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Applying Elliott Wave Theory on MC DONALDS by ThinkingAntsOkToday we will Use Elliott Wave Theory as a method to bring extra information to the chart, remember that this is a tool that must be combined with other trading analysis methods, and the final objective is to bring a clear framework for decision making. We will give a Real example on MC DONALDS chart, Elliot Wave Theory was developed by Ralph Nelson Elliott by observing the behavior of the Stock Market. This is a complex Theory, if you are interested in learning more about this, we recommend Robert Balan´s Book "Elliott Wave Principle" Remember the Basic 3 Rules of Elliot Wave Theory: 1) Wave 2 will not retrace past the starting point of wave 1. If the impulse waves are going up, wave 2 cannot go below the origin of wave 1. If the impulse sequence is going down, wave 2 cannot exceed the peak from whence wave 1 originated. 2) Wave 3 can not be the shortest of the "impulsive waves". Wave 3 is not necessarily the longest, but it is almost always the longest 3) In an upward sequence. Wave 4 cannot overlap the peak of wave 1. In a downward sequence, Wave 4 can not rally above the bottom of Wave 1. If any of these combinations is violated the particular sequence is not impulsive in nature. Another important concept is that Markets are Fractals by Nature, that means that the structures that you find on a 1D chart, for example, will be replicated on lower timeframes like 4HS. This Rule keeps going independently of the timeframe you are working on, the same happens on a 1H chart and a 10 minutes Chart. That's the reason you will see different symbols on the Elliott Count on this Example. Observe how we can make a new Count on the 5th Wave we see on the Weekly Chart (is composed by a new 12345 full count). And if we go to the Daily chart, we can make a new count over the 5th wave of the 5th wave, I know this might sound complex but when you take the idea of Fractals, this process becomes really logical. In this case, Elliott Wave Theory will tell us that all the Cycles are completed, if we combine this with price action for example (using trendlines) we can see that also the price is against a major trendline that is working as resistance, and the last Item will be the Divergence on MACD. This doesn't mean that the price will go in that direction, but if we have to put our money on something, for sure you want to do it in the strongest direction of your analysis. Hope this Educational post is Usefull for People interested in Elliot Wave Theory. Thinking Ants
NYSE:MCDEducation
by ThinkingAntsOk
3
Dow TheoryHere is a prime on Dow Theory to help you get on the right track. Charles Dow was an American journalist. He founded the Dow Jones & Co., created the Dow Jones Industrial Average (DJIA), founded the Wall Street Journal and created the Dow Theory, the basis for technical analysis (which is the important part for us). All in the XIX century. I will use the Dow Theory, and just that, to analyze the $BTCUSD daily chart from the beginning of 2017 to today. You will learn, I hope, the basics and see how to implement a very simple, but effective, trend following strategy using just that. Dow divided trends into 3 types: Major, Intermediary, and Minor. Minor trends are fluctuations inside Intermediary trends, which are themselves fluctuations inside Major trends. In this image, I've drawn Major trend components in red, Intermed. in orange, and Minor in yellow. Minor trends aren't very useful and Dow considered them to be distractions, noise, so we'll ignore them. Notice how during the bull run the Intermediary trends kept forming higher highs and higher lows, that's the very definition of an uptrend. A bull market is simply a Primary trend going up, so we were in a bull market. But not just any bull market, a parabolic bull market, since the trend was accelerating, getting always more vertical, higher prices in smaller times. Dow called each of the Intermediary trends "Swings" on the Primary trend. A Successful Swing (in an uptrend) happens when price makes a higher high, followed by a higher low. A Failure Swing happens when price fails to overcome the previous high and breaks the previous low. A Failure Swing is a reversal pattern, from it, you can derive other patterns you probably know: Double Top, Triple Top, Head & Shoulders... (And their bottom counterparts). Dow also divided each trend into 3 phases. For bull: I) Accumulation, when smart money starts buying; II) Public participation, when retail investors notice the trend and start buying; III) Excess, when the media starts calling the general public attention. For bear: I) Distribution, when smart money starts selling; II) Public participation, when retail investors start selling; III) Panic, when the broader public starts panic selling. I've drawn these phases in green and purple. Dow Theory gave us 4 signals the bull run was ending/ended: 1) At 17k, when price couldn't overcome the previous ATH, starting a Failure Swing (that's when I started selling a little); 2) At 15k, when the Parabolic trend line was broken (sorry @parabolictrav) (I sold more); 3) At 12k, when price broke the previous low, thus confirming the Failure Swing (Here I sold the bulk of what I planned on selling); 4) At 11k when price swung again - twice - at the previous low, but was unable to break it. For 1), according to Dow, we even had one more signal: the low volume. Volume confirms price action. Should price break our previous low @ ~5.9k, Panic phase begins, possibly taking price to one of the accumulation regions of the bull run: ~4k and 2.6k. (Remember: Support and resistance are regions, not solid lines.) With this, I hope you can better understand where all TA springs from, thus learning to use it correctly. For more info on Dow Theory and everything TA related, read this book: www.amazon.com
BITMEX:BTCUSD.PEducation
by FelipeZavan
2