This is an Uptrend, where:
1-2-3-4-5 - is an impulsive move, where waves 1-3-5 are Impulsive waves, 2-4 are corrective waves.
A-B-C - is a corrective move, where A-C are impulsive waves, B is corrective wave.
Wave 1 - represents an impulsive optimism among the first group of Buyers - they have found a good reason to Buy (for technical or fundamental reasons), and so they begin pushing the market higher.
Wave 2 - the impulse fades out as the original Buyers begin to close trades with profits, while other investors who missed the train, stay outside waiting for a new opportunity.
Wave 3 - usually the longest and the strongest wave. Every investor who wanted to Buy (those who missed Wave 1 and those who didn't) will start Buying now. In addition to that, in the middle of the wave 3those who weren't convinced about an Uptrend will be convinced by now. Altogether this will bring a large acceleration to the main trend.
Wave 4 - sooner or later it's time to take profits, an impulsive move starts to fade again. However, the correction will be shallow as there are still many Buyers who want to join the trend.
Wave 5 - and so the uptrend restores, but the markets are already overbought and it becomes obvious that a reversal is due. The end of wave 5 is often marked by oversold (in an uptrend) markets and divergence.
Waves A, B, C - these waves develop in the counter-trend style to the major trend. At this point a new trend may develop, but may also not, and the new sequence of 1-2-3-4-5-A-B-C waves may begin.
1-2-3-4-5 - is an impulsive move, where waves 1-3-5 are Impulsive waves, 2-4 are corrective waves.
A-B-C - is a corrective move, where A-C are impulsive waves, B is corrective wave.
Wave 1 - represents an impulsive optimism among the first group of Buyers - they have found a good reason to Buy (for technical or fundamental reasons), and so they begin pushing the market higher.
Wave 2 - the impulse fades out as the original Buyers begin to close trades with profits, while other investors who missed the train, stay outside waiting for a new opportunity.
Wave 3 - usually the longest and the strongest wave. Every investor who wanted to Buy (those who missed Wave 1 and those who didn't) will start Buying now. In addition to that, in the middle of the wave 3those who weren't convinced about an Uptrend will be convinced by now. Altogether this will bring a large acceleration to the main trend.
Wave 4 - sooner or later it's time to take profits, an impulsive move starts to fade again. However, the correction will be shallow as there are still many Buyers who want to join the trend.
Wave 5 - and so the uptrend restores, but the markets are already overbought and it becomes obvious that a reversal is due. The end of wave 5 is often marked by oversold (in an uptrend) markets and divergence.
Waves A, B, C - these waves develop in the counter-trend style to the major trend. At this point a new trend may develop, but may also not, and the new sequence of 1-2-3-4-5-A-B-C waves may begin.