Steemit Crypto Academy - Season 2, Week 6} Elliott Wave Theory: Post by Prof @fendit

Hello friends, welcome again to my homework task for Prof @fendit lecture. Lecture was on Elliot Wave Theory. So i will do my best in attempting all these questions as demanded.

(Screenshot from BTC/BUSD EWT Chart)

What's the application of this theory?

The EWT as a market indicator has helped investors and traders over the years in in proffering market direction in a bit to better the user trader experience and enhanced profitability. The Elliot Wave Theory is a market indicator that helps in identifying market trends in a given trade in relation to the psychological effects of those actively determining the trades activities. This accountant man called Elliot sees the psychological impact of the investors behavior
in the trade as waves and tagged them to be repetitive in nature though on similar but different scale.

This particular discovery for investors and traders makes them a lot more proactive knowing that when they see this similar and repetitive market trends, they already know what next to do by either making an entry positions or exit positions all geared towards making profits and minimizing losses. This theory which tends to place more emphasis on market trends simply notifies us on the demand and supply push, entry and exist positions all determining if trade should continue bearish or bullish.

Considering the strength of this market indicator seen in the adequate use of the Stop loss, investors are now proactive to reduce loss to its low level vis-a-vis the traders risk aversion level. It comes with the two typical wave patterns that guides the trader which are the Impulsive Wave pattern that is classified as wave 1 to 5 and the Corrective Wave pattern that comes as wave A,B & C. When it is impulsive, it simply means that the wave pattern is in tandem with the market trend and all responding in same direction but when Corrective, it means the wave pattern is seen to be acting in opposite or reversal state.

There are little highlights here that would help to guide the trader when using this market indicator which is its ability to identify the shoes different wave patterns and not confusing it with other wave patterns. In the EWT, wave-3 is seen to have a longer trend than the others while wave 2 & 4 are seen to act alike. Wave 1 & 5 are also seen to have same wave direction. Immediately after the 5waves seen in the impulsive wave pattern, the corrective wave is seen and it has the A & C wave pattern pointing to same directing hence indicating the real corrective trend while the B wave moves in the contrary.

This simple knowledge positions and prepares the trader should in-case he come around such wave pattern so as to quickly take advantage of its profit story. The EWT is also seen to work as combo with the Moving Average Convergence and Divergence market indicator and the Relatively Strength Index to providing a more complete information on exit and entry positions needed for the traders onslaught in the market.

What are impulse and corrective waves? How can you easily spot the different waves?

The EWT basically functions on the duo; the Impulsive and the Corrective Waves in order to function more efficiently and effectively in the trade. This helps to proffer immediate and proactive solutions instead of reactionary actions in the trend.

IMPULSIVE WAVES

For any trader using the Elliot Wave theory (EWT), the impulsive wave pattern is the first of its kind to encounter. Just like its name Impulse, it simply means acting inline or same way. The Impulsive wave is seen to be in tandem with the market trend. When market is seen to go bearish, it becomes bearish impulsive waves. And when market goes bullish, the impulsive wave is seen in the bullish direction. The impulsive wave is categorized into five different wave patterns.

• Wave-1: This is where little activities of buying and entry positions done by traders , and hence there are little bullish trend seen. Prices are usually seen to be low at this entry level. When some form buying activities continues, this little bullish trends creates price variations or changes which enables some of the traders to take advantage and make some exit positions for profits.
• Wave-2: The little exit positions made before the bullish run which places some profits in the hands of the investor creates a bearish trend, hence the downward movements witnessed here. But one can trust the activities of the traders or investors to make an entry position given to the low prices witnessed again. In this cycle of wave pattern, there would be more entry positions unlike what was seen in wave 1. This is will give birth to the next wave.
• Wave-3: The more activities seen in wave-2 when prices went low will give way for another bullish trend. This time, the trend is seen to be more longer. It is an all cruise advantage for all traders who made entry positions as they would have more time to maximize profits. Most likely, there would more exit positions in this wave.
• Wave-4: Due to the several exit positions seen in the previous wave (wave-3), the market is seen to go bearish. This is also same scenario seen in the wave-2. Wave 2 and 4 as earlier said are similar in actions and traders activities. Prices will also go low, and there would be little investment see again.
• Wave-5: The little activity seen pushes up the market trend again and goes bullish. But traders are skeptical about this positions as it simply depicts and overbuy zone. Smart traders sell before markets hits the corrective wave.

