Why Bitcoin? Because Bitcoin generally trades with although not in sync with the broad market indexes (NASDAQ, S&P 500 etc.), and she is already dropping hints or market “tells” as to her intensions!
Who knows what currency or commodity may lead this market down from THE TOP for a normal though needed major correction? Oil dropped hints three weeks before leading markets down in Jan 2020 — COVID. Yet Bitcoin is at least a good indicator? Today, ARKB, an ETF for Bitcoin, commenced Wave 5 of 5 — the last leg at the top.
Whooph is considering a Bitcoin (ARKB) trade only for this last Wave 5, but the primary purpose of this week’s Whooph Trades brief is to illustrate generally how Whooph would enter this or any trade. First, a swing trader must know Where AM I?
I cannot stress this enough: For the longest time I struggled to make consistent income in the market, because I didn’t know where I was. I didn’t have a clue. I hadn’t grasped the importance of market waves or their regularity. A market’s ORDER.
Elliott Wave Theory
(In a Nutshell)
Five-wave Impulse
A Primary Trend consists of a FIVE-wave sequence (1, 2, 3, 4, 5 impulse waves), culminating in a final “exhaustion” push higher (Wave 5).
Three-wave correction
Following exhaustion of the Primary Trend (bull run or bear market) a corrective THREE-wave sequence (A, B, C corrective waves) will move against the primary trend.
Where am I?
Before I enter a trade, I must be able to answer this question: Where am I?
Where am I… in the midst of this chaotic mess we call a stock chart?
Step 1: Find the START of the most recent trend.
Has Price crossed above the Moving Average (MA)? Using the chart frequency you prefer, as a trader or investor (10-Day Hourly, Daily, or Weekly). At first glance you may see an uptrend, a downtrend, ranging, or you may see a pull-back. Locate that point where Price crossed above the MA.
Now, Increase the frequency from Hourly to Daily or Daily to Weekly, essentially “zooming out”. Now identify a Primary 5-wave Trend and Corrective 3-wave Trend. At the end of this article is MORE HELP for making this process much simpler and easier.
Step 2: Count the wave-highs above or since crossing the MA.
Likewise, I count the number of waves before crossing the MA. In this way, you can determine exactly where you are and in what trend, before you attempt BUY.
Warning: Failing to do this exercise, traders are left anxious, floundering, and woefully lost. Some may still snatch gains here and there, but always doubting their abilities. So, then it becomes about the money. And it’s NOT about the money! Trading is first about the METHOD. Of course discipline, emotional control, position size, risk management…all of these things are critically important, but they’re a part of the method.
Step 3: Find Wave 5.
We’re going to talk A LOT about Wave 5 and what happens on Wave 5 to corroborate your analysis. It’s too much to delve into now. But I will say, if you don’t see the “tells” or evidence of exhaustion, you’re not there! One example of buyer weakness or buy exhaustion is Divergence. Price-Indicator Disagreement. Here at Charlie Whooph we’ll explain where and how-to look for and identify disagreement. We’ll show simple and more complex examples of Price-Indicator Disagreement. If you’re not seeing some definitive tell or sign in Wave 5 of an uptrend, your wave analysis was wrong.
It’s a lot at first. Be patient. Hang in there. There are no dumb questions; feel free to direct message me with questions!
MORE HELP — Elliott Wave Theory:
Elliott Waves were discovered by Ralph Nelson Elliott in the 1930’s. Today market bot algorithms are written to include a recognition of Elliott Waves. Before I accepted the Elliott Wave Theory, I was bent on disproving it.
Call it Human Psychology or self-fulfilling prophecy, trade decisions in large numbers by traders, investors, fund managers and BOTs cause the Wave phenomena. I don’t know. But to you, best of luck disproving the Elliott Wave Theory! I’ve analyzed over 40,000 charts in 25 years trading daily; I failed to disprove the theory. So, I recommend: Call it Law.
Before I embraced the validity and existence of Elliott Waves in every timeframe, I could not make regular and consistent income.
Regular or Consistent Income
What is regular or consistent income? When I look at a graph of my account balance over time, I want to see a straight damned line! Even part of it, spanning several months, consisting of 150-200 trades.
There should be a gradual upslope indicative of regular gains or income, which suggests there’s a METHOD. Charlie Whooph’s Substack Whooph exists to share those swing trade METHODS.
If a trader looks at his or her account balance and doesn’t see a relatively straight line, he or she probably feels “lost” and may be lacking a key component or method. If that’s you, you are not alone. Believe me, angst and frustration for lack of know-how or instruction is normal in this profession. You may feel you’re lacking discipline or a viable trading method; that also is normal!
Until I understood that markets move consistently in Elliott Wave patterns, began to parse these waves, answer the Flight Checklist Question “Where am I ?”, I didn’t have a clue. I was lost. When I finally acknowledged that truth, my game changed. I was on my way to Repeatability and Consistency in trading.
Parsing waves via Price (only) will give ya headache. Instead, I recommend using the MACD histogram highs and lows, exhibited in the example above, to count waves.
Elliott Waves 1-5 are present in 99% of trends and corrections in all timeframes.
Until next time, thank you for reading. And seriously, message me with questions.
— Charlie Whooph