- 4-5% volatility
- higher price
- Histogram (white line) has to be lower than the previous one on the next price wave going up, and this is incredibly important
- MACD crossing over to the negative side for the 2nd time
- Bearishly diverging RSI
Rules to short that can never broken: I never short wave 1 and the RSI needs to be over 70.
1 – 4% or more volatily on 5 or 10m timeframe on an impulse wave up.
2- higher wave 5 than 3/ MACD bearishly diverging
3- Lower high on the RSI
Waves to short following those rules.
1 – wave 3 or 5 going up
2 – wave 3 going down
Short it when it breaks right here and target a 1.618 or a 1:1 extension, that’s what I do every single time.
I never short wave 5 coming down because there’s not enough move.
4 – wave C coming down
I also short C coming down, but it has to rally, it has to be impulsively moving.
I’ll short it between the 382 and the 65. Target the 382 or a support region.
Incorporating RSI, MACD, Histogram, PA and L2 to Scalping
Requirements to enter a short position apart from EW:
- 4-5% volatility
- higher price
- Histogram (white line) has to be lower than the previous one on the next price wave going up, and this is incredibly important
- MACD crossing over to the negative side for the 2nd time
- Bearishly diverging RSI
Do not ever stay in a trade if you can’t manage it
I first noticed the histogram levelling off and getting lower, and the MACD blue line about to cross over for the 2nd time (I never short on the 1st MACD crossover).
In the price action we see tons of wicks. This resistance, a higher wick (higher price), the histogram downtick just means it’s losing strength, and this is also shown by the bearish RSI.
If the RSI is showing 85 on a 10m chart, I am definitely considering entering a trade. Target the 382 or a support region.
Again, signs to short: histogram downtick, higher high on price action (1st peak, 2nd peak). 2nd wave of histogram downtick, MACD crossing over, bearish divergence on the RSI, but the price kept getting higher.
Take the fib region of whatever 2 peaks you are comparing and target the 382 (or a support region) because it gets hit way more often than the .5
Again, first we look for the histogram downtick, and we look for a higher price, those are the bearish divergences that will allow us to short.
Enter the short position on the vertical line. Target the 382 or a support region.
Enter a long position when you see a huge red candle. The 2nd histogram uptick is a requirement being met already. Look for a higher low on the RSI, and a lower low on PA, which is a bullish divergence.
Isolate the area we are comparing, from the 1st and 2nd histogram uptick, where they bullishly diverge. I would have bought on the 2nd histogram uptick.
I always long A because it’s always a decent bounce.
Another long example: we look for a bigger and then a smaller histogram tick up. If I don’t find that, I don’t enter the trade. When the smaller histogram starts ticking up that’s when I enter my position and target the 382 or a support region.
I also need to have a bullishly diverging RSI to go long.
Incorporating EW in the Scalping strategy in small timeframes
We are looking for a 5 EW structure going up and we want to short it at the top of wave 3 and 5.
The 5th wave will always have a lower high on the RSI than wave 3. So, start laddering shorts on the 5th subwave of the 5th wave.
Wave 3 is often much higher in RSI. Did this one hit target for the 1.618?
When A forms in the downtrend is when I go long, but subwave 5 of A needs to have a higher low on the RSI for me to do that. The histogram needs to have a higher low as well on the negative side (smaller uptick).
I’m definitely considering shorting because I believe it will get to this strong support region, also because we are getting the formula.
To go long, always make note of the previous low, and as soon as it breaks down, always assume it will make some sort of abc correction. When it breaks down the bottom of the A wave, we confirm it’s a C wave going down. The double bottom as the 5th wave of C indicates reversal.
At that point I isolate the area, and I look for the RSI and the histogram, the 2nd smaller uptick.
To go long I start by identifying a top and then I look where it bounces. At the same time I count the 5 EW structure. These are the subwaves of the 1st wave coming down.
We also see the 3rd wave coming down, wave 4 makes a bearish flag, and makes the 5 waves coming down.
After completing a 5 wave count we look for signals to go long. If we get 3 (instead of the 2) histogram upticks from the downside, even better.
When the 2nd MACD makes the high, it just wants to drop.
EMA50 on daily
EMA50 on daily will help in determining the trend (no need to buy exact bottoms and tops). Many alts broke out with huge green candles, and never retested EMA50, but they were forced to retest EMAs again yesterday when BTC went mad.
If you had buys on EMA50 daily, 80% of the alts would have given you 10% trades already.
Try to buy the alts which are closer to EMA50 on the daily, and just set the target. Our selling point will be the retest of EMA 50 once we close below EMA50.
