Crypto Academy Week 14 | Homework Post for @fendit

Hello everyone welcome to my last home work of this week, this homework is about elliot wave theory which was a lecture given by the prof @fendit and obviously he gave a homework after the lecture and that is what this article is all about.

HOME WORK QUESTIONS

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A) Share your understanding on this lecture by answering the following questions:

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What's the application of this theory?

The Application of this theory reveals a lot lessons in the application of some principles in following market direction before investing in any trade, just like the prof wrote in his lecture, the theory helps to identify the market direction which determines the bullish and bearish trends of assets price, bearing in mind the psychological factors surrounding the investors in the trade.

Elliot went further to suggest that the unstable psychological element seen in the masses that is an effect of the up and down movement of the market wave, and this waves are similar in nature with infinite repetitive forms. This clearly shows that the market repeats overtime in the nature of psychological trends which can be used to determine the the actual trend of trade when not in use.

This theory that we are talking about try to pint out some important points for us as regards price action and determinants. When any action is taken there are there are equal and opposite to balance and counterbalance the actions. When the cost of crypto increases you will find some people selling their crypto to make profits and when the price dips, we will also find more people trying to buy-in more of this assets (because of low asset value) and lesser people selling off.

The theory intensify market strategy the identification of stop loss. It is obvious to use the impulsive and corrective wave patterns in directing the trader on when to stop loss or cash out after making profits. In the uptrend bullish impulsive wave pattern where the first 5 of the waves are seen on an uptrend and the last 3-waves seen on the down wave trend, it occasional directs the trader to know when to dump on the 3rd wave or HODL and make an exit position in the 5th wave pattern before market dips itself. This theory invariably gives the trader a quick market decision and direction on where to draw its analysis as soon as he sees this patterns. The good things here is that this patterns are repetitive though on a different scale pattern.

Finally the EWT theory has shown us that it works more effectively with the help of MACD and RSI which they both have the ability in delivering a complete data value in making both entry and exit positions in a trade which is detected inconclusive in the EWT alone.

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

After finding out that Elliot wave theory is an indicator that specifically direct traders of the market by taking into awareness of the rise and fall of market trends bearing in mind the psychological factors of the investors and participants in the trade, these theory basically works with the idea of two waves;

IMPULSIVE WAVE: by applying the EWT markets trends are always seen to be either bearish or bullish and this determines the nature of the impulsive waves if it should either be in the bullish or bearish trend. But on the normal level the impulsive wave move the same way the market trend moves because it is a wave that is in agreement with market movement, if the market appears to be bearish the impulsive wave will be the same.

It is characterized with five (5) waves in its trends which are seen to be from wave 1-5. To be able to identify the individual impulsive waves, the 3rd-wave always play a spotlight role due to its long wave trend. with wave 2 and wave 4 also playing a same directional wave pattern and wave 1 and wave 5 playing a same directional wave pattern.

• Wave 1: This wave is the wave were small investors invest because it shows small bullish movement and shows the opposite when there is a little change in the trend.

• Wave 2: This shows a bearish trend may be because of the sell out witnessed in wave 1 pattern This also reduces the prices of assets in trade and give in for a possible buy in by traders.

• Wave 3: Because of the low price seen in wave 2 traders buy the dips into the market again just like it was seen in wave-1 but this time there is a rush in investments which sees the long bullish trend in this wave pattern. This is where we see the long wave trend in the impulsive wave pattern.

• Wave 4: This is some how the same thing happening in wave 2 pattern, the long bullish pattern saw traders exiting just to make profits and hence led to slight shed off from markets and bearish trend seen in wave-4.

• Wave 5: There is always a region were the peak has reached and at this peak price movement are mostly likely to reverse and correct itself. The little bullish trend seen was because of the little entry positions in wave-4 made after a some exit positions seen in wave-3

Note that the best entry position in this kind of market pattern is seen in Wave-2 when traders are sure of the market trend and the best exit positions is at the peak of the long trend in wave-3 or HODL till Wave-5 and exit immediately before market corrects its self and starts a bearish run.

CORRECTIVE WAVE: This is different from what we saw in the impulsive wave pattern which we know respond directly to the market trend, Corrective wave works opposite of prevailing the market trends, do you know why it is named corrective trend? It is because the market reverses itself from a particular pattern. This is seen after the 5th wave from the impulsive wave pattern. It is labelled A,B & C corrective wave patterns. Corrective wave A & C are always to have the same market trend in same direction with Wave B always in the opposite direction. This patterns may be seen as ZIGZAG, FLAT or in the TRIANGLE pattern.

ZIGZAG: This pattern detect pattern B always different and moving in opposite direction from Wave A & C pattern.

FLAT: This position where all points of market trends are equal unlike what is seen in the zigzag pattern. This may be a little difficulty to decode.

TRIANGLE: Also another difficulty pattern to trace, but at this time its pattern clearly shows that volatility and volume is on the decline.

What are your thought on this theory? Why?

The EWT is a Genuine tool because this tool is seen to be good in entering stop loss given to the market trends at the point of trade. This is a great tool that should guide Traders and put their losses in check given to its proficient management of Losses, using the EWT Traders are put in an advantageous position to always know when to place the STOP-LOSS or monitor the patterns which give them possible occurrence of the impulsive and corrective wave pattern.

Let us continuously keep in mind that this wave design is fractal in nature where it is seen to be monotonous and never finishing with similitude seen on distinctive patterns

Since the EWT is seen not be more detailed in giving total and specialized information for investors to execute Entry & EXIT positions within the trade or investment, its combination with the MACD and RSI as a strong market tool would be an improved combo seen in giving for traders exit and entry positions within the trade or investment. So the use of the EWT with this combo too will makes it a more detailed and proactive indicator.

Finally the EWT is excellent the strength of market patterns which places investors in a profitable position in making benefits given to its position to proper entry and exit positions.

This is the BTC/BUSD pair market chart used for the purpose of EWT analysis. The market was traced when market was a little before 45000 mark, some few traders were seen making entry positions into the market which gave it some bullish trends. And when there were some price differences, traders were able to make some exit positions with some profits acquired which saw the bearish trend in wave-2. When prices were seen to drop at wave-2, More traders quickly made an entry positions this time more than what was seen from the entrance of wave-1, hence leading to price rush and uptrend seen in wave-3. Ordinarily, when we are at liberty to be at a promising position like this, we are expected to make some exit positions and make good profits which are also the resultant of the bearish trend seen on wave-4. These exit position in wave-3 vis-à-vis low price witness there after would normally attract more investors to make an entry positions which produce wave-5.

Key Highlights:

• There are a little buying position for investors in wave 1
• Dips are experienced from exit positions in wave-1 due to some bullish trends seen in low price in Wave-2. This attracts more traders to make stronger entry positions.
• There is always a long trend seen from the Wave-3 which exposes the traders to more profits from price changes and also more exit positions. There are influential effects on the next pattern which is wave-4
• There are downtrend positions seen in wave-4. This scenario also plays out in the wave-2 trend pattern.
• A small bullish trend is experienced in wave-5 before market corrects itself.
  Immediately this is seen in wave-5, the market reverses and tow the line of a corrective wave as captured in the screenshot. Just as seen in the market trend, corrective wave A & C are seen to follow the direction and trend pattern, hence leaving its counterparts B on a solo different or opposite pattern.

Conclusion:
The EWT is a great tool that will help in any trader trading journey so this lecture has been helpful and elliot is a genius any way thanks for reading @fendit