Impulsive moves tend to have three characteristics common among all of them.

These three can help clue you in to when an impulsive move is starting, or in play. They are;

• Large Candles (bodies).
• Mostly of one color (bullish, or bearish).
• Closes towards highs/lows of the move.

Large Candles communicate to us there is strong participation and order flow behind this particular candle.

• Strong imbalances during a candle will translate into larger candles than the norm.
• When you see large candles forming consistently in one direction, they indicate strong order flow behind them from the institutional side.
• Since the larger players are behind them, they give us a clue of the direction we want to take, essentially surfing the waves they (institutional) are creating.

Impulsive moves tend to have large candles (bodies and wicks) behind them.

Common among impulsive moves as it communicates something critical to us – time.

• How the bulls or bears were able to maintain control of the price action over time.
• By maintaining control over time, the market is communicating who is the more dominant side because they are not allowing the other to take control of a candle for that time period.
• The greater the imbalance is between the bulls and bears over time, the greater the dominance is from either the bull or bear side of the market.

It is important to look at price action not just based on structure of the candles, which is one dimensional.

• Price do not just move in a vacuum, it moves in time, and how price moves over time can communicate a lot of information.

When the market is in a strong trending move, and the candle that closed in the direction of the trend has a very small wick, thus a strong close towards the highs, what does that communicate?

• It should communicate that there is very little profit taking from the players behind that candle.
• Thus suggesting likely continuation.
• If they were worried going into the close of that candle about an upcoming resistance level holding, or perhaps the bears may take control of the market, they would likely close their position, or take profits right before the candle closed.
• But when you have a strong close with a very small wick, this usually indicates very little profit taking, thus a confidence the move will likely continue.
  • This is highly useful, and will be common among impulsive moves.

Impulsive moves about 75% of the time are followed by corrective moves.

• These corrective moves can either be horizontal, slightly against the impulsive move, or even slightly in the same direction, but they denote a change in the order flow and participation.
• 75% of the time, these corrective moves are followed by impulsive moves in the same direction as the original impulsive move.

Because those who are in control, rarely give up control unless encountering a strong counter-trend force.

• Even then, they usually make a second attempt to take out a recent swing high or low before giving up.

Only when they fail a second time will they usually exit the market, either waiting for a new chance to get in on a pullback, or reset completely.

• This is why V-Bottoms are quite rare and only form about 10% of the time.
• Usually there is a 2nd bottom, which is could be a LL (lower low), HL (higher low) or a similar low.

This series between the impulsive vs. corrective moves will generally continue until the market encounters a counter-trend impulsive move, which usually translates to an equal or greater force on the opposing side of the market.