- Ladder Buys – Never buy from one specific position.
Don’t chase profit, chase a good trade.
Use the Long Position or Short Position tools in Trading View to check your risk/reward ratio.
Setting Alerts on TradingView
above 70 and below 30 RSI, from 5 to 30 minutes charts
4% moving up/down over 4 bars in the 15m chart
Favorite Tools to Use
- Long Position
- Short Position
- Elliott Impulse Wave (12345)
- Elliott Correction Wave (ABC)
- Trend Line
- Parallel Channel
ELLIOT WAVE THEORY
Wave 2 never retraces more than 100% of wave 1.
Wave 3 always travels beyond the end of wave 1, and is often the longest and never the shortest. One of the impulse waves (1-3 or 5) will always be longer and bigger (a count of nine and a count of five have the same technical significance).
Wave 4, on higher timeframes, cannot retrace more than a wick into wave 1 territory.
The peaks of wave 1 and the bottom of wave 4 will act as strong supports. I try to buy there.
We need to make note of the 5th wave territory, which is the 1st impulse wave if we think it like that. We don’t know if it will double top or will break out, so that is why it’s important to take profit at the region on the top of wave 5.
We should target the area inside the green box as the end of the zig-zag pattern correction.
Extensions typically occur in only one subwave.
If the first and third waves are of about equal length, the fifth wave will likely be longer.
Equality (guideline of) – In a five-wave sequence, when wave three is the longest, waves five and one tend to be equal in price length. If wave three extends, the fifth should resemble wave one.
In Figure 1-6, wave 4 overlaps the top of wave 1. In Figure 1-7, wave 3 is shorter than wave 1 and shorter than wave 5. According to the rules, neither is an acceptable labeling.
Once the apparent wave 3 is proved unacceptable, it must be relabeled in some way that is acceptable, as shown in Figure 1-8, implying an extended wave (3) in the making. Figure 1-8 is perhaps the single most useful guide to impulse wave counting.
Extensions may also occur within extensions. The third wave of an extended third wave is typically an extension as well, producing a profile such as shown in Figure 1-9 (similar to extended 5ths, which are fairly uncommon).
Introduction to EW Theory
Rule of Alternation – Wave 4 is usually the opposite of wave 2 (if wave 2 is a sharp correction, wave 4 will usually be a sideways correction, and vice-versa).
The best way to look for the 1-2-3-4-5 is after a consolidation period. After the consolidation pattern is broken we try to count 5 waves.
The breakout counts as wave 1. In a micro setting we can see 1-2-3-4-5 and the a-b-c as well.
We will use the top of wave 1 as the breakout region for EW, and we will target at least 1:1 with the fib ext.
This breakout can be an impulse wave going upwards or an abc correction, so we need to analyse the structure to understand.
Again, wait for the wave 1 support to break to go short, this time on the downside.
Same thing on wave C, I wait for the break of wave 1 to short.
Intermediate to advanced EW Theory
Third of a Third – Powerful middle section within an impulse wave.
Corrections are never fives, only motive waves are fives. For this reason, an initial five-wave movement against the larger trend is never the end of a correction, only part of it.
Specific corrective patterns fall into four main categories, which can be sharp corrections and sideways corrections:
Zigzags (5-3-5: single, double, and triple);
Flats (3-3-5: regular, expanded, and running);
Triangles (3-3-3-3-3; four types: three contracting (ascending, descending, and symmetrical) and one expanding (reverse symmetrical);
Double threes and triple threes (combined structures – corrective combinations)
Double Zigzag – Combination of two zigzags, labeled W and Y, separated by a corrective wave labeled X.
Triple Zigzag – Combination of three zigzags, labeled W, Y and Z, each separated by a corrective wave labeled X.
A single zigzag in a bull market is a simple three-wave declining pattern labeled A-B-C. The subwave sequence is 5-3-5, and the top of wave B is noticeably lower than the start of wave A.
Zig Zag patterns can happen 2 or 3 times in a correction, resulting in 2 or 3 zig-zag patterns linked together.
In a bear market, a zigzag correction takes place in the opposite direction, which is often referred to as an inverted zigzag.
Occasionally zigzags will occur twice, or at most, three times in succession, particularly when the first zigzag falls short of a normal target. In these cases, each zigzag is separated by a “three”, producing what is called a double or triple zigzag.
Flat – Sideways correction labeled A-B-C. Subdivides 3-3-5
Expanded Flat – Flat correction in which wave B enters new price territory relative to the preceding impulse wave.
