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Impulse wave

In Elliott Wave, a five-wave move in the direction of the larger trend, with three advancing waves separated by two corrections.

Waves one, three and five advance; waves two and four correct. Wave three is usually the longest and strongest and is never the shortest of the three, which is one of the theory's few unbreakable rules.

Practitioners look for wave three to show displacement and heavy volume, and for wave five to show weaker momentum than wave three, often producing a divergence on rsi or macd. That momentum divergence is the part of the framework that overlaps most with conventional analysis.

Identifying which wave you are in while it is happening is the hard part. Counts routinely get revised, and a supposed wave three frequently turns out to have been wave one of something else. Use the structure for context, not for precise entries.

Related: corrective-wave, elliott-wave-theory, wave-extension, displacement, divergence

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Bearish divergence between price and RSIA price line whose second peak is higher than its first, drawn above an RSI panel whose second peak is lower than its first, with the two peaks joined by sloping dashed lines.PRICEhigher highRSI (14)70overbought30oversoldlower high
Divergence between price and RSI. RSI measures how one-sided recent price moves have been on a 0–100 scale. Here price sets a higher peak while RSI sets a lower one, so the second push carried less momentum than the first.

Educational only, not advice. Spotted an error? Post in Site Feedback.