A few years ago I was introduced to TA (Technical Analyses). TA can be applied to any tradable asset and currency. It's a method giving an indication of what the future value development of said asset or currency will be like. TA is not a crystal ball as such, but it tries to predict the future, therefore behaves kinda like the combination of a crystal ball plus its reader. TA is mostly useful to investors and traders not able to park 'emotions'.
Back in the days when I got myself into crypto, I tried to apply some of the basic TA technics to some of the assets and currencies I was interested in. This was 2017 for those interested in learning. Those who are not interested in knowing, sorry, you know now 🤣.
Introduction & Summary
In this article, I'm gonna try to explain how TA is to be applied. Though this article may seem to be relevant to those that not using TA, or not knowing what TA is, I urge any TA expert to continue reading as well: You may learn something 😉.
In these paragraphs, I'll provide you with a peek inside of TA: I'll use the form of an empirical study. I'll introduce the Emotion/Ratio converter. The results from all this, you can read in the last two sections of this article. The structure is as outlined below:
- TA Explained: Empirical Study
- Emotion/Ratio Convertor
- Strong Advice
- Final Words
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TA Explained: Empirical Study
Yesterday late afternoon and evening (my time, which is GMT+2, or for those thinking in Universe instead of Greenwich, UCT+2) I took hours and hours watching the developments of the Ether/US Dollar pair at Bittrex. The aim of this exercise was to find TA patterns and subsequently to make the decision to step in, to step out or to do nothing.
In the early evening, I discovered the Elliot Wave as shown in the chart below. It starts at the bottom, near the 1340 USD value of Ether and travels up to A, B, C, D and finally E.
Note: The Elliot Wave is a truly great pattern in the TA toolbox. Not always easy to find therefore increasing our levels of happiness when detecting one. But not only that, the outcome of such a pattern can be thrilling! Please read further and you'll start to notice the coolness of this pattern.
In any Elliot Wave, when you can't find a spot for the E, you can set it more or less randomly.
Though some basic rules apply.
Since the Elliot Wave is upwards, E shall be set at a point above C, and always to the right side of D. The direction of E, from D point of view, shall be similar to the direction of the BC-line. It's allowed to play with the angle of the DE-line within set boundaries. On the vertical axe you can set E as high up as you like. Since I wanted this point to be on-chart, I decided to set it to the all-time-high mark of Ether (approx 1450 USD). But, in reality, E is unlimited in height, as I've indicated with the blue-ish arrow in the chart below.
The market decided to break with the Elliot Wave, as you can see in the chart below. It ran out of the trapezium shape (the area in between the AC-line and the BD-line).
But rest assured!
When something like that happens, all the work in finding patterns is not bin material. More specifically, when this happens to Elliot Waves, it's a sign to investigate further.
Whenever Elliot Waves are not finished and we can detect multiple triangles in the chart, chances of a run-up with a multiplier to what we expected from the Elliot Wave pattern is increased: The more triangles, the larger the multiplier.
As you can see in the chart below, 4 triangle shaped patterns can be detected. This basically means, we can multiply the length of the DE-line with 4. In case you've set E off-chart eg at an unlimited high USD value, the rules are no different. You shall simply multiply 'unlimited' with four which gives you 4 times unlimited which in itself is unlimited. Cool! Isn't it?
In my case, I've set the USD value at 1450 USD, which is about 50 USD above point D, therefore the new E is to be set at: 4 times the difference of E and D plus D equals 1600 USD.
In the chart below, it becomes apparent the market was not too happy with breaking the Elliot Wave pattern. Subsequently, the market tried to get its act together and positioned itself nicely within the previously created trapezium.
This reaction of the market gives us another indication. When something like this happens, we almost know for sure the sky is the limit! No reason to hesitate anymore. It is time to apply aggressive Las Vegas moves: All-In!
Note: When your own 'All' is not a lot, no worries: Get yourself a loan as large as you can get; Borrow all the money you can get your hands on! Rest assured, it's gonna be beyond Mars soon!
By now, you've learned TA is a great tool! But I'll tell you, it's greater than you'll expect!
Though TA is taking the emotions out of the equation, turning decisions on buying, selling or do nothing into the realm of ratio, it can deal with emotions. Though TA is based on a set of basic math rules, the beauty of the TA tool is that it allows massive customisations and adaptations. How will this help TA to deal with emotions? Please continue reading below...
Intermezzo: The more creative you are as a person, the more creative and unpredictable your work is likely gonna be and the more likely you will make decisions based on emotions.
TA allows you to be more or less as creative as you handle your own work (ie you can let your emotions run freely), while it produces rational outcomes.
Though TA comes with a set of patterns and rules, advanced users may and can adjust them as they see fit. Due to its flexibility, endless amounts of patterns cane created, and endless combinations of patterns can emerge. All these patterns are mathematically described therefore the results are rational. Do you see the power of TA? Enormous flexibility while the results are basic math exercises: Ratio by default.
TA, therefore, is a so-called emotion/ratio converter. An emotion/ratio machine if you will.
In case you actually like to learn TA, forget about this article but check the content of our community members such as @rollandthomas.
None of the content of this article shall be regarded as any advice whatsoever or provide you with information that can, shall or must be used in anything you are planning to execution at the time of reading said information or any time afterwards, with the exception of the "Strong Advice" section above.
all images by edje unless stated otherwise
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