Watching the price chart of a currency pair, you can see that there is a sharp and strong movement in the market for a relatively short time. This is the so-called impulse on Forex. For market professionals, it can become an opportunity for good earnings, and for beginners – the cause of serious losses. To prevent this from happening, it is necessary to immediately deal with this market phenomenon and understand how to respond to it correctly. Today we’re gonna talk about it.What is such a forex impulse
Present this situation. The market has accumulated a lot of orders, including pending ones. These are both buy and sell deals. At the same time, the forces of the “bulls” and “bears” are approximately equal, which is the reason for the formation of the consolidation period. If a very large trade is opened after that, it will trigger pending and stop orders. As a result, we see an impulse – a sharp spike in price movement in one side (up or down).This is how it might look on the chart:
Forex impulse may also occur after some important fundamental news is released. In this case, as a rule, the price returns to the initial level after a rapid rise or fall.Example of such a situation:
What can be considered a precursor of the impulse
First of all, this is an increase in the volume of trades. It can be tracked using standard indicators (Volume or Momentum), or a third-party indicator can be installed for this purpose.
Second, a strong price breakthrough can be a precursor to impulse movement. In this case, in order to earn money, you can place a pending order above/below this level. If a pending order has been triggered after a break-down and the price has fixed at a new level, you can hold a position to get a higher profit. If after the impulse the price did not go further in its direction, but returned to the level of the impulse candlestick opening price, it is better to close the order to avoid a large loss. For a safer entrance, we can wait for the price to return to the pierced level and back away from it towards the impulse movement.Example:
Beginning traders should first work on this topic on the history. After that, it will be possible to use the knowledge gained in real trading.
In the next article, I will offer you the Forex Impuls indicator, which can help you determine more precisely the possible impulse on the forex market. And this, in turn, will allow you to use the sharp price movement to gain profit.Fyodorov’s Inga15.10.2018