What is ‘pulse wave’
Pulse wave is a technical trading term to describe a strong move in the share price coinciding with the main direction of the main trend. It is often used in discussion of the theory of Elliott wave system to predict the movement of stock prices. Impulse waves also refer to the strong downward movements in a downtrend.
Breaking down the ‘pulse wave’
The interesting thing about the pulse wave structures in relation to the Elliott wave theory is that it is not limited to a specific period of time. This allows some waves to last for several hours, several years or even decades. Regardless of the time of impulse waves always move in the same direction as the main trend. These impulse waves are shown in the illustration below as wave 1, wave 3 and wave 5.
Elliot wave Theory was formed by R. n Elliott in 1935 on the basis of studying 75 years of stock charts that cover different time periods. Elliot, these theories are widely used in the investment community, was developed to provide insight into the possible future direction of large price movements in the stock market. The theory is intended for use in conjunction with other technical analysis to find potential profitable trades.
The Elliott wave Theory seeks to establish the market or the direction of prices through the study of impulse wave and corrective wave patterns. The impulse wave consists of five shorter waves, moving in the same direction of the larger trend, and corrective waves consist of three short waves moving in the opposite direction. For the advocates of the theory, the bull market cycle consists of five impulsive waves and three corrective waves retracement.
Today, The Pulse Wave
The magnitude of the waves can be measured using the Fibonacci numbers, a mathematical sequence of numbers also is used in technical analysis. Elliot recommends the addition of Fibonacci numbers will improve the accuracy of the predictions of a wave pattern. Traders use Fibonacci ratios in particular, 38.2%, 50% and 61.8%, which are based on the Golden ratio 1.618 to calculate the percentage of drawdowns or ascending.
Wave patterns are also part of the oscillator, Elliott wave, an extension of the original theory, which depicts the price patterns as positive or negative, above or below a fixed horizontal axis.
The theory of Elliot waves is still a popular shopping tool, thanks to the work of Robert Prechter and his colleagues at Elliott wave international, a firm of market research is generated for the work of Elliott, integrating it with modern technology such as artificial intelligence.