Elliot waves Fibonacci trading method in Crypto is highly appreciated and used by many investors. Combining these two factors will help investors make a higher probability of trust when trading. However, this method requires investors to have solid professional knowledge. To better understand this method, let’s find out with Crypto Trading right away!
Analysis of Elliot waves Fibonacci in Crypto market
Elliot waves Fibonacci when applied to the Crypto market will give reliable results.
What is the concept of the Elliott Wave?
The Elliott Wave Theory was created by Ralph Nelson Elliott with a method applied to the price patterns of trading sessions. Through many years of research, statistics and observation of historical data of the Crypto market. This theory concluded that the market has a cyclical repeating wave pattern. The Elliott Wave Principle is related to the behavior of investment groups and the psychology of conversion.
And then they form waveforms. This phenomenon is most clearly seen in price and trading fluctuations. The Elliott waves rules is done through 11 wave patterns with specific names and chart patterns. Investors and traders can use this theory as an analytical tool. Besides, they also help investors identify cycles and predict market trends.
Basic concepts of the Fibonacci sequence
The Fibonacci sequence is considered an infinite series of numbers that start with the numbers 0 and 1. The special thing about this series is that it includes numbers such as 0,1; 1;2;3; and 5;….. The numbers after will be calculated by adding the two numbers before together. Because of this, the Fibonacci sequence is also the origin of the term golden ratio. With the Fibonacci sequence, the higher the two consecutive numbers, the greater the correct ratio they will have.
Elliot waves Fibonacci’s relationship
Elliott Waves and Fibonacci are closely related. First, Fibonacci helps control the analysis of waves. The more accurate the Fibonacci ratios from wave calculations, the higher the accuracy of the wave. Waves are often related to each other according to the Fibo ratios of 2.618; 1.618; 1; 0.618;…
In fact, when analyzing, researchers have discovered that the wave structure is the internal structure including impulse waves and corrective waves. The Fibo ratio between the waves will be related to price and time. The price and time of the wave will be related to the Fibo ratio through the 0.618 or 61.8% zones.
See more: Elliott wave: learn principles, trade effectively
What is the structure of the Elliott Wave?
In an Elliott and Fibonacci wave cycle, whether it is an uptrend or a downtrend, there will be 5 waves. Waves 1, 3, and 5 are impulse waves, while waves 2 and 4 are corrective waves.
Technical analysis of wave structure 1-2
Wave 1 is the first wave and it starts in a down market. Therefore, it is quite difficult to identify wave 1. The market trend before the first wave appears is still mainly down. The slight increase in trading volume in the market is due to the increase in price. Therefore, many investors when analyzing the technical analysis do not realize the existence of Wave 1.
Wave 2, based on Fibonacci trading ratios, will go up at least 38.2%. But they can potentially go up to 61.8%. Most wave 2s will have a retracement around wave 4 in wave 1. The reason why wave 2 has a retracement is because many investors at this point believe that the market will trend down.
Technical analysis of wave structure 3-4-5
Wave 3, is an extended wave and tends to last the longest among the 3 waves 1,3,5. At this time, wave 3 will tend to be 161.8% or 261.8%. To be able to identify Wave 3, investors need to pay attention to the slope of the wave. For wave 3, their slope will be higher than wave 1 and almost vertical.
Wave 4 is similar to wave 2, it will retrace 38.2% or 61.8% of wave 3. In case wave 3 is extended, wave 4 will usually retrace only 23.6% or 38.2%. In case the market runs very strong, wave 4 will retrace only 14%.
Comparing wave 5 to wave 1, wave 5 will usually be equal to wave 1 or a distance of 61.8%. Wave 5 can also be equal to wave 1 and wave 3 combined. If wave 5 is an extended wave, it will be 161.8% of wave 3. Or it can be 161.8% of both wave 1 and wave 3 combined. Investors should note that if wave 5 is not an extended wave, there is a possibility of peak-bottom divergence in waves 3 and 5.
Using Elliot Waves Fibonacci when trading Crypto
As mentioned, the Elliott wave along with Fibonacci are two indicators that have a close correlation. Combining both indicators and tools will help investors increase their winning percentage in the forex market.
How to Draw Fibonacci Retracement Numbers on Crypto Charts
The trader draws Fibonacci retracements on the chart by zooming out. Then the trader starts looking for the longest trend. The first three ratios on the chart will be the task and the compression zone. If the price has touched the level, the price will tend to increase again. After drawing the lines together, the trader will see that they are closely connected. The intersection of these lines is the resistance and support level on the chart.
See more: Open an Bybit account – explore the crypto exchange
Trading method with Elliott waves and Fibonacci
The Fibonacci sequence is also closely related to the golden ratio of 1.618. Researchers have found that investors often use this ratio. These ratios are related to the establishment of support and resistance levels. Specifically, these price levels will help determine the reference index of a trend. Fibonacci is simply a series of numbers that are added next. First is wave 1 which is formed with a Fibo ratio of 38.2%. Wave 2 with a support wave of 23.6%. Wave 3 also reaches the highest level with a Fibo of 62%%. Finally, the correction wave of the Fibo support zone is 50%.
Conclude
In fact, when investors use Elliot waves Fibonacci is quite difficult in the market. Because they require investors to have the skill to draw Fibo accurately and professional investment knowledge. For new investors entering the market, you can use a demo account to apply this method before trading for real. To gain more knowledge and news about the Crypto market. Don’t forget to follow Crypto Trading every day!
FAQs
When doing technical analysis, can Fibonacci and Elliott waves be used separately?
Investors when trading Crypto can completely use these two tools separately.
Besides the 5 main waves, are there other types of Elliott waves?
Besides the 5 main waves, Elliott waves also have corrective waves A, B, and C.
Can investors use Fibonacci in a non-trending market?
With an uncertain market trend, investors do not use Fibonacci.
