The purpose of this post is a reference post, giving a background for all future posts. My name is Ryan Wilday and you can reference my work via Twitter if you like, follow me via Twitter @rwilday. I syndicate a certain number of articles on the web (Medium, Seekingalpha, and Moneyshow). I am also a regular speaker at Moneyshow.com’s TraderExpos. I will add these to Trybe now, as well as my occasional ‘charts of the day’.
Note that all of this is shameless marketing for the cryptocurrency service on Elliottwavetrader.net. Hey, just like the blockchain I’m transparent!!. But regardless whether you want to try the service or not, you’ll get some actionable reads from me. While I had a decent 18 year as an industrial designer and product strategist for a few fortune 500’s, I have ‘retired’ from corporate life, trade, and share my experience as best I can. If a daily trading room is the right place, where I post 30+ charts a day and take requests, and more thorough ‘guidance’ is right for you, come along. Otherwise, I hope you enjoy my public posts.
Here is a link to the service: https://www.elliottwavetrader.net/cryptocurrency
What you need to understand about me is I don’t give a flying rat’s back end about fundamentals in my trading. Tried it. Been there done yet, and it helps, but isn’t precise enough. IF I was buying a business for cashflow it would be essential. I have an MBA and if I was purchasing a company for cash flow, I’d tear into those financials looking for the stains and the stench of death before dropping a dime. With trading I don’t care. I’m a chart guy, pure and simple. And, the starting point for me is the Elliott Wave Theory, though I add a lot of other means along the way in trading a chart. Why? Because price action is the most direct feedback on a trade one can get. It sums the sentiment of all operators in a market, from whatever vantage point they are making their decisions, whether fundamental, technical, and yes, inside knowledge. Price captures it all.
I was first introduced to Elliot Wave (EW) with Prechter and Frost’s book, The Elliott Wave Principle in 2001. I read it through twice, but found it difficult to apply. I basically ignored it even though I could still see the basic structure in the market that Mr. Prechter outlines. So while I could see it, I couldn’t apply it. I learned to apply it as a paid member of Elliott Wave Trader, founded by Avi Gilburt, considered by many to be a ‘guru’ of the theories use. After a few years as a member, I was asked to host cryptocurrency on the site as an analyst.
The theory itself was postulated by an accountant named RN Elliott in the 1930’s. He proposed that markets move in waves of sentiment that reflect some of the fractal growth we see in nature- these waves observe a fibonacci relationship to each other, much like the subdivisions of a nautilus shell. ‘Waves of sentiment’ is key. In the end Elliott studied market sentiment- that bull and bear mood in a market and he proposed that it expressed a pattern similar to nature because people drive the market and they follow the pattern of nature.
In 1941, he stated: [
1941] should mark the final correction of the 13 year pattern of defeatism. This termination will also mark the beginning of a new Supercycle wave (V), comparable in many respects with the long [advance] from 1857 to 1929. Supercycle (V) is not expected to culminate until about 2012.
That ended up being an amazing quote. He had stated that the US stockmarket was going to begin a run that would last for decades. He was off a bit as it is still running. Yes we’ve have ‘bear market’s but if you understand Elliott Wave, you’ll see that they are subwaves or lower degrees of this great run. I’ll describe wave degrees briefly below.
I won’t belabor the basic rules of EW here except to emphasize the key principles: that impulsive or trending waves in ALL markets are subdivided in 5 waves, with waves 2 and 4 corrective. Corrective waves are typically divided in three. We impulsive waves 1,3, and 5 and the subdivisions of waves 2 and 4 as abc, to keep track. If you are visual stare at any stock chart long enough and you’ll see this 5 wave pattern. To read on it in overview, see wikipedia’s entry: https://en.wikipedia.org/wiki/Elliott_wave_principle.
However I highly recommend picking up Prechter and Frost’s book.
The first crypto I tracked with Elliott Wave theory was Ethereum. I first started trading Ethereum at $4 in 2016 and vacated all positions around $17 when I got a sell signal. That sell signal came after Ethereum’s first wave was complete, which topped at $21. I had my first signal that that wave 2 was complete when Ethereum broke over $7.
We project all waves forward from the log relationship of waves 1 and 2. From this projection, the third wave should top between the 1.382 and 1.618 log fibonacci extension. This is between $1420 and $3,563. Note ‘log’. If you are using linear fibonacci tools like on tradingview, even if your chart is set to log your numbers will be completely different- by a lot! In January this year, Ethereum topped at $1410 before starting the deep correction we’re now in, $10 off!!. Now that we’ve seen the 1.382, the .764 is ideal support. We don’t want to see that violated in wave 4, or we’ll question our view. That number is $122. We may not see that low, but we don’t want to violate it, at least not strongly.
If wave 4 support is not violated wave five can extend to the 1.764 to 2.0. That is between $6,490 and $16,500. That’s a big distance between fibs, which is typical in cryptos because of their immense volatility. Because these wave patterns are fractal, we can expect wave 5 when it begins to form to also present a 1-2, from which we can hone our target. This is called confluence- where two fib targets from two different degrees point to the same zone. Usually the lower degree can be used to make the larger degree target zone more precise.
While I don’t expect all this to be deeply understood, I wanted to give a brief workup on the method to my madness. I also don’t want to hold out Elliott Wave as a ‘predictive tool’ though sometimes it seems to work that way. It is actually a very practical guide through the seemingly random movements of markets. And, through that guide we can place trades at the most advantageous places, maximizing risk vs. return (distance to our stop versus distance to target).
Let me know if questions and I’m happy answer.