IMPULSE

AND
CORRECTIONS
IMPULSE
An impulse is defined
as a strong move
whereby the market
moves quite strongly
or heavily in one
direction, covering a
great distance in a
short period of time.
CORRECTION

A correction is defined
as a relatively short-
term movement of the
market in the direction
opposite to the main
trend.
MARKET STRUCTURE
The market moves
in these 2 phases.
The entirety of
price action can be
marked out using
just impulses and
corrections.
CADJPY Example
(2 week Timeframe)
 Question: How can we catch the big
impulse moves?

Answer: By identifying the corrections

and readying ourselves for the next
impulse
 Our Job
Our job as traders is to catch the most amount of pips in the shortest amount of
time – naturally these would be the impulse moves.

In order to do this, we need to know what the different types of corrections look
like and how we can trade them.

All corrections can be broken down into 2 categories:

1. Continuation Corrections. This is when the correction keeps the trend going.

2. Reversal Corrections. This usually occurs at the end of a trend where price
creates a correction that reverses the trend.
 Continuation Corrections
Flag pattern (Bull flag/Bear Flag)
The flag pattern is the most common continuation patterns in technical analysis .
It often occurs after a big impulsive move. The impulse move is followed by short
bodied candles countertrend to the impulsive move, which is called the flag. It is
named because of the way it reminds the viewer of a flag on a flagpole.
 Continuation Corrections
Flat Correction (Rectangle)
The flat correction is similar to the flag pattern but instead it is just a horizontal
flag. There's an elliot wave complexity behind this pattern where each move has 3
waves - which we'll get into later.
 Continuation Corrections
Triangle Pattern - Expanding/Contracting
Expanding and contracting triangles can be used similar to flags. Instead of 2
parallel lines like the flag, there are 2 lines that either contract or expand
depending on the type of pattern.
Continuation Corrections
Continuation Corrections
Flat Correction & Bull Flag Example
Triangle Example
 Reversal Corrections
Rising Wedge/Falling Wedge
The most common reversal pattern is the rising and falling wedge, which typically
occurs at the end of a trend. The pattern consists of two trendiness which
contract price leading to an apex and then a breakout appears.
 Reversal Corrections
Ascending Channel/Descending Channel
Channels are usually formed on higher timeframe indicating that a trend reversal is
about to take place. They consist of 2 parallel lines where price stays within until it
breaks out.
Reversal Corrections Entry After Breakout
Reversal Corrections Entry On Rejection
Ascending Correction Examples
Descending Channel Example
 How To Spot Corrections
1. Find a trending pair (on any timeframe)
2. Draw an trendline
3. Identify the impulsive phase (strong bodied candles)
4. Wait for price to slow down and create a correction
5. Identify what type of correction it is: Continuation or Reversal
6. Mark out the correction - Flag, wedge etc.
7. Enter on breakout of correction

** Please note that the most reliable corrections are those that bounce off the
trendline
Step One - Draw a trendline
Step Two - Identify Impulse Phase
Step Three - Draw Corrections
 KEY POINTS
Corrections can be found on ALL timeframes.

Corrections will not always look perfect. Spikes

happen.

Impulse length before the correction should be used

as first TP.

If the correction is not clear, do NOT enter.