On March 9, I discussed how embracing the right learning approach is what sets most successful traders apart from the rest.
But for long-term trading success, it’s also important to have a highly detailed and structured trading plan.
So today, I’ll reveal the foundation every good trading plan needs. It involves identifying the current phase of market behavior as either “impulsive” or “corrective.”
Let’s start with a look at the impulsive phase…
Powerful Surges of Price Action
During impulsive market behaviour, you’ll notice a powerful surge of either buying or selling pressure. The market breaks new ground by making new highs or lows.
For example, the 2021 melt-up in stocks is a great example of bullish impulsive price action. And the November 2022 sell-off in cryptocurrencies is a bearish example.
Now let’s look at another example in Tesla (TSLA) on the price chart below…
Notice how the market made a series of new lows. From April to May 2022, TSLA steadily sold off from $384 to around $221.
Whenever the market broke through support (red lines), the sell-off picked up steam. You can see the sections of impulsive price action each time the sell-off accelerated.
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Here’s another example in Bitcoin (BTC)…
Between March and December 2020, BTC experienced an impressive rally.
Notice how prices accelerated higher each time a resistance level (red lines) was broken. This is an example of bullish impulsive behaviour.
Impulsive price action is the kind of move you want to capture as a trader. If you get in early on a developing impulsive phase, you’ll see your gains pile up in short order. These are the “big moves” everyone is afraid of missing out on.
As a rule, I only trade for impulsive moves in the market. I avoid the other choppy, sideways moves like the plague.
Once price action isn’t moving in an impulsive manner, that’s my cue to get out of the trade.
It’s crucial to know how to identify the kind of market action you want to target… and avoid.
That’s why on Thursday, I’m going to discuss corrective price action – the opposite of the impulse.
More importantly, I’ll show you how to take advantage of both phases of the market for big gains.
Happy trading,
Imre Gams
Analyst, Market Minute
Reader Mailbag
In today’s mailbag, Currency Trader members thank Imre for his forex service…
Hey Imre, I’m enjoying your videos and recommendations very much. Keep up the great work.
– Ed M.
Imre, thanks for the excellent trading service. Keep up the great work!
– Jeffrey M.
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@jeffclarktrader.com.