Trading Elliott Basics with Cryptos

This post is not for the veterans here. That is unless you never created a trading plan. If you haven't start. But, I got a PM today that was clear the person didn't have a handle on trading the wave counts. So, want to give some quick basics. This is the way I do it. You'll find many more examples of styles. 

First, the universally bad way to trade Elliott wave counts is to see an analysts price targets, go all in and hold til you get there. While it may sound ridiculous to many, it has been done. In fact I was so impressed with the accuracy when I first got here that I tried it. I know of some both privately shared and publicly shared horror stories on this site. Don't be a horror story. And don't think that analysts are heros. The method works if expectations are correct.

COUNTS CAN BE WRONG. They are just reasonable probabilities based on study. What most traders neglect is that accuracy is NOT all you need to be profitable. Rather, some level of accuracy with good money management is a key combo. For example, I once had a 30% accurate quarter trading mostly options a few years back. That is 70% of my trades were losses. But I made $3000+. Terrible for me, but I came out profitable while accuracy was dismal.  Money management saved me. 

With this little lesson I am trying to show how I mix the two. The basic principle is that I want to be filled with the biggest position close to the stop, not enter the biggest position far away from the stop and watch as it drops to the stop but you have no ammo. That's painful. It's simple but few do it. 

The emotion you will need to fight is not being fully filled as it takes off. Let that go. 

Note I'm using my forex platform, not crypto charts because have the ease of mixing the visuals of EW, plus entry orders and stops. 

The basics of EW is we are trying to trade wave 3, the longest, usually fastest moving wave. Wave 4's are for scaling in for the fifths, but you should trade then smaller over all. In cryptos we have some massive wave 5's so, we do get a bit more aggressive in wave 5's. Most of our daily charts now are 5's at some degree. 

So, with the USDCAD short, I can't show the entry. Actually it was done in one chunk but close to the stop. See how close the stop is to the entry and where profit taking is below. I am 'scalping the 5th in this one.  may reverse them as this progresses but I'm doing a laddered scale out below. Because in Forex you are using margin I can set those orders now. In cryptos you need to make the entry trade first. 

Note short the USDSGD. I am doing a big scale in to the second wave with the biggest orders up top. I have some profit taking set for the 1.0 to 1.382 (A=C zone) I'll be moving stops down at that point to the .764 and hoping it continues. But I'll let the market take me out if it doesn't 

With the GBPUSD short I am not clear if we are in a fourth up or two . I am putting both entries for a deeper wave 2, but also putting in some orders for profit taking below in case we end up with a wave 4, complex correction. I put a half out stop at the wave 4 stop in case we get a deep wave 2. I'll then replace that order at the .618 where a deep wave 2 should hit. 

All these orders are set overnight and I walk away. I also am only using about 20% of my margin in the account. That is important. But with cryptos most of you are not going to trade on Margin. 

In my charts the boxes are that scale in zone. So, you can use them to place your orders if you want to trade this way. I know that some people like to ask me where to put orders. I can't give personal advice, but you can use these boxes to make your decisions. Typical stops I use:

Note that wave 2's can be shallow to deep compared to wave 4's, which why my entry orders are so spread on the wave 2's.

Wave 2: Strong break of the .764. Certainly the bottom of wave 1 MUST be a stop, but I like it a bit tighter in cryptos. 

Wave 4: .5 the length of three. 

I have been asked why my stops on the long term portfolio are so broad. This is for the folks that want to build a portfolio long term, not for everyone. Notice the cash position in the portfolios. I am giving room to use this scale approach but on the DAILY LEVEL, not the hourly like most of the short term trades. I am leaving much cash to add. But the principle is the same. But that wide stop is not for everyone. It is up to you. 

If you are new to these principles, let me know. 

USDSGD
USDSGD
GBPUSD
GBPUSD
USDCAD
USDCAD
Ryan Wilday hosts the Cryptocurrency Trading service on ElliottWaveTrader.net.