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We all know that markets travel in waves called impulsive and corrective waves. Impulse moves are with the trend and the corrective move is counter to the trend and is also called a pullback.
Generally, I prefer to enter every trade during the corrective wave in the direction of the overall trend or the impulse waves. It is a bit of an art form as you are entering the trade when the market has yet to confirm a return to an impulse move. The problem is that when you wait for too much confirmation, the trade is well underway and you now have a larger stop which equals a lower position size.
The good thing is that we can use the prior impulse move to estimate how far the market may travel before entering another corrective wave. We call this a measured move.
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