Give Probability a Hug and a Kiss. She Really is Your Friend

If you are a veteran  you've heard me say this over and over, but it bears repeating after the posts I've seen the last 24 hours. But first, let me say overall I see great 'maturity' versus the bottom we had in September and October. I find the crew here, which mostly seems to be from 'external' sources and not from the other EWT trading rooms, to have achieved a new level of Zen. That says a lot to you as people. That said I need to address some things anew given the influx of new members and because we had our highest influx of new members in January. (poor souls). Those folks must have experienced particular pain. 

Three years ago I was drawn to EWT because I already saw the EW theory playing in the markets I traded. But I didn't know how to use it even though I read the Elliott Wave Principle twice back in 2001. But this guy Avi Gilburt, who I had been following on Marketwatch,  has this strange ability to call moves in the SP500 and gold, almost predictively, using EW. I joined within a month, on trial. Not only Avi but many other analysts, paid and unpaid, seem to have the market pinned.

Did I make money? NO. I lost a lot actually. I was so enamored by the 'predictive value' of EW, I went all in. Badly. I blew up a futures account in the process. To make matters worse, I was here to repair some financial damage done by a failed startup and some tax issues. I needed that money. Yes, I am a gambler at heart. But I had nothing to lose at the time. I was here to learn to trade for a living, at least part time, but my start was rough. 

Fast forward 18 months -  2 years...

I was achieving consistency in my trading. Much of my trading at the time was in the SPY, IWM, and GDX options and they were producing a regular part time income. What was the difference? A trading plan.

You see, if not part of our regular market room you are missing out on exposure to many professional traders. And, in that room I was encouraged by analyst, and member alike to form a trade plan. 

Some components, though not exhaustive of a good tradeplan are:

What timeframe are you trading?

What PnL goals to you have?

Other success metrics?

What setups?

Where do you trade? What levels, and how much at risk?

I have long said that relying on EW's 'predictive' potential alone, which really isn't predictive at all, but rather based on probabilities, is a setup for failure. New traders go after directional edge alone. Mature traders, mix directional edge, which is never 100% (70% is outstanding), with position sizing and risk management. If you are only after directional edge, you are setup for failure, and you will likely leave here having lost money and angry, lest you turn that around. You will go from system to system until you are worn, broke, or both. I must have done it three times in a couple decades. 

What I encourage is that you actually hold my analysis with a fair amount of skepticism. Yes, put in some healthy doubt. But I do hope you respect the method for what it produces: CLEAR trade parameters, that give you probable entries with good stops, and key places to take profits where risk increases. If you consistently, based on the time frames and risk levels YOU have set out in YOUR plan, use EW you can succeed. But please note, the plan part is yours. I cannot decide how much risk you can take. (how close to the stop you can buy). I cannot decide how big your position can be (how much risk you take in net), and I cannot decide where to take profit, or how much heat to take in trade. I have a hard enough time deciding for myself and I have a plan. So, you have a big responsibility in making EWT successful for you. 

If you have thought different about this whole game; if  you are searching far and wide for a sure directional edge, I really want to encourage you to embrace probability. Internalize the trade parameters EW can offer. Put together a plan. And, set out mastering it. I still am.

Garret owns the educational role on EWT but because I have many who only belong to my room and have not been in EWT at large, for long, I have taken some responsibility for it. I have produced many webinars in 'about crypto' teaching these principles. Not only have I gone from being a money loser to 'consistently profitable' but I have become secure enough to leave my corporate job for good, using the principles and approaches I espouse. But this takes time. You have to find a trade plan that works for you. And, like my recent switch to long term trading while managing the trading room, your plan will change with the ebbs and flow of life.  Granted crypto trading helped a lot. But I promise without a plan it would not have happened. Please ask if this troubles you or leaves questions. However, I'm sorry I will not hear challenges of EW as a method. I use it very successfully to the point of retirement after being under financial duress. But that's because I turned the corner from relying on its predictive power to using it as a means to manage trades objectively, according to my own plan understanding probability. If you want to challenge it, that's fine. But really, you are missing out on the potential. 

Ryan Wilday hosts the Cryptocurrency Trading service on ElliottWaveTrader.net.