ICWR stands means Impulsive / Corrective Wave Retracement. The ICWR forex system is a list of rules that traders use to determine when to enter and exit the forex market.

The ICWR forex system is based on a combination of the Elliott Wave Theory and Fibonacci ratios. Traders have found that corrective waves have a inclation to retrace the precedent impulsive waves by a Fibonacci ratio.

So what are corrective waves? Corrective waves are short-term corrections that go against the long-term market trend. The major waves in alignment with the long-term market are referred to as impulsive waves. Bring 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 certain corrective waves.

The most recurring Fibonacci ratios observed in the ICWR system are 25%, 38%, 50%, 61%, and 75%.

Many traders use the ICWR forex system with an existing entry system to assist with their exit strategy to squeeze out the most gain possible from the trade. Many traders have found that managing a trade and determining the exit point is more important than choosing an entry point and direction to trade in.

The ICWR system is very simple to use. Simply open up a chart of an interval you wish to trade, find the precedent impulsive movement (in the direction of the long-term trend) and calculate the Fibonacci ratios. Now mark the Fibonacci ratios on your chart. For example if the precedent impulsive movement UP was 100 pips, for the Fibonacci ratio of 25% you will place a line 25 pips below the high of the impulsive movement. Many charting packages come with a Fibonacci function built in, calculating the ratios and marking the lines for you.

These Fibonacci ratios can then be used in a number of ways:

– go your stop loss with each impulsive movement in your favor to maximize gain and minimizeize risk (the 75% ratio is commonly used for this)

– determine when the corrective movement is probable to finish in order to determine good entry points.

Traders often tend to panic when their trade is in gain and it begins to go against them. By using the ICWR system you will be ready to ride out the corrective waves in order to squeeze out the most gain from your trades.

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Source by Jon Provencher