Forex

ICWR

Hey!

I’ve read an interesting book about a trading strategy called ICWR (Impulsive/Corrective Wave Retracements) and I’ve followed the must of discussions in the forex forums about the idea (they are few indeed).
I’ve decided to write this article to who didn’t hear about the strategy or read the book!

Note: I’m not after how successful the strategy is, I’m trying only to summarize the strategy without any recommendations!

The phenomena:

The ICWR strategy founders started with two observations and the whole of the book trying to proof the correctness of the observation.

This is the idea:

When the market moves in the direction of the trend - no matter what the strength of the trend or the duration of the trend were - the market always reverses its movements against the trend (counter-trend move) for a period of time before continuing its movements in the direction of the trend (trend-following) then moves again against the trend then in the direction of the trend etc.
These reversal movements often last for a short period and they are only Minor movements while the Major movements remain in the trend direction.

The ICWR founders calling the Major movements that in the trend direction “impulsive waves” while the Minor moves that in the reversal direction of the trend called “corrective waves”.

This was the first observation that the ICWR strategy founders had concluded.

The second observation the ICWR strategy built on is that:
The correlation between the height of a corrective wave (trend following movements) and the height of the prior impulsive wave (counter trend movements) they found that the corrective wave tends to retrace the prior impulsive wave in Fibonacci ratios that are 25%, 38%, 50%, 61% and 75%.

And for that was the name of the strategy ICWR “Impulsive/Corrective Wave Retracements”

They called these observations the phenomenon and affirm it’s not only applicable to the currencies moves but it’s applicable “For all kind of complex systems in nature as social, chemical, or physical systems”

What does it useful for?

As a result of the ICWR observation about the retracements of the corrective wave to the prior impulsive wave in predictable Fibonacci ratios it gives us a good answer for the important question “What’s the best time to exit the trade?”

When we know that the reversal of the trend direction is a temporary movement, we can the trend following trade the chance to gain the maximum profit the trend could give and ignore those temporary movements (”Let the profit run”).

But when should we exit the trade and how could we know that the reversal of the trend still a temporary movement (corrective wave)?

ICWR has the answer for these question and we are going to know them right now.

6:07 pm