Elliot Waves Complete Guide | Chapter 3.5 - "Double Three"Hello Traders. Welcome to Chapter 3.5, where we talk further about two more different types of triangles - the Barrier and Expanded triangle. In the previous chapter we talked about the running flat and contracting triangle, but for these two, they are essentially the same but different overall shape! Most importantly, these are very common patterns within the realm of technical analysis and these textbook patterns also have Elliot Wave patterns within these common patterns. So, as you can see, if you can memorize the simple patterns, then you can start applying more advanced theories on top of them!
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction , Expanded Flat
3.3 Running Flat, Contracting Triangle
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
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Double-Three
A double-three pattern is most often distinguished by all the segments in the pattern being almost equal. This is also known as an accumulation period! Yes, most people who like to accumulate when markets are flat, even have Elliot Wave patterns applied. To have this outcome, the x-wave should be included in this category as well. It merely means that we can only look for flat patterns for corrections that form both before and after the x-wave. In a way, such a pattern resembles a double-flat pattern, the only difference being that the x-wave retraces more than 61.8% into the territory of the first correction (more on fib levels in the future chapters).
When compared with the double flat pattern, a double three has no channelling component. Even in the case of a double flat, the channelling component is different from what channeling in general means. An important factor in trading a double three is knowing the timeframe the pattern is forming on. If it is forming on a longer timeframe, such as daily, weekly or monthly, then the market is basically taking a lot of time to consolidate, and it is not wise to take a trade based on the move that should follow such a consolidation. The reason for this is that swaps are going to be paid throughout all this time, and swaps are mostly negative. As a quick reminder of what a swap is, it is the difference between the interest rates of the currencies that make up a currency pair; and at the end of a trading day, providing the trades are not closed, a small amount is deducted or added to the trade. Paying a negative swap when trading a double three on the longer timeframes can prove to be an extremely expensive thing to do, and should therefore be avoided.
Technicals:
Again, apart from the normal and shorter corrections, there are actually more complex variations like the double or triple three (the triple three will be talked about in the next sub-chapter). These patterns are a combination of single and simple correction patterns like the zig-zag pattern, the flat, or the triangle variation. These single corrections are associated by a connecting X wave, which can take any corrective form, but is USUALLY in the form of a zig-zag pattern. Characteristics for complex corrections is a sideways movement (consolidation) as indicated by the blue rectangle box.
Rules:
• Zig-Zag patterns and triangles only happen once in this type of combination.
• Triangles only appear as a Wave Y.
• The difference to a double Zig-Zag correction apart from the components, is the horizontal orientation. A Zig-Zag corrects sharper and more against the major trend.
→ It is possible that two flats are appearing, but a flat followed by a triangle is a more common example. As the single corrections tend to alternate in form.
The count for a double three is a W-X-Y. Double three’s are common in the more shallow part of the wave 4.
❗The purpose of double or triple threes is to expand the DURATION of the correction.
❗Watch out for a triangle or a final wave C to catch the continuation of the primary trend. This is where you want to possibly take the trade!
If you have no idea what you are reading, start from chapter 1!
Btcusdshort
Elliot Waves Complete Guide | Chapter 3.4 - "Barrier/Expanded"Hello Traders. Welcome to Chapter 3.4, where we talk further about two more different types of triangles - the Barrier and Expanded triangle. In the previous chapter we talked about the running flat and contracting triangle, but for these two, they are essentially the same but different overall shape! Most importantly, these are very common patterns within the realm of technical analysis and these textbook patterns also have Elliot Wave patterns within these common patterns. So, as you can see, if you can memorize the simple patterns, then you can start applying more advanced theories on top of them!
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction , Expanded Flat
3.3 Running Flat, Contracting Triangle
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
-----
Barrier Triangle
The only difference from the contracting triangle is that the line BD or ACE is horizontal. This is actually a very common pattern we see used daily by traders - the "ascending triangle". The other one goes towards a horizontal line, so a Barrier Triangle is a variation of the contracting pattern. A barrier triangle has the same characteristics as a contracting triangle except that waves B and D end at essentially the same level.
Expanded Triangle
Most rules are the same as for contracting triangles, with these minor differences (make sure to memorize these as well!):
- Waves C, D, and E each move beyond the end of the previous same-directional subwave (the result is that going forward in time, a line connecting the ends of waves B and D diverges from a line connecting the ends of waves A and C.)
In the next chapter we will be going over the double three, and finally the triple three as a conclusion to chapter 3.
Make sure to read review all of my previous chapters. It will start to get more advanced!
Elliot Waves Complete Guide | Chapter 3.3 - "Running, Contract"Hello Traders. Welcome to Chapter 3.3, where we talk further about a different form of corrective waves, the Flat and Expanded correction. In chapter 3.3 I discuss the last of the types of flat corrections! Here, we will also dissect the contracting triangle, also known as the symmetrical triangle by many traders.
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction , Expanded Flat
3.3 Running Flat, Contracting Triangle
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
-----
Running Flat
The is the last type flat correction: the running flat variation. It is the least common one, but has the same 3-3-5 structure. This one is hard to spot because a rising wedge is usually considered bearish for many and the last wave is where you will find the confirmation. For these, you want to trade the breakout.
Rules:
• Wave B ends above the beginning of wave A
• Wave C ends higher than the end of wave A
• Usually wave C is the same length as wave A.
