Corrective Waves

What Are Corrective Waves?

Corrective waves are a set of financial asset price movements associated with the Elliott Wave Theory of technical analysis.

Grasping Corrective Waves

Elliot wave theory sets that security price movements are broken up into two types of waves: impulse waves and corrective waves. These two types of waves can be utilized to observe price trends of securities. Inside a wave pattern, impulse waves move with the trend at one bigger degree while corrective waves move the other way.

Corrective waves are an important part of the Elliott Wave Theory, which was developed by Ralph Nelson Elliott during the 1930s. The Elliott Wave Theory offers supportive knowledge into financial market price trends and patterns.

R.N. Elliott presented the theory in his 1938 book, The Wave Principle. The theory was once again introduced to Wall Street in A.J. Ice and Robert Prechter's 1978 book, Elliott Wave Principle: Key to Market Behavior.

The Elliott Wave Theory depends on two types of waves: impulse and corrective.

1. Impulse Waves — net movement is toward the trend at one bigger degree. Impulses comprise of five sub-waves.
2. Corrective Waves — net movement is against the trend at one bigger degree. Corrective waves regularly comprise of three sub-waves.

Overall, the Elliott Wave Theory gives constructive knowledge that can help technical analysts monitor and comprehend the movements of financial asset prices over the short and long term. As indicated by the theory, both impulse and corrective waves happen over all scales and time periods as parts of a hierarchical fractal. By knowing the difference between impulse waves and corrective waves at several degrees of trend, a technical analyst can better separate which price movements are happening with a trend and which price movements are happening against a trend.

Features

• Corrective waves are a set of price movements regularly associated with the Elliott Wave Theory.
• Net movement of corrective waves is against the trend at one bigger degree.
• Corrective waves ordinarily comprise of three sub-waves.