The Elliot Wave Theory concept can seen intimidating at first, it can show up as quite complex and difficult to grasp but in truth, once you know the basics of it, it becomes really simple.
We will be looking XRP together with Elliot Wave Theory to spot a strong buy type of signal.
Let’s start with the chart!
Let’s focus on the last 5-down wave count, this is marked in black.
When you can easily spot a 5-wave count, this is a good place to start with Elliot Wave (EW).
When a 5-wave count is not clear, one should move to another timeframe or change to a different chart all-together.
If you are new to this concept, you need to read some books on the basics of Elliot Wave theory, Robert R. Prechter, Jr. has the best volume on the topic and the R.N. Elliot Masterworks book can do the job.
With these two books you have everything you need to get started.
Now, we can clearly spot a 5 wave count and once we can spot this pattern we know that the current move is very likely to be at its end.
Since this is a bearish wave, what is supposed to follow is a bullish wave.
- XRPBTC moved to hit the 0.786 Fib. retracement level relative to the May-Sept. 2022 bullish wave. This is a strong level and can easily work as support.
- As this level is activated, we can have some consolidation/accumulation and then a bullish breakout or the new bullish wave can start right away.
- I looked back on the XRPBTC pair, not shown here, and the previous bearish wave also ended exactly once the 0.786 Fib. retracement level was activated. The consolidation took a few months as you can see between July and September 2022.
The last signal here comes from the volume profile and this is a great one.
When looking at a chart through Elliots eyes, his perspective, the strongest/highest volume should come around wave 3.
If you notice the volume for XRPBTC between December 2022 and January 2023, when it moved from wave 1 to wave 3, you can see a huge increase in volume.
As wave 5 comes into play the volume is much lower, confirming and strengthening our wave count.
This type of confirmation is really useful because this system is quite subjective and you can end up with a wrong wave count.
The volume really helps.
The same signal looked at in a different way relates to lows and lower lows.
While we had really high volume in December ’22, in January a lower low was hit yet the volume was lower, telling us that the bears lots strength or simply, they are done.
Now, the signals are there for a potential reversal in the coming weeks or months.
How To Trade?
Trading is a completely different game compared to chart reading.
You can buy anything without having the need to read charts just by defining your risk, a stop-loss.
If you set your risk before-hand, for example 15%, you can hold this or any other altcoin trading pair for as long as necessary in anticipation of a potential bullish breakout.
If the Cryptocurrency pair moves below your risk tolerance, 15% in this example, then the trade can be considered lost but if it holds above your stop-loss, the trade would remain active.
If a bullish breakout takes place the trade becomes a success. This is explained in more details on the 1INCHBTC article.
For the stop-loss, we always use a manual stop-loss but thats a different story. Here at AltcoinsPedia we are focusing mainly on chart reading/technical analysis, the trading strategy can be found through Lamatrades.com.
Thank you for reading.
I hope you are enjoying the content.
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