Regardless of how strong a long-term market trend is, the market never moves only in the direction of the long-term trend – there are always minor movements against the long- term market trend. These deviations usually don’t last very long and after them the market moves again in the direction of the long-term trend.
The major market movements in the direction of the long-term market trend are called impulsive waves and the minor market movements against the long-term market trend are called corrective waves.
The ICWR phenomenon is a typical self-similarity effect of a complex system. For all kind of complex systems in nature as social, chemical or physical systems such self- similarity effects can be found. Self-similarity is a fundamental property of self-organized complex systems and is a matter of recent intense investigation by physicists andmathematicians.
And, why is this fundamental trading rule so important?
Because not letting the profits run will make your trading unprofitable in the long run: two losses of 50 pips followed by a win of 80 pips results in a net loss of 20 pips. In contrast two losses of 50 pips followed by a win of 250 pips, reachable with our strategy, results in a net win of 150 pips! I’m sure you get the point.
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The ICWR phenomenon
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