CORRECTIVE WAVES

This is the kind of wave that sets in immediately after the activities of the Impulsive wave in the EWT market indicator. Just as its name, it is a wave that tries to reverse and correct whatever trend that has been seen effective in the market. When the Impulsive wave ends in a bullish position, it is obvious that the first wave in this category called Wave-A will follow a bearish trend but the impulsive waves ended in a bearish positions, the corrective wave starts with a bullish trend. Also in this kind of wave, the first and last waves in this category (Waves A & C) are seen to be in tandem and agreement of same trend whereas the B-wave is seen in an opposite position. Corrective wave may come in the form of Zigzag which comes with the zigzag trend what sees Wave pattern A & C heading in one direction aside the B-wave going on a different positions. It is also seen in the form of Flat where all points of the waves are in a almost flat states which makes it difficult to identify most times. The last is the Triangle which also seem alittle difficult to trace but it simply indicates a decreasing Volume and market volatility.

What are your thought on this theory? Why?

My thoughts are simple on this theory, the theory is an addition to the existing market indicators used by traders. The EWT may not be an excellent or perfect tool but it is left for any trader/investor to harness its field of strength. Given to the fact that it enables the efficiency use of the Stop Loss, traders are better placed to curtail the loss of assets seen during trading by leveraging on the EWT.

From my research, I found out that the EWT works on what we call FRACTAL which means it is a repetitive and ending kind of wave with similar waves but on a different scales. This helps the Trader to forecast and predict the market as soon as this repetitive signals are seen and hence make quick market decisions geared towards profiteering.

Though the theory does not make complete availability of data required to perform optimally during market forecast and prediction as regards exit/entry positions, it is known to work well in combination with other market indicators to give accurate entry and exit positions during trade. Some of this market indicators seen are the Moving Average Convergence Divergence & Relative Strength Index indicators.

All what the trader or investor needs to do is to explore the use of this tool by leveraging on all its benefits as well as try to limit the Cons by either using this indicator as a combo with other existing trade indicators or as a singular entity.

B) Choose a coinchart in which you were able to spot all impulse and correct waves and explain in detail what you see. Screenshots are required and make sure you name which cryptocurrency you're analyzing.

From the screenshots, i will be showing us the BTC and BUSD EWT chart. The screenshot demonstrate the different waves were captured right from the Impulsive to the Corrective Waves. The First wave was seen to start up on a low bullish trend which invariably means that there were low/little investors activities in play. But trust this investors, they are mostly short term investors who quickly take advantage of price changes variation seen in a trade. Hence , this little bullish trends that Led to price changes also allowed for some exit positions seen for traders to make profits.

This causes the bearish trend seen in wave-2. Prices get low in this spot and investors are seen to massively buy-in and make some entry positions. This births the next wave which is the longer wave-3 trend. This is longer than every other wave tend capture due to the engaged activities of investors who made entry positions when prices were bearish and low in wave-2. In this long trend position, investors and traders are at liberty to take advantage of the longer bullish trend, hence make enough profits in the trade.

We all know that each time there are exit positions, there are most likely cases of a bearish trend. This is the case in the next 4th wave. This wave have some similarities with the second wave. They are both bearish and act in same wave pattern. But nevertheless, as soon as prices hit low, there are some attractions from investors who make some entry positions and hence the next bullish trends seen in Wave-5 before the market corrects itself.
All this wave patterns discussed from the screenshot are all Impulsive kind of wave

The market is seen to correct itself immediately after the 5th wave. This is indicated with the A,B, and C positions. The Wave-B are always seen to go contrary to the A and C wave patterns. In a scenario where the 5th wave is bullish, the A & C Corrective wave patterns are bearish in trends and vice versa.

Thank you Prof, @fendit... This is my submission