Flat formations are sideways corrective waves where the length of the waves is generally equal. Sometimes wave B can go above the beginning of wave A though.
Since the first actionary wave, wave A, lacks sufficient downward force to unfold into a full five waves as it does in a zigzag, the B wave reaction, not surprisingly, seems to inherit this lack of countertrend pressure and terminates near the start of wave A. Wave C, in turn, generally terminates just slightly beyond the end of wave A rather than significantly beyond as in zigzags.
In a bear market, the pattern is the same but inverted, as shown in Figures 1-31 and 1-32.
Flat corrections usually retrace less of preceding impulse waves than do zigzags. They participate in periods involving a strong larger trend and thus virtually always precede or follow extensions. The more powerful the underlying trend, the briefer the flat tends to be. Within impulses, fourth waves frequently sport flats, while second waves do so less commonly.
In a regular flat correction, wave B terminates about at the level of the beginning of wave A, and wave C terminates a slight bit past the end of wave A, as we have shown in Figures 1-29 through 1-32. Far more common, however, is the variety called an expanded flat, which contains a price extreme beyond that of the preceding impulse wave. Elliott called this variation an “irregular” flat, although the word is inappropriate as they are actually far more common than “regular” flats.
In expanded flats, wave B of the 3-3-5 pattern terminates beyond the starting level of wave A, and wave C ends more substantially beyond the ending level of wave A. The formation in the DJIA from August to November 1973 was an expanded flat correction of this type in a bear market, or an “inverted expanded flat”.
Triangle (contracting, ascending or descending) – Corrective pattern, subdividing 3-3-3-3-3 and labeled a-b-c-d-e. Occurs as a fourth, B, X (in sharp correction only) or Y wave. Trendlines converge as pattern progresses.
Triangle (expanding) – Same as other triangles but trendlines diverge as pattern progresses.
Triangle formations are corrective patterns bound by converging or diverging trendlines, which can be descending, ascending or symmetrical.
Triangles appear to reflect a balance of forces, causing a sideways movement that is usually associated with decreasing volume and volatility. Triangles contain five overlapping waves that subdivide 3-3-3-3-3 and are labeled a-b-c-d-e. A triangle is delineated by connecting the termination points of waves a and c, and b and d. Wave e can undershoot or overshoot the a-c line, and in fact, our experience tells us that it happens more often than not.
There are two varieties of triangles: contracting and expanding. Within the contracting variety, there are three types: symmetrical, ascending, and descending, as illustrated in Figure 1-42. There are no variations on the rarer expanding triangle. It always appears as depicted in Figure 1-42, which is why Elliott termed it a “reverse symmetrical” triangle.
Figure 1-42 depicts contracting triangles as taking place within the area of preceding price action, in what may be termed regular triangles. However, it is extremely common for wave b of a contracting triangle to exceed the start of wave a in what may be termed a running triangle, as shown in Figure 1-43. Despite their sideways appearance, all triangles, including running triangles, effect a net retracement of the preceding wave at wave e’s end.
There are several real life examples of triangles in the charts in this course. As you will notice, most of the subwaves in a triangle are zigzags, but sometimes one of the subwaves (usually wave c) is more complex than the others and can take the shape of a regular or expanded flat or multiple zigzag. In rare cases, one of the sub-waves (usually wave e) is itself a triangle, so that the entire pattern protracts into nine waves. Thus, triangles, like zigzags, occasionally display a development that is analogous to an extension. One example occurred in silver from 1973 through 1977 (see Figure 1-44).
Triangles nearly always occur in positions prior to the final actionary wave in the pattern of one larger degree, i.e., as wave four in an impulse, wave B in an A-B-C, or the final wave X in a double or triple zig-zag or combination (to be shown in Lesson 9). A triangle may also occur as the final actionary pattern in a corrective combination, as discussed in Lesson 9, although even then it always precedes the final actionary wave in the pattern of one larger degree than the corrective combination.
Corrective combinations – Double and Triple Threes
Double Three – Combination of two simple sideways corrective patterns, labeled W and Y, separated by a corrective wave labeled X.
Triple Three – Combination of three simple sideways corrective patterns labeled W, Y and Z, each separated by a corrective wave labeled X.
Elliott called sideways combinations of corrective patterns “double threes” and “triple threes.” While a single three is any zigzag or flat, a triangle is an allowable final component of such combinations and in this context is called a “three.” A double or triple three, then, is a combination of simpler types of corrections, including the various types of zigzags, flats and triangles. Their occurrence appears to be the flat correction’s way of extending sideways action. As with double and triple zigzags, each simple corrective pattern is labeled W, Y and Z. The reactionary waves, labeled X, can take the shape of any corrective pattern but are most commonly zigzags.
