elliott Impulse Truncated 5th wave pattern

The wave pattern with wave 5 that cannot break through the end of wave 3 is called Impulse Truncated 5th. Wave 5 only approaches the top of wave 3. This pattern shows a weak trend and the market will quickly turn in the opposite direction.

Impulse Truncated 5th wave pattern
Impulse Truncated 5th wave pattern

Rules:

  • The Truncated 5th pattern consists of 5 waves.
  • Wave 2 is not longer in price distance than wave 1 so it will not cross the starting point of Wave 1.
  • Wave 3 is never the shortest compared with waves 1 and 5.
  • Wave 4 does not enter the amplitude of Wave 1 except in cases when the Diagonal Triangle sometimes occurs in wave 1 or A but never in wave 3. Thus, Diagonal Triangle patterns can also turn into Failure or Truncated 5th form when wave 5 fails to cross wave 3.
  • Wave 5 does not cross the end of Wave 3.
  • Wave 3 shows the greatest momentum.
  • The internal wave structure follows different correction patterns.

The Truncated 5th pattern only occurs in waves 5 or C and usually does not appear in wave 5 of wave 3 of the larger wave level.

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Basic knowledge about Elliott – Impulse Wave
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