Lesson 2 — Reading Context: Impulsive vs. Corrective Moves

Goal: Turn raw candles into a simple map: impulse → correction → decision. This keeps you trading with the active side (buyers or sellers) and avoids fading strong moves.

1) Quick definitions

  • Impulsive move: larger candles, mostly one color, many closes near the extremes. It shows a one-sided order-flow push.
  • Corrective move: smaller, mixed candles, overlapping ranges, lots of mid-range closes. It’s a pause/pullback.
  • Impulse base: the small shelf/cluster just before the impulse starts. This is where you expect retests to hold if the trend continues.

Your HUD criteria (defaults): an impulse flags when Body ≥ 60% of the range and Range ≥ 0.8 × ATR(14). Adjust with InpImpulse_BodyFracMin and InpImpulse_RangeATRMin.

2) How to map it on your chart (step-by-step)

  1. Attach PA_Context_HUD and CapreContext_Arrows_v2.
  2. Find the last clear impulse: scan left and spot the latest fast, one-colored push (larger-than-recent ranges, closes near the extreme).
  3. Mark the impulse base: box the small pause/mini-range that price left right before the impulse launched (for buys: the last minor consolidation below; for sells: above).
  4. Define the correction: everything after the impulse that drifts back in overlapping, mixed candles is your correction zone. Draw a light rectangle around it.
  5. Set a bias: trade with the impulse until price clearly accepts back through the base (invalidates).

3) Turning context into a plan

  • Continuation idea: Wait for a valid pattern (IB mother-bar breakout, Engulfing, Pin, Marubozu) leaving the correction in the impulse direction.
  • Invalidation: If price closes back through the impulse base and holds, your directional edge is likely gone—stand down or flip only with a fresh impulse the other way.
  • Levels help: If the correction sits near PDH/PDL/PWH/PWL, look for false-break → reacceptance as a quality trigger.

4) Using the HUD to keep you honest

  • Last impulse: HUD shows UP/DOWN/NONE. Trade only with UP for longs and with DOWN for shorts.
  • Trend (EMA-21) & HTF trend: Turn on HTF (e.g., H4) if you want extra alignment. If both agree with the impulse, your bias is stronger.
  • Near levels + false-break: HUD flags if you’re near PDH/PDL/PWH/PWL and whether a recent false-break occurred. These add quality to continuation signals.
  • Confluence score: In the arrows indicator, set MinScore to 2–3 so only aligned, higher-quality signals print.

5) Two simple trade templates

A) Impulse → correction → IB mother-bar breakout

  1. Identify an impulse UP (HUD shows Last impulse: UP).
  2. Let price pull back in a correction (overlap, mixed candles).
  3. Take the first IB breakout up (arrow prints only on close) that leaves the correction.
  4. SL: other side of the mother bar or below the correction low; manage: partial at 1R, then trail under higher lows or use ATR.

B) Impulse → correction → Engulfing continuation

  1. Impulse DOWN, correction drifts up in small candles.
  2. A single strong bearish engulfing closes with the trend (arrow prints).
  3. SL: above the engulf bar; manage: partial at 1R, trail via structure.

6) Settings that help (practical)

  • HUD: keep BodyFracMin = 0.60, RangeATRMin = 0.80 to start. If your pair is very whippy, raise them a bit.
  • Arrows: begin with MinScore = 2. If you want fewer, pickier signals, try 3.
  • Timeframes: build the map on H4/D1, time entries on H1 (or M15 if you want more frequency).

7) 10-minute exercise

  1. Open H1 on EURUSD or GBPUSD.
  2. Draw boxes around the last 3 impulses and their bases.
  3. Shade the following corrections.
  4. Mark every arrow that fired with the impulse as price left those corrections.
  5. Note which ones occurred near PDH/PDL/PWH/PWL or after a false-break—you’ll see the quality difference.

8) Common pitfalls

  • Fading fresh impulses: shorting right after a strong up-impulse (or buying after a down-impulse) without a clear false-break is low probability.
  • Chasing in the middle: entering during the correction’s middle with no structure or pattern.
  • Ignoring the base: if price accepts back through the impulse base, stand down—it’s not your trade anymore.

9) Cheat sheet (printable)

  • Map: Impulse (bold) → Base (thin box) → Correction (light box)
  • Bias: Trade with last impulse until base is broken/accepted
  • Trigger: IB mother-bar breakout, Engulfing, Pin, or Marubozu leaving correction
  • Quality: Near PDH/PDL/PWH/PWL + false-break & HUD score ≥ 2

What’s next

In Lesson 3, we’ll cover Inside Bars in detail: how to mark the mother bar, trade the close beyond it, and filter with context and levels.

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