→ This kind of correction happen in really strong and fast markets, especially Bitcoin. The fast and high push of wave B and the short wave C are signs of a strong primary trend.
A parallel channel regularly marks the low of
wave C, marked by the yellow lines!
Contracting Triangle
Triangles represent a balance and even pressure of buyers and sellers within the market. They contain five overlapping waves with a 3-3-3-3-3 structure. The contracting triangle represents the most frequently appearing.
Rules:
• Triangles have 5 Waves: A-B-C-D-E
• All of the waves are corrective
• Upper line is declining, lower line is rising
• Wave E frequently overshoots the trendline and can also be a triangle
• Triangles only occur as a Wave 4/B/X/Y
• Never as a Wave 2/A
❗Triangles represent a continuation pattern for the dominant trend. Remember, continuation patterns are the main trend!
Elliot Waves Complete Guide | Chapter 3.2 - "Flat-Expanded Flat"Hello Traders. Welcome to Chapter 3.2, where we talk about another form of corrective waves, the Flat and Expanded correction. In chapter 3.2, we will be discussing Zig-Zag waves. This is where most people will get "chopped" up in the market, as these corrections can often cause a lot of small panics within these corrective waves. These corrections more often than not, destroy traders. If you learn even the basics of corrective Elliot Waves, you can use them to your advantage to identify if we are in a fakeout and identify whether you are in a corrective pattern or not.
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction , Expanded Flat
3.3 Running Flat, Contracting Flat
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
-----
Flat Correction
The Flat correction is probably the second most common corrective pattern and always has a 3-3-5 structure. This can be a very confusing pattern for many as it's also known to cause a lot of losses for intraday traders - it's AKA a "choppy" market period.
As wave A is not five-waved and powerful enough, the retracement of wave B is considered strong. There are rules to this!
📌Rules:
• It's a sideways movement - Wave A and Wave B are corrective.
• Wave C is impulsive, but does not go much below Wave A.
• Most of the time, Waves B/C go some degree above or below of Wave A (just to trick people into believing a breakout occurs, hence, choppy!).
• Although it is called the Regular Flat Correction, it is not the most common one and the second most common consolidated corrective pattern.
❗The ABSOLUTE most important thing is to just observe in corrective waves unless you are a true day trader. Otherwise, watch for overall market structure to avoid overtrading in corrections since these are the most trickiest. Once you achieve an overall picture of the structure (about 70% through), you can start considering on entering a position to increase your probabilities and risk of not over trading.
Expanded Flat
The Expanded Flat is the second most common one under the flat corrections. Confused already? Go back and re-read everything.
• Expanded flat is a corrective wave pattern with an extended wave B, which reaches higher than the start of wave A.
• Wave B makes a fake breakout above the last high.
• Wave C is also extended and goes deeper than wave A.
• Structure of the correction is 3-3-5.
📌Rules:
• Wave B ends higher than the beginning of wave A
• Wave C is considered an impulse or ending diagonal and ends lower than the low of wave A.
❗ Wave B/C over and over again catch traders on the wrong side, as fake breakouts take place just before the market turns. This in turn creates a lot of traders to get destroyed in the market!
Trade Safe!
Below are the chapters from 1-3.1!
Elliot Waves Complete Guide | Chapter 3.1 - "Corrective Waves"Hello Traders. Welcome to Chapter 3, where we talk about corrective waves. In chapter 3.1, we will be discussing Zig-Zag waves. The zig zag wave is one of the common of patterns in corrective Elliot Waves. Many of us see this on a daily basis, but did you know that there was a meaning behind all of the fluctuations in the price action?
Chapter 3 Glossary:
3.1 Zig-Zag Waves
3.2 Flat Correction, Expanded Flat
3.3 Running Flat, Contracting Flat
3.4 Barrier Triangle, Expanded Triangle
3.5 Double-Three
3.6 Triple-Three
-----
We have to understand that markets also move against the trend of one greater degree only with struggle due to intraday traders. This is why Elliot Waves is another technique to organize the chaos within the market, as two forces are pulling in each direction regardless of how we want it to move. Let's talk about the MAIN important note for correction waves - they never have five waves. If they do, they are only a motive part of the overall corrective pattern. It's that simple. Corrections can be classified into two different classes of styles. There are the sharp corrections, which move sharply against the major trend. Their angle is rather steep. On the other hand are sideways corrections, they don’t retrace much in price, but can take a long time to finish.
Apart from the two styles are in general three correction pattern:
• Zig-Zag (5-3-5)
• Flat (3-3-5) (regular, expanded, running)
• Triangle (3-3-3-3-3) (contracting, barrier, expanding and running)
Combination of these pattern form either a double three or triple three correction. These prolonged corrections are separated by a wave X. All of these will be discussed in the following chapters.
Zig-Zag Patterns
A single Zig-Zag is a simple three-waved corrective movement which is labelled as an ABC wave. It’s structure is 5-3-5, and the top of wave B is noticeably lower than the start of wave A as shown above. There are rules to this. If you are still not sure of what we are talking about, you need to go back and review chapter 2.
Rules:
• Wave A has to be a motive or diagonal
• Wave B can only be a corrective pattern
• Wave B has to be shorter than Wave A
• Wave C has to be an impulse or ending diagonal along the way
This is the most common corrective pattern in Elliott Wave Theory and is usually a sharp correction within a descending wedge structure. For those not able to see it from an Elliot wave perspective, most traders can identify this pattern as a pennant continuation pattern. But the chaotic movements inside can be organized via Elliot Waves.
