Bitcoin - Forecast with Elliot Waves

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Hi Traders, Investors and Speculators📈📉

Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year.

The Elliott Wave theory is named after Ralph Nelson Elliott (28 July 1871 – 15 January 1948). He was an American accountant and also an author. Inspired by the Dow Theory, Elliott concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves. I find this another useful take on market cycles/phases, R Elliot is considered one of the 5 titans of chart analysis.

Let's take a BRIEF look at the Elliot Wave Theory:
Simply put, movement in the direction of the bullish up-trend is unfolding in 5 waves while any correction against the trend is in three waves (called corrective wave). From this you can already conclude that there is no specific time frame limit - you can have multiple waves in a larger wave, for example:


The movement in the direction of the UP-trend is labelled as 1, 2, 3, 4, and 5. The three-wave bearish correction is labelled as A, B, and C. These patterns can be seen in long term as well as short term charts.
Smaller patterns can be identified within bigger patterns. Think of it like this: Elliott Waves are like a piece of broccoli🥦 , where the smaller piece does in fact, look like the big piece. This information on smaller patterns fitting into bigger patterns, offers the trader a level of anticipation and/or prediction when searching for and identifying trading opportunities with solid reward/risk ratio.

The world is changing at an exponential rate, and some changes need to be considered as we take a look and plot the waves. We have five major classes of market: Stock market, forex market, commodities market, cryptocurrency markets and bond markets. The Elliott Wave Theory was originally derived from the observation of the stock market (i.e. Dow Theory), but certain markets such as forex exhibit more of a ranging market.
In today’s market, 5 waves move still happen in the market, but many analysts recently suggest that a 3 waves move happens more frequently in the market than a 5 waves move. In addition, market can keep moving in a corrective structure in the same direction. In other words, the market can trend in a corrective structure; it keeps moving in the sequence of 3 waves, getting a pullback, then continue the same direction again in a 3 waves corrective move. So not just ABC, but possible ABCABCAB etc. until a bottom is established via candlestick analysis.

To conclude, don't be too rigid with rules especially considering the ever changing markets and the fact that the Elliot Wave theory was originally designed for stock markets. However, this does not make it obsolete ! By combining a few of the methods mentioned above, one can get a reasonable idea of which market phase we are trading in and confirm it by taking a look at the charts from multiple perspectives and theories. Currently, I enjoy using Wyckoff Method, Elliot Waves, Fibonacci Retracement + trend based Fibonacci Extension , Candlestick analysis, Chart patterns (occasionally) as well as major supply and demand zones / whale zones. I like to use support zones and resistance zones for lower timeframes / the lower the timeframe analyzed, the higher the risk.


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ملاحظة

After the most recent hack on Solana, this is my take: