Three Wave - ABC Pattern

Compared to Impulsive waves, "corrective waves" are harder to spot.

Wave A
This is usually at the end of the 5-wave pattern and fundamental news is typically still positive. Many analysts see this as a mild correction and buy in hoping for a bull run continuation. Again new and inexperienced traders are more likely to fall in to this trap.

Features of Wave-A is an increase in currency pair volume and higher volatility (in the options markets).

Wave B
In most cases this is the last effort by those traders who believe it's a ongoing bull run. The last puff of upward movement before the price goes down again. You can see that wave-B forms the right shoulder of the "head and shoulder" patter.

Volumes are lower again and fundamental factors are no longer supporting the technical.

Wave C
By this time everyone knows there is no further momentum in the currency pair. There is mass selling and the bear has a strong grip on the downward trend.

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