The length of wave C is between 100%-161.8% of wave A.
Zig-Zag corrections appear most of the time as a wave 2 only, but are also very common as a connective wave in more complex corrections like a double as shown above! Occasionally Zig-Zag corrections will occur in two, sometimes even three times in a row. This happens usually when the first Zig-Zag does not correct far enough from a price action perspective.
❗If a double Zig-Zag occurs, the single ZigZags are separated by a three-waved reactionary move, which is labelled as Wave X and is always corrective on the way down.
Note: Zig-Zag corrections often fit into a parallel channel! It is drawn between the highs of wave A & B to determine the end of wave C.
Thank you!
Trade Safe.
Elliot Waves Complete Guide | Chapter 2.1 - "Motive Waves"Hello Traders. I hope you enjoyed chapter 1 and studied hard. If you are having a hard time understanding chapter 2, please go back to chapter 1 and study that chapter first.
Chapter 2 - Motive Waves:
2.1 Impulse, Leading Diagonal
2.2 Ending Diagonal, Truncation
2.4 Extension, Fifth Wave Extensions
------
2.1 Impulse, Leading Diagonal:
Impulse Wave
As previously discussed in chapter 1, 'Motive Waves' are subdivided into five waves. These five waves always move in the same direction of the current trend by degrees. The countertrend of wave 2 never moves beyond the beginning of wave 1 and wave 4 moves never beyond the beginning of wave 3. The impulse wave is one of the most common of wave types. In the impulse, wave 4 never overlaps with the high of wave 1. Waves 1,2,5 are themselves are what is called "motive." Also, wave 3 is NEVER the shortest wave and always an impulse
Leading Diagonal
The leading diagonal is also considered a motive wave, but not an impulse. It is a subcategory of a motive wave because it also has corrective characteristics. Wave 4 overlaps with the top of wave 1 and can be the wave 1 of an impulse or a Wave A of an ABC correction. It's structure can be seen as: 3-3,3,3,3 or 5,3,5,3,5. For the leading diagonal, wave 4 overlaps with wave 1 and has a smaller retracement than our wave 2 as shown above. It is usually followed by a wave 2 in a motive wave or by a B wave in an ABC correction.
Elliot Waves Complete Guide | Chapter 1 - "The Overall Cycle"Hello Traders. I would like to introduce a new series of articles pertaining to the Elliot Wave theory. We are seeing higher interest in Elliot Wave theories these days but many traders and investors have a hard time grasping the foundation of Elliot Waves. I would like to finally start implementing my overall view of the basics on Elliot Waves so that investors can start understanding the many great charts we have here on TradingView. The Elliott Wave Theory is one of the best tools to describe how markets behave from both a technical and market psychology perspective. It is used to identify the end of a movement and predict where the market will turn via reversals. In combination of basic patterns, indicators, and Elliot Waves, you can have the secret recipe to a high probability, or near perfect trade.
I will be dividing the chapters as followed:
Chapter 1: The Overall Cycle
Chapter 2: Motive Waves
Chapter 3: Corrective Waves
Chapter 4: Variations of Waves
The Most Used and Profitable Chart Patterns - Bullish PatternsHello Traders. Here, I would like to show the most commonly used and highly profitable patterns for new traders (and advanced!). There are two categories of patterns in terms of price action:
Continuation patterns
Continuation patterns are usually indications for traders to look for a signal that the price trend is likely to remain in play from a market psychology perspective. These patterns occur in the middle of a trend, hence, continuation - and once the signal has been proven, the trend will most likely resume from a probability perspective.
Reversal patterns
When the pattern signals a change in trend direction, it is known as a reversal pattern as shown in the examples. Technical analysts have long used price patterns to examine current movements and forecast future market movements by using reversal patterns. These self-fulfilling prophecies have become a thing of the past and is now used daily in everyday trading.
These patterns are the most often used patterns in the trading arena, especially in cryptocurrency trading. These patterns are often identified by many as the essentials for trading. As we can see in the diagram above, we have many different patterns to choose from and we can see these patterns on almost all timeframes if you look closely enough. I hope these bullish trading patterns become useful, as I also use these patterns on a daily basis. Part two of the series will be showing the BEARISH patterns, so please stay tuned.
***These are the patterns to memorize***
1. Symmetrical Triangle
2. Ascending Triangle
3. Bull Flag
4. Double Bottom
5. Inverse and Shoulders (Inv HnS )
6. Falling Wedge
7. Cup and Handle ( CnH )
Trade Safe!
How to Use the Long/Short Positioning Tool - Full BreakdownHello Traders. This is a continuation of how to use the long/short positioning tool from our previous post. In my previous post, I talked more specifically about how we can calculate the Risk Reward Ratio ( RRR ), but here, in a visualized format, I have broken it down as best as I can so that you as the trader can understand each and every part of the tool.
This tool is one of the most important tools to use as a trader, in my honest opinion, due to it being heavily focused on how to preserve your account taking into accountability of your overall funds. Your goal in trade is to make sure you preserve your capital, and not lose it. Often more than not, traders have no idea on how to exit a trade. No matter how bad (or good) of a trade setup you may have, having a solid risk reward ratio setup is incredibly important for making sure you are taking profits and losses at the correct places.
