What is ‘Impulse Wave Pattern’
A term used in the Elliott wave theory to describe the strong move in a stock’s price coinciding with the main direction of the underlying trend. These impulse waves are shown in the illustration below as wave 1, wave 3 and wave 5. Impulse waves also refer to the strong downward movements in a downtrend.
Explaining ‘Impulse Wave Pattern’
The interesting thing about the Elliott wave theory is that it is not limited to a certain time period. This allows some waves to last for several hours, several years or even decades. Regardless of the time frame used, impulse waves always run in the same direction as the primary trend.
Further Reading
- Using wave theory to maximize retail investor media communications – www.tandfonline.com [PDF]
- The Elliott's Wave Theory: Is it True During the Financial Crisis? – papers.ssrn.com [PDF]
- Small-sample confidence intervals for impulse response functions – www.mitpressjournals.org [PDF]
- Unconscious herding behavior as the psychological basis of financial market trends and patterns – www.tandfonline.com [PDF]
- The financial/economic dichotomy in social behavioral dynamics: the socionomic perspective – www.tandfonline.com [PDF]
