ICWR stands means Impulsive/Corrective Wave Retracement. The ICWR forex system is a list of conditions that traders use to determine entry and exit points in trading the forex market.
The ICWR forex system has been developed using a mix of the Elliott Wave Theory and Fibonacci ratios. Traders have discovered that corrective market movements have a inclination to retrace the preceding impulsive market movements by a Fibonacci ratio.
So what are corrective market movements? Corrective market movements are short-term corrections that go against the long-term market trend. The major market movements in the direction of the long-term market are called impulsive market movements. Open up a chart of a major currency (say the GBP/USD) with the interval set on daily and you will easily see the long-term trend, along with several corrective market movements.
The most frequent Fibonacci ratios observed in the ICWR forex system are 25%, 38%, 50%, 61% and 75%.
Most traders use the ICWR forex system with an existing entry system to assist with their exit strategy to take out the most gain possible from the trade. Many traders have discovered that managing a trade and determining the exit point is even more important than choosing an entry point and direction to trade in.
The ICWR forex system is very easy to use. Simply bring up a chart of a time frame you want to trade, find the preceding impulsive wave (in the direction of the long-term trend) and compute the Fibonacci ratios. Now mark the Fibonacci ratios on your chart. For example if the preceding impulsive wave UP was 100 pips, for the Fibonacci ratio of 25% place a line 25 pips below the top of the impulsive wave. Most charting packages come with a Fibonacci tool built in, calculating the ratios and marking the lines for you.
These Fibonacci ratios can then be put to use in several ways:
- go your stop loss with every impulsive wave in your favor to maximize gain and minimize risk (the 75% ratio is usually used for this)
- determine when the corrective wave is probable to end in order to determine the best entry points.
Traders often tend to panic when their trade is in gain and it begins to go against them. By using the ICWR forex system you will be better prepared to ride out the corrective market movements in order to take out the most gain from your trades.
For more information on trading forex visit the link below.
Author Resource:-
Jon is the owner of iBlogForex, a blog about every aspect of the Forex market including Forex trading methods and strategies.
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