I have separated this article into three sections as shown in the diagram above.
1. Profit Zone
2. Stop Loss Zone
3. Trade Zone (Risk Reward)
Reference: www.tradingview.com
TradingView offers plenty of great tools, but it's important to know how to use the tools. Many traders use the long/short positioning tool; however, often is misguided due to not understanding the full functionality.
For more on risk reward management posts, please check the posts below!
Financial Risk Cheat Sheet - How To Allocate Your Funds ProperlyHello traders. Here I present to you an important lesson of how we should all be allocating our funds. In the pyramid above, you can see the distribution of risky assets to low risk assets. Low risks are associated with low expected returns while high risks are associated with high expected returns. Investors who are not willing to take high risks have to be contented with lower returns and investors who want to achieve higher returns must be prepared to bear higher risks. This is life - but life is all about taking risks. As there are good stresses and bad stresses in life - there is also good risks and bad risks. Instead of simply saying what's good or bad, I like to use a term called, "calculated risks". By calculating your risks properly, you can learn to allocate your capital and exponentially grow your funds in a longer period of time if you take proper action. Think of this as the food pyramid. Too much sugar can be bad for you. But with just the right amount, it can be beneficial for you mentally.
The Investment Risk Pyramid is an asset allocation theory and I have presented it in an easy visualization in this article. Investors can use in selecting different asset classes to diversify their portfolio according to their risk tolerance and expected returns. I highly advise many to screenshot this and hang it on their walls. It can be a good daily reminder before you press the buy or sell button.
Bottom of the Pyramid: Lower Risk
The base of the pyramid contains the lowest set of risky investments. These investments that have the lowest risk, because, well, they generate the lowest rates of returns. These investments are represented by the pyramid’s wide base as low-risk investments should generally constitute the bulk of your portfolio. These investments include cash and cash equivalents, money market account and money market funds, treasury bills, certificate of deposits as well as high-rated government and corporate bonds.
Middle of the Pyramid: Medium Risk
The middle of the pyramid contains investments of a moderate risk. Although they are riskier than the assets at the bottom of the pyramid, these investments should still be r'elatively' safe as investors all around the world also like to invest into these types of assets. They are the pinnacle of how the economy runs. These investments generally offer a stable return and capital appreciation in the longer term. These investments include income stocks and growth stocks as well as mutual funds, index funds and real estate - all necessities of life in the economy.
Top of the Pyramid: Higher Risk
The top of the pyramid represents high risk investments. These investments may yield large gains but may also yield large losses. Because of their speculative nature, you should only allocate money to high-risk investments if you can afford to lose them without serious repercussions. These investments include futures, options, commodities, penny stocks as well as alternative investments like precious metals and gems, collectibles, peer-to-peer lending and cryptocurrencies.
The most important part of this lesson is how to allocate these funds. It is not bad to invest into risky assets, as long as you are making sure to allocate your funds properly by moving them down the pyramid! For more risk management articles, please check them below! Happy investing and trading!
Trade Safe.
X Force
4 Rules to Day Trading - Realistic Approach On How To Not LoseHello traders. So you are thinking of day trading as a career? Let's start off with the bad news: it's difficult. Good news? It's doable - if approached with the right mindset. This is a part of my risk management series that I believe many traders can benefit - new or advanced. Day trading involves buying an asset and reselling it for a profit the same day - or for swing traders, a few days. Many people turn to day trading because it’s rewarding when done correctly. But for the faint of heart, many fail to do so and give up - or lose their whole accounts. My job here is to explain to the general public that day trading is not realistic for the faint of heart; however, if you do your research, practice accordingly, day trading can lead to some serious gains.
1. Compare your expected returns
The first step in limiting your losses when day trading is figuring out the expected return on all the trades you’re considering. You can use the following formula to calculate the expected return as also shown above in the diagram
Once you have calculated the expected return on all of your upcoming trades, you can compare the results and choose the trades that offer the most opportunity for profit. Please refer to my previous post on how to calculate the risk reward ratio below this guide.
Manage Your Risk
Managing risk is incredibly important. The best way to limit your day trading losses is to manage individual trades. You should never risk more than 3-5% of your balance on one trade. People tend to go all in. Yes - it gives the maximum gains possible - but often leads to liquidations or a trap that you may never be able to get out! As an example, if you have $10,000 in your trading account, you never want to risk more than $300 on a single trade. By keeping this rule in mind, you know you’ll never lose everything if you happen to have a bad day in trading. More opportunities will come - I promise, especially if you keep this step in mind.
Create a Daily Stopping Point (Risk Reward Ratio (RRR))
Here, you must decide how much you can afford to risk each day. This is very straight forward, but often missed out by many traders, including me! You have a few ways to determine this stopping point. For example, you can plan for the day to stop a trade if you lose 3 percent of your account, or, if you have three losing trades in a row, or, if you lose the sum of your average daily profits. These are just three of my favorite strategies to use. Keep in mind that if you decide to create a stopping point based on your average profits, the amount you can afford to lose will increase over time as you improve your skills.
Use Stop-Loss Orders! (SUPER IMPORTANT)
This is probably one of the most important ones. Even if you don't follow any of the 4 steps above, you can still reduce your total blowout loss by having a stop loss in tact. With a stop-loss order, you can minimize losses by deciding on a specific price that doesn’t go below your tolerance for risk. If the price of your trade reaches the stop-loss, you know it’s time to exit. 99% of traders forget this.
I hope this post helps everyone out!
Please check out my whole risk management series below!
The Hurdles of TradingI read something that made me think of something Steve Gregor had said in one of his teachings about the "failure" rate in this space (trading). "They" say the failure rate is 95%+ and that the failure rate is based more on the individual's psychology that has a direct impact on their trading decisions. I know personally that this is true from the things that I am dealing with in my life. One of Warren'Buffet's famous quotes is, "If you can't control your emotions, YOU will NEVER be able to control your checkbook." We have such an emotional response to money (just let someone ask you to borrow some money) that the pursuit of money, especially money that is relatively simple to attain, can cause many "head-game" problems in "searching" for that money.
To be successful in trading wealth, it takes just two things: 1) Belief and 2) SEEKING to UNDERSTAND FIRST. That is it, the secret sauce, the mojo, etc. The problem (and I am speaking from my own experience) is that I want it now; I want to take shortcuts, don't want to be patient, want things done my way, etc. 1) Anyone on the face of this planet can have success in the financial markets. It has nothing to do with "smarts" but more so with #2. 2) Seeking to understand first (the most challenging part of getting BUT once GOTTEN you have just created your very own MONEY TREE).
I will take a look at one of the hottest alt-coins on the market, which is BTCUSD. When we are brand new at starting to learn the ancient "secrets" of this GAME, we are taught some pretty basic things that, along the way, we seem to forget. 1) Larger time frames dictate smaller time frames, 2) Market Structure, market structure, market structure, and 3) Refer back to #2.
We have to understand what volume and the associated price action tell us so that we can then prepare to move when the market moves. (paraphrased Steve Nison - The Father of Japanese Candlestick Charting in the west). We need to know where we are in the "grand scheme" of things and where we are headed ("Look left to get right, look left to get on the right side of money" - FX Shepherd). As we can see from the chart, I have blue ellipses and red ellipses. The blue ellipses follow the market structure as it is moving up, making higher lows and higher highs. The red ellipses are where the market structure has been broken but not changed the trend (red arrows point to these red ellipses). A trend change would occur with breaking the long-term outer trend (short term) line and then finally, the LOW that started the upward journey, to begin with (long-term). I have included some "key" institutional moving averages to show how the market works together to keep everything in order (ALL THINGS ARE FIBS). You can see how the market has responded to the "nature" of these things as it has continued to move (further confirming the upward/rally)
With all that being said, to quote my brother Bin Wright, "If you want to make Grandma's Famous Cake, you can't change the recipe if you want it to be Grandma's Famous Cake." 1) Believe you can do this, 2) Seek to Understand First!
The Most Recommended Timeframes to Trade On (Top Down Analysis)Hello traders. Here I would like to take my take on the best timeframes (personally) that I use to trade on. This can apply to all tradable assets - especially for cryptocurrencies.
Weekly Timeframe (1W): Usually one-week traders are known as longterm traders. Usually they are good at analyzing the market from a longer perspective and will usually have a portfolio that is heavily catered towards fundamentals, rather than technicals. They will hold trades from lasting from a week up to even months - and possibly up to years. The advantages to a weekly trader will be that you don't have to always watch the trade; however, it will take longer to realize profits - and that's okay by them. Many new traders tend to avoid this approach because it means longer periods of time before trades are realized. However, by many accounts, trading with a shorter-term (day trading) approach can be far more problematic to execute successfully, and it often takes traders considerably longer to develop their strategy.
One-day Timeframe (1D): These are also known as swing traders. These traders hold positions from days, up to weeks. The advantages for swing traders is that they are usually more geared towards longer term profits and is comfortable with holding a trade overnight. After the trend has been determined on the weekly chart (lower highs and lower lows, for example), traders can look to enter positions on the weekly chart in a variety of ways. Many traders look to utilize price action for determining the overall trend, but indicators can absolutely be utilized here as well.
1H - 4H Timeframes (1H, 4H): These traders are usually known as 'hybrid' intra-day, day, and even swing traders. These two timeframes are usually the best to use indicators as the provide quick data and more data to help learn the process of the larger scale timeframes. These two timeframes are the epitome of creating the larger picture. These traders usually understands the concept of how markets open and closes from a day-to-day perspective. They understand the exposures of 'fake-out' signals. These traders will usually realize profits or losses quickly. After a trader has gained comfort on the longer-term chart, they can then look to move slightly shorter in their approach and desired holding times. This can introduce more variability into the trader’s approach, so risk and money management should be addressed before moving down to shorter time frames.
The best time frame to trade an asset will vary depending on the trading strategy you employ to meet your specific goals. The diagram above shows the time frames used by different traders for trend identification and trade entries.
This is a part of my risk management series, so if you are interested in checking out my other posts, please check below!
Complete Guide to Bitcoin Dominance & Alt Season CyclesHello traders. Here I will be showing a simple diagram of the whole Bitcoin dominance effect towards Bitcoin and Alt coins. The diagram is extremely simplified so that anyone can refer to this chart in the future. Many people have a hard time when an alt season starts; however, understanding the few simple rules of Bitcoin dominance can help you know whether you are in a bull market or not!
In the above diagram, I am showing the complete relationship between BTC Dominance (BTC.D), Bitcoin's price, and Altcoin's price. You can refer to the chart above and use it to your advantage on positioning, timing, and risk management without the whole FOMO ordeal.
