How price moves: impulse, correction, volatile
Price never moves in a straight line. It moves in waves, and the waves have different characters.
The same market can be in any of these three moods at different hours of the day.
| Mood | What you see | What it means | What traders do |
|---|---|---|---|
| Impulsive | Big bodies in one direction, small wicks, few pullbacks | Big players are pushing. This is the real direction. | Trade with it, never against it |
| Corrective | Small candles that overlap, slow drift against the impulse | The market is resting and taking profit | Wait. Look for an entry at the end of the correction |
| Volatile | Big candles with long wicks in both directions | Fight and confusion, often at news time | Usually stay out. Stops get hit both ways |
Key idea
An impulse that breaks a previous high or low is called a displacement. It shows big players have arrived. Fair value gaps (Lesson 11) are born inside displacements.
Traders measure how much a market usually moves with ATR (Average True Range): the average size of the last 14 candles. If gold's 1-hour ATR is $8, a $30 candle is a huge impulse.
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