Combinations of threes were labeled differently by Elliott at different times, although the illustrative pattern always took the shape of two or three juxtaposed flats, as shown in Figures 1-45 and 1-46. However, the component patterns more commonly alternate in form. For example, a flat followed by a triangle is a more typical type of double three, as illustrated in Figure 1-47.
A flat followed by a zigzag is another example, as shown in Figure 1-48. Naturally, since the figures in this section depict corrections in bull markets, they need only be inverted to observe them as upward corrections in bear markets.
For the most part, double threes and triple threes are horizontal in character. Elliott indicated that the entire formations could slant against the larger trend, although we have never found this to be the case. One reason is that there never appears to be more than one zigzag in a combination. Neither is there more than one triangle. Recall that triangles occurring alone precede the final movement of a larger trend. Combinations appear to recognize this character and sport triangles only as the final wave in a double or triple three.
Sometimes waves can fail.
Sometimes wave 5 does not exceed wave 3. When wave 3 is super strong sometimes wave 5 can make a double top, not surpassing the resistance of wave 3.
It can also make a truncated top, where it doesn’t even get close to the top of wave 3. Both of those are called truncated 5th, as cannot exceed or get close to the 3rd.
Wave c from the abc (5-3-5 structure) correction can be truncated too, making a double bottom.
There are 2 types of motive waves: impulse and diagonal. People think that waves cannot overlap, but with leading and diagonal triangles wave 4 overlaps wave 1 territory.
Diagonal Triangles – is a motive pattern yet not an impulse (as it has one or two corrective characteristics).
Diagonal triangles substitute for impulses at specific locations in the wave structure. As with impulses, no reactionary subwave fully retraces the preceding actionary subwave, and the third subwave is never the shortest.
However, diagonal triangles are the only five-wave structures in the direction of the main trend within which wave four almost always overlaps wave one.
Ending Diagonals – are found at the termination points of larger patterns, indicating exhaustion of the larger movement. They only occur in the wave 5 or C position with the 3-3-3-3-3 wedge shape.
A rising diagonal is bearish and is usually followed by a sharp decline retracing at least back to the level where it began.
A falling diagonal is bullish, usually giving rise to an upward thrust.
Fifth wave extensions, truncated fifths and ending diagonal triangles imply a dramatic reversal head.
An ending diagonal occurs primarily in the fifth wave position at times when the preceding move has gone “too far too fast”. The main key to recognizing this pattern is the decided slowing of price change in the fifth subwave relative to the third.
Leading Diagonal – appears in the wave 1 position of impulses and in the wave A position of zigzags. The overlapping of waves 1 and 4 and the wedge shape remain as in the ending diagonal triangle.
However, the subdivisions are different, tracing out a 5-3-5-3-5 pattern in the direction of the larger trend, communicating “continuation” as opposed to the “termination” implication of the three-wave subdivisions in the ending diagonal.
In leading 1st waves diagonals subwave 4 can overlap subwave 1.
Wave 5 is an ending 5th wave diagonal, and their 5 waves are broken down into 3, reaching the apex of the wedge wanting to break down.
Leading 1st wave diagonals also appear in the abc corrections, it’s the wave A, while the C wave is the ending diagonal. Do note, while A is 5-3-5-3-5, C is 3-3-3-3-3. As it go squeezed in there, go long!
Elliot Double Combo Wave (WXY)
Along the 1-2-3-4-5 structure it can fail anywhere, creating a w-x-y correction, a zig-zag 5-3-5 correction.
X marks the failure, and we will then see an extended abc correction.
To draw the wxy correction the 1st point (0) is where the 1 is, the second point is the w at 2, the 3rd point is the X (the failed wave 3) and the 4th point is at the bottom (abc).
Between the X and the Y we get an abc structure because it’s a correction.
Elliot Triple Combo Wave (WXYXZ)
After this correction it will try to make another impulse wave up, but it can fail again by retracing more than 100% of what would be wave 1, leading to another X, this time a triple combo correction wave.
We repeat the wxy and add an additional xz to complete the wxyxz correction. Many times we don’t need this to be good traders though, it’s just a matter of introducing concepts.
abcd patterns are 33333 patterns (abc-abc-abc-abc-abc-abc). Abcde is the correction and then it breaks out, here presented as an ascending triangle.
