D4rkEnergy is back with an educational post about Wave-Theory. Yesterday, Philakone, a famous crypto-trader and TA-educator, was calling out one of the Top Authors in here, because he could not figure out how to draw lines. Philakone wrote the following on Twitter:
"How to NOT draw Waves. it blows me away... this guy has one of the highest reputations on tradingview, and his is shit. Ignoring the most BASIC rule of in zig zags..."
D4 is not here to create drama. D4 is not here to get enemies. D4 is only here to spread love and wisdom. He wants everyone to have success, therefore he decided to make this basic guide to Theory. It is pretty complex if we go into the smallest details, but let us keep it basic for now.
We are here looking at the 30 min BTCUSD Chart.
ELLIOT WAVE THEORY
Ralph Nelson developed the Theory in the late 1920s. He believed that stock markets was traded in repetitive waves and cycles. According to Investopedia this method gained popularity in the 1970s. Traders try to identify these waves and patterns, because it can help them predict the market.
- 1 Cycle contains in total of 8 waves. 5 waves (1-5), which follows the trend, and then a correction pattern A, B, C. We also call this a 5-3 pattern.
- Wave 1, 3, and 5 are impulse waves up
- 2 and 4 are correction waves down
- A, B, C are the correction
As you can see, Inside every wave we can have smaller waves, also called sub waves.
1. Wave 4 always have to be above wave 1.
2. Wave 3 can never be the shortest.
If these rules are broken, we have what we call an failure. And therefore it is not a real Cycle.
This was a really short introduction. D4 encourage you guys to dig deeper into this!
D4 loves you <3
And as always. Please follow D4 and give a LIKE, if you liked the analysis. It is much appreciated. Thanks in advance, my friends!
No hate here at all. D4rkEnergY loves Philakone and all the other Top Authors in here. So please refrain from any kind of drama. We all make mistakes.
• Impulse wave subdivide into 5 waves. In Figure 2, the impulse move is subdivided as 1, 2, 3, 4, 5in minor degree
• Wave 1, 3, and 5 subdivision are impulse. The subdivision in this case is ((i)), ((ii)), ((iii)), ((iv)), and ((v)) in minute degree.
• Wave 2 can’t retrace more than the beginning of wave 1
• Wave 3 can not be the shortest wave of the three impulse waves, namely wave 1, 3, and 5
• Wave 4 does not overlap with the price territory of wave 1
• Wave 5 needs to end with momentum divergence
It also came to D4s attention, that somebody disagree, with which wave we are on. And that is really great!
We always want to keep our eyes open for all opportunities. There are both arguments for we are on Wave 4 now. There are also good arguments for why we are in the middle of an ABC-correction.
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