Phase – correction market prices.
An important role in the trader’s work played by the structure and the market phase. The structure we described in our webinars and showed ways to search. As for the market phase, the technical analysis allocates only two kinds of phases: the impulse and corrective.
If the pulse phase for most traders is not a problem, and even a novice can easily find a pulse (rapid price movement in a particular direction), then, with respect to a correctional phase, there are many difficulties, but all traders, investors and analysts use this term.
Here is a definition Wikipedia gives the word correction (rollback) – a change in the share price or currencies in the direction opposite to the trend.
But in practice it turned out that very few people understand how the correction looks at a price chart, or are only some of its views. In this article we want to introduce you to all existing shares on the market, currency or commodities types of corrections.
There are only four types of correction, are presented below:
The first type is the “zigzag” correction, which is clearly visible a series of successively lowering / rising lows / highs, this kind of correction is not uncommon.
The second type is “flat” correction when the internal structure of the second wave, the highs and lows are about the same visual level.
The third type is quite common and is known to many, is a “triangular” correction, representing a narrowing of the price range and foreboding powerful impulse movement. Depending on where in a wave of her lie, can be a very high probability to understand where to move after the completion of a triangle, although many technical analysts write that triangle is a controversial figure.
The fourth type is the most complex and intricate. This type of correction is called “wrong” correction and is very common. Failure to understand this type of correction can lead to serious losses, since its internal structure is very similar to the beginning of a new pulse more (blue in the figure) of the period. This type of correction has become quite common on the foreign exchange market after the 2008 crisis.