So, what is Bitcoin Dominance (BTC.D)? Bitcoin dominance is the percentage that measures Bitcoin’s share of the WHOLE cryptocurrency market capitalization measured in percentages. It is not a 100% perfect metric to use, but it helps to analyze the macro-market since many people like to refer to it - so it becomes a self-fulfilling prophecy, and a self-fulfilling prophecy is what usually happens if everyone starts to use it. We can observe the total capital (money) flowing between alts and BTC with this chart and make some conclusions about the market’s current state.
The chart above is showing that in most cases you’ll want to be in Bitcoin when Bitcoin Dominance is in an uptrend, and then be in alts when the Bitcoin Dominance is in a downtrend. We are witnessing that right now. When BTC and BTC.D rises, we psychologically assume that we want to be in Bitcoin, which then leads to a decrease in the alt coin market. For those who are interested in more risk management strategies, please look at the links below!
Trade Safe!
X Force
Why Many Continue to "Miss the Train" - Trading 101Hello Traders. Thank you so much for the overwhelming support on the last post - we reached over 1200 likes - a new record and the best post of the month on Tradingview. Here I would like to go over why we all continue to fail buying the dips time after time from a market psychology perspective. This is a big problem for many of the traders, and we are all guilty of it. Let's take a moment to discuss all of the phases as shown in the chart above.
1. Your initial signal is here but you don't take it - because you are waiting for a second confirmation,
2. You wait for a retracement so you can enter into a trade, but doesn't happen,
3. Retracement comes along at the top, but you are thinking that you have already missed the big move,
4. You long at the breakout high, then the market dumps to support, and you think that the top is already in, so you sell,
5. Then it consolidates, then pumps. Price continues up and you start panicking that your approach was wrong.
You are now either positionless or have waited too long after a 300% rally. The most important part of this approach is that you must have an idea of how Bitcoin has behaved over the past years. I have made an extremely detailed plan on where we are on the timeline - which may help with many investor's buying decision:
In this post above, I show that Bitcoin is currently trading in a new bull run. Retracements occur, and it's important to position yourself within the correct timeline. As you can see, with the right indicators, we can position ourself even if we feel that we "missed the train" - as long as you know and can accept we are in a new bull run. Another important aspect is understanding the concepts of accumulation. Accumulations may either lead to a dump or pump, but if you follow the correct overall trend, we can easily see that we were accumulating for the upside.
It's all about positioning! This is a part of my risk management series so please make sure to look at all of the related posts for risk management.
Trade Safe.
X Force
Why You Should Never 'HODL' Your Positions Up To A Certain PointHello Traders.
Here I give a friendly reminder to all beginners and advanced traders that holding (hodl'ing) your position is not ideal up to a certain point. The math of percentages shows that as losses get larger (compound interest), the return necessary to recover to break-even increases at a much faster rate. A loss of 10 percent necessitates an 11 percent gain to recover - and that is where it goes all downhill. Increase that loss to 20 percent and it takes a 25 percent gain to get back to break-even. A 50 percent loss requires a 100 percent gain to recover and an 80 percent loss necessitates 400 percent in gains to get back to where the investment value started.
Investors who get hit by a bear market need to be aware that it will take a while to recover, but the math of compounding returns will help the cause. Consider a bear market with a 30 percent drop in value, down to 70 percent of what the stock portfolio was worth. A 10 percent gain returns the portfolio to 77 percent. The next 10 percent recovers to 84.7 percent. Two more 10 percent gain years put the portfolio back to 102.5 percent of the value before the drop. So a 30 percent drop necessitates a 42 percent recovery, but 10 percent a year compounded for four years puts the account back into profitable territory. I will be doing a second part to this post on the idea of "DOLLAR COST AVERAGING" (DCA).
What the math of stock market losses shows best is that investors need to protect themselves against big losses as shown in the diagram above. Mental or limit based stop-loss orders to sell stocks or cryptocurrencies are there for a reason. When a certain loss level is reached, it will pay off big if the market is moving into bear market territory. Investors sometimes have trouble selling stock they like at a loss, but they will like the stock or cryptocurrency if it can be bought back at a lower price.
If you are interested in how to create the perfect trading plan, please see my previous post here:
Trade Safe.
X Force
Bitcoin's Two Year Forecast - "When Should I Buy Bitcoin?"As Biden suggested, "It is a time for healing." - I believe it is absolutely true for a time of healing in all aspects of the world, including Bitcoin.
What is the Stock to flow? (about this indicator)
As suggested by the creator of this indicator, 'PlanB' :
" SF = stock / flow . Stock is the size of the existing stockpiles or reserve. Flow is the yearly production."
In simple terms:
Stock = How many Bitcoins are currently in circulation
Flow = How many Bitcoins are created each year
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Here I would like to explain the observations based on my own - these are the FIVE main phases of price action:
1. Price Halving Event
2. Price Discovery Phase
3. Price Continuity
4. Price Explosion / Blowoff Top
5. Price Maturity
Without getting too much into the mathematical details and formulas on how this indicator was created, this is a perfect indicator, in my opinion, to show the overall observation of where Bitcoin stands from a visualized perspective, where it shows that Bitcoin can withstand anything in any certain period of time. The first and foremost, Bitcoin has not only have we survived the harshest conditions of the market for 2020 (and 2018 alike), Bitcoin's fundamentals are getting incredibly stronger by the day; furthermore, Bitcoin is now collectively seen as a form of investment tool and regarded by many as one of the best returning assets of the decade. I believe the next decade is yet to offer more when the fundamentals of Bitcoin is much clearer and clears up the issue of scalability and overall issues with price maturity.