It can also present itself as a falling bullish wedge, which can be found in the A, C or 5th waves structures.
This 12345 are the subwaves for wave 3.
Above is the correction: 12345 of wave A, abc of wave B and 12345 of wave C.
After the abc correction we were expecting a wave 1 up, and that happened, but wave 2 failed as it retraced more than 100% of wave 1, so that means we will have more corrections, making another abc correction after the 1st abc correction.
Example on abcde correction. Sometimes on wave 2 or 4 we can find abcde. If wave 2 is an abc, wave 4 will be an abcde, or vice-versa. Note that sometimes it has some bulltrap regions, like in a.
Here’s another example of an ending 5th wave diagonal, which also makes a double top.
Open a 1h chart and switch to a 2h chart to adjust (don’t forget to count the subwaves). By rule of alternation, since wave 2 barely retraced, we assume wave 4 will retrace much more, possibly to 1.5 or 1.618 fib ext.
Having determined this in the 2h timeframe we will break it down further on the 30m chart to count the 5 subwaves for wave 3.
We can even go to a smaller time frame (15m) to confirm this is the 3rd wave going up, and it’s five subwaves and correction.
Breaking it further down to the 8m timeframe we see the 5 waves of subwave 3 forming already.
According to the rule of alternation wave 2 bounced from the 0.382, which means wave 4 will hit somewhere between the 0.5 and the 0.618.
Tom Dante’s webinar on order flow really made that topic very clear to me. The idea of FTA (“First Trouble Area”) I learned is my primary tool to know when to exit.
As long as you know where you’re wrong (stop loss) and what price is likely to reach for (target), your actual entry doesn’t need to be precise. If you have a good idea of what’s going to happen, you can still get in the trade focusing on direction and invalidation as opposed to sweating over my exact entry has offered me plenty of trade opportunities.
I used to think that if I had a support level drawn and price broke through it and then back above it, that meant that the level was ‘washed’ and of no further use. Such price behaviour is often a false break to get everyone bearish/shorting the retest before reclaiming the level and trading higher.
The same principles applies to trendlines, ranges, and plenty of other structures. ‘Confirmation’ is a frustrating term.
SZ makes this slippery idea very clear. If price comes into resistance, confirmation that the resistance will likely hold is given if price makes a lower low. At that point, rallies are for selling. If price comes into support, confirmation that the support will likely hold is given if price makes a higher high. At that point, dips are for buying.
Inner Circle Trader – market structure – “what does price need to show me to warrant pulling the trigger without blinking?”. Market making/markets seeking liquidity - markets and movements in price as a story.
Will Hunting (wmd4x) – In his videos he lays out very clear and objective criteria for trendlines, walls, et cetera. I am currently working on incorporating diagonal structures into my trading plan, at least as a factor of confluence.
Look for the origin of sharp rallies and drops in the market. This also often led me to the best support/resistance levels.
Structures become weaker the more they are tested repeatedly from the same direction. With each strike the orders at that structure are absorbed until finally buyers overcome sellers at resistance (and it breaks)/sellers overcome buyers at support (and it breaks).
This has had a great impact on my trading.
Several of my best setups are premised on the first touch/strike of a level i.e. when it is fresh.
I’ve stayed out of many bad trades (and thus protected my capital) by not buying/selling levels that were getting beaten up, whereas in the past I would have interpreted the repeated tests as a sign of strength.
Open the Chart after checking Price Action / RSI / Volume Scanner to find most trending / top liquidity / top volume coins.
Find out the exchange with Longest History
Measure the strength of Whale’s Bank Balance. Is he poor or rich. How to Measure ? Check past instances of Pumps & dumps. Rich Whales can sustain, bigger pumps for a sustained period of time with multiple 100% ++ sustained pumps during the history of the coins. Poor Whales can at best manage to pump prices intra-day / intra-week and you can clearly see large wicks dotting the skyline of the chart. Multiple Large wicks & no sustained pumps in the past suggests the big ticket investor who were interested in those coins were kinda poor wannabe whales who couldn’t really manage to pump it nicely. In most cases, they would post new lows and continue to trend lower. while such coins can surely pump but their sustainability of those pumps will be always low and they will almost immediately dump back. Now this can change only if new set of whales become interested in those coins
If the whale is rich, focus on the chart, if the whale is poor, leave the chart & move onto next. Why Leave? Well because those coins wont respect any TA & move all the time like headless chickens
If the whale is rich, use the TA and apply all the rules and take a position based on your trading strategy
This logic is relevant for unknown coins