The most important aspect of this chart is to find where you can start investing Bitcoin . This answers the million dollar question of, "When can I buy Bitcoin?" The answer is NOW, according to this indicator. Why and based on what evidence? First, history is not indicative of the present price action, however, it does certainly rhyme with it. We can note that with each consecutive rise, it was usually after the halving events of Bitcoin . As we are now approaching into 2021, we are now putting our first step into the uncharted territory of new price discovery .
Despite the heightened level of volatility in the market, I believe it's important to emphasize that long term investors are unlikely to be fazed by the recent drop - especially after the 2020 events. The current short-term holder activity is reminiscent of previous bull trends, and if we are able to survive 2020, how can we not survive 2021-2022. As such, if BTC recovers strongly from the recent drop, the chances of a rally continuation could increase.
What will you do?
We hope that you are able to be disciplined this time and learn from the past mistakes of every year, and it is increasingly showing that we are well on our way to new uncharted territories of ATH .
How to Create the Perfect Trading PlanHello traders! Here I would like to present to you another personal market psychology trading plan that I believe is effective for all traders ranging from beginners to advanced . Do you have a trading plan? Most don't. It's very important to create a set of fixed rules that you will always follow when you are trading! The key word here is trading - not investing. Investing has a completely different set of rules when finding the right entry and profitability of your account; however, here I will be showing you the sole principles of my own trading strategy that I believe has worked for me over the past years of trading. If you follow these steps correctly, I believe you will have the golden ticket to a much more profitable future, and if applied correctly, you will be having more winning trades than losing.
The 7 crucial steps:
1. Understand what timeframe you want to use
2. Risk management is key - don't over leverage, use a certain percentage
3. Market trend - make sure to follow the trend, don't be trade against it
4. Types of markets - do you trade mostly stocks? Bitcoin? Forex? These are all good for technical analysis
5. Entries - make sure that you have the correct entry. Don't rush into the market
6. Stop losses are crucial - especially when you are away from the charts
7. Targets - do you know where you want to exit?
Trade Safe!
X Force
Waiting to Enter on a Channel BreakHello my friend | Welcome Back.
Please support this idea with LIKE if you find it useful.
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* Once I have this structure in place, finding the trend becomes relatively easy. When the pair is trending lower, I only want to look for selling opportunities. Of course, the opposite is true when the pair begins trending higher.
Enter in the Direction of the Trend
At this point, you have identified the major trend and found a favorable corrective pattern such as a channel or a wedge.
The next step is to look for an entry once price breaks the pattern.
BTC: Understanding Healthy vs Unhealthy Bull RunsHello traders and investors, here I would like to compare and contrast the stark differences between a healthy and unhealthy bull run. I would like to dissect the 2019 bull run vs the 2020 bull run, as there is one major difference that I would like to focus on in terms of the differences of the two bull runs.
The first thing that we can witness from 2019 is that we saw an incredible 300%+ bull run. This is no doubt an incredible feat for Bitcoin during that time, but it was merely impossible to know when to enter the market with no confirmation in sight. We have seen a series of higher highs being printed, with no real pullback until the end of the blowoff top where most have entered. After the real pullback, most were probably entering the market thinking it was going to go higher, which wasn't the case as we were seeing a series of bearish confirmations and sell signals from our lagging indicators and a bearish descending triangle.
The second thing that we can witness from the current 2020 bull run is that it is much more extended and simply a matured bull run, especially taking into account of direct stock market correlations and the on-and-off decoupling of different assets. This year has brought interesting and new concepts of how the bull market is running, especially with the series of uneventful news such as the unfortunate COVID19 pandemic (my prayers are out for everyone to be safe!) and now the election cycle in place.
In my opinion, this is actually one of the most healthiest bull runs we have had with all things considered. The fact that Bitcoin has responded to all negative news and events from 2020, the fundamental news of Bitcoin and the store of value idea is being shown within the price action. We are also technically seeing a higher low with each consecutive pullback, which is absolutely fantastic from a bullish perspective. Now the underlying question remains, "when should I enter the market?" Based on confirmations, we can enter safely when Bitcoin consolidates when we create a new 'higher low', possibly in the upper $9,000 to $12,000 range for the longer perspective. Remember, Bitcoin can still have impulse waves in between, but the overall point is making sure you are riding the 'waves' of the market, not the impulse waves.
Trade Safe.
X Force
Trading Hierarchy: What Really Matters in TradingHello traders, these past few weeks have been incredibly profitable for many traders (and many losses as well)! Here I would like to show you an investor philosophy that I always trade by when approaching the market. Many people approach technical analysis thinking it's the first and foremost thing they must learn, which in reality, should be the last. It's crucial to first understand that trading psychology and risk management is the MOST important factor when trading within the market. Even if you have strong technical analysis (which can never be perfect), you can lose if you have BAD risk management. You can lose even more if you are no patient enough and trade EMOTIONALLY.
The sad reality is, many professionals who have traded for years, still have yet to realize this. I hope this small educational post shines light onto advanced and beginner traders. Everyday, I am witnessing traders who are making money not knowing why, or losing money not knowing why. One thing that I always like to advocate is that it's better to know why you lost a trade, rather than not knowing why you made money in a good trade. These are realistic expectations of the market, there is no simple magic pill in technical analysis .
Trade Safe.
X Force
2020: Why Bitcoin Is Inversely Correlated With the US DollarThere is no doubt that Bitcoin and the overall crypto market has some correlation with the stock market, with market experts remarking that Bitcoin has been surging in tandem with traditional markets for awhile over the past year or so. Extensive research has already been conducted by market experts to study the seeming correlation of both markets, but I would like to take my stab at it as well, but from the US Dollar correlation perspective. Investors should be aware of the close inverse correlation between the strength of the US dollar and Bitcoin.
A widespread debate among investors is the correlation of Bitcoin (BTC) with other markets. In other periods, gold and Bitcoin appear to be moving in tandem. However, the correlation that needs to be monitored most closely is that of the dollar, as the global economy is based on the strength or weakness of our global reserve currency, the US dollar.
Bitcoin and Cryptos as assets:
The US dollar is the de facto world currency, thus the value benchmark for everything else, including assets and other fiat currencies. A lot of financial activities are based on US dollars like loans and settlements, which no doubt increase requirements and adoptions of US dollars (In a negative word, US dollar colonization). When the world lacks a supply of US dollars, everything else will fall in price in reference to US dollars. If the US dollar is stable, then the crypto prices may have become influenced by the monetary policies of other currencies. For example, there is very high inflation in Argentina, so the general public would like to exchange their Argentine pesos for Bitcoin, to reduce the risk of inflations.
Although Bitcoin and other cryptocurrencies can function like currencies, like payment and store of value, the market cap of cryptocurrencies is quite small compared to traditional finance, and most financial activities are based on fiat money. After all, you can't borrow Euro, then pay back Ethers. Typically you need to pay back Euro. In other words, the financial inclusion of cryptocurrencies is not enough. If bitcoin and other cryptocurrencies replace more traditional financial functions, which may reduce the role of the US dollar and other fiat money, the relationships between Bitcoin and other fiat money will be different.
For most of Bitcoins’s young life, the correlation between the cryptocurrency and the S&P 500 was largely negative—until the 2017 bull run (when Bitcoin’s skyrocketing notoriety seemingly invited a host of new investors, many of whom had their hands in other markets).
What I believe:
I believe that since the US dollar is now standing at the frontlines of support, and testing it twice, we can see some form of recovery within the US dollar, especially with Trump miraculously being tested negative again, and now also going into elections - which makes people want to carry more cash while the stock market remains volatile. People will be looking for a hedge, whether it is gold or Bitcoin, we also can't take out the fact that cash is also king. In the chart above, we can clearly see the inverse correlation between Bitcoin and the US dollar. For example, the COVID19 crash led to the USD rise immensely high in preparation for a possible recession caused by this pandemic (stocks also plummeted). After a miraculous recovery, we saw the US Dollar bleed slowly and also saw a clear recovery in the stock market, bringing Bitcoin along with it up.
From a pure technical standpoint, we can see that Bitcoin has broken down our legacy trend line, and is now retesting the resistance twice, while the US dollar retests the support for a second time.
With all of these considered, we can assume that Bitcoin will have some form of correction, while markets remain volatile and cash driven investors will liquidate their investments in preparation for a hedge.
Trade Safe.
X Force
2020 BTC Timeline - In-Depth Fundamental & Technicals AnalysisAs a result of the Corona pandemic, the financial markets are experiencing a year of extremes. These include, as well as the speed of the price slump and the severity of the market fluctuations during the panic phase in March, the recovery rally that has lasted for two and a half months. Its extent is extremely impressive, and considered by many, terrifying. All of my explanations are clearly inputted in the chart above. Let's take a moment to dissect the current ups and downs of 2020:
Phase 1: Pre Corona Bullrun
Bitcoin was in the traditional bull market during the months prior and after 2020. There were no clear signs of retracement, including the indices and equities market.
Phase 2: Corona Crash
COVID 19 Pandemic, with a series of uneventful news. Global markets saw a crash, including Bitcoin's largest drop in it's history in a short timespan.
Phase 3 & 4: Recovery + Accumulation
1. Stimulus from the Fed and Congress
2. Expectations of a strong recovery
3. Dominance of Tech Stocks
4. Individual Investors outweigh the market
5. Momentum Trading
Phase 5 & 6: Uncertainty + Election Cycle & Post Cycle
Stock market makes a full blown new high, bringing Bitcoin to newer highs. All we can do is now assume and mix new educated guesses via technical analysis and current world fundamentals. Things to consider include the possible tech bubble, Trump testing positive for COVID-19, the election cycle. IT WILL BE A ROCKY RIDE.
Technicals:
1. Bitcoin has created a definitive top for the year 2020, and we still have yet to fill our CME gap near $9,700.
2. We are currently bouncing on the larger 236 fib level.
3. We are also trading in a tight region of the newly immediate fib level.
It is possible to revisit $11,000 levels, before re-visiting any lower levels. Current sentiment for Trump testing positive is NEUTRAL. The markets have reacted rather neutral. Bitcoin has dumped pre-market upon announcement, but has stuck to support.
Trade Safe!
X Force
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