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#### Introduction
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The **Elliott Wave Theory** ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) considers that the market obeys to psychological factors coming from the mass of investors which are influenced by the supply-demand, becoming the factor responsible for the rise or fall of the prices of a currency. It seeks to explain the behavior of the market to determine the current trend of an asset in order to predict the future propensity of the price.
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##### Application in Cryptocurrency Trading
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> In cryptocurrency trading ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) is applied to identify as accurately as possible the moment to enter or exit the market taking into account the history of a crypto on a given timeline. A good analysis will allow to create a buy order or schedule a _stop loss_ at the most convenient time to profit or minimize any possible loss. Patterns are easily identifiable by candlestick charts and consist in the verification of the set of negotiations presented by the market, rather than, in an individual action or specific point.
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##### EWT is applicable for any type of trader as the patterns are presented as a continuous occurrence that takes place in both the long and short term.
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https://i1.wp.com/trendystockcharts.com/wp-content/uploads/2016/10/Elliott-Wave-Featured-Image-H.jpg?fit=1200%2C600&ssl=1<sub>[image source](https://trendystockcharts.com/technical-analysis-the-basics/elliotts-wave-principles/)</sub>
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##### What is required for the application of ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott))?
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It should be noted that this practice is part of the classic chartism since it is based on the study of candlestick charts and the support in the technical analysis of other indicators such as: trading volume diagram, support and resistance, confirmation of Fibonacci sequences, moving averages, among other technical aspects that serve to get to understand the history of a particular asset and its future behavior in the market.
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##### The goal is to determine when it is convenient to sell or buy stocks. Therefore, the application of EWT will depend on the ability to read and interpret charts.
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##### What is ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) based on?
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<sub>[image source](https://www.academia.edu/38330576/Elliott_Wave_Theory)</sub>
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According to the research I was able to conduct, the topic of ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) delves into the stock market taking into account mass psychology, which induces the graphical study of the market price movement, the formation of trends and patterns that are derived from human behavior and which in turn are repeated over time.
The EWT is based on the Theory of [Charles Henry Dow](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_Dow), from which I have analyzed a small excerpt which seems to me fundamental to understand **What is the application of the EWT?**.
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##### Primary market trend phases
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##### An asset's systematic cycle meets the phases of accumulation, participation and distribution, which repeats over time to form an asset's history.
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> The "accumulation" phase occurs when the investor or group of investors, according to their experience and study, enter the market considering that they are buying shares at the lowest price. This will cause the value of the asset to increase relatively up to a certain point where it will be possible to sell and obtain a differential profit. Subsequently, more investors will come in and buy motivated by the human behavior that governs the market, this is called "public participation" which contributes to the rise in price thus confirming the uptrend. The sales will have an increasing dividend and the market will gain confidence until reaching the "maximum" of the price, which will be considered as a _Resistance_ and the "distribution" of the asset will be about to begin, anticipating a percentage fall of the value, product of the sales at the highest price, which will finally confirm the downward trend that puts an end to a complete price cycle which will be repeated continuously. (Dow Theory)_ (Dow Theory)_
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The application of ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) extends to the stock exchange, CFD (spread market), ForeX market and cryptocurrency market, as well as, to any asset financial system where trading activity is carried out according to supply and demand.
Let's remember that price speculation and stock auctioning generate psychological influence on the masses creating the impulse on investment and consequently price fluctuation. This human behavior is the main source of information reflected in charts and other stock market indicators.
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#### What are impulse and corrective waves?
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https://www.mooncatchermeme.com/wp-content/uploads/sites/11/2018/12/trading-740x492.jpg<sub>[image source](https://www.mooncatchermeme.com/japanese-holdings-company-to-use-blockchain-for-forex-trading/)</sub>
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##### Momentum waves:
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They are those whose direction or trajectory evolves in the same direction of the market trend. They represent the investment or disinvestment that is made on a crypto asset; during an uptrend the momentum wave represents investors who have decided to buy assuming that the upward behavior will be maintained during a certain timeline.
While during a downtrend the momentum lines decline because they represent asset sales and therefore lead to market decline, just as in the uptrend, the momentum lines are in charge of propelling the market trend and selling predisposition.
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##### Corrective waves:
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It is the wave that comes after an impulse wave and unlike the impulse wave this one represents a retracement of the trend. It is about investors selling their position to take some profit margin during the course of the trend but such a price correction does not represent a trend change as such, but is part of a stock market behavior.
During an uptrend the corrective wave represents some selling operations while in a downtrend the corrective wave will represent a buying margin.
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#### How can you identify them?
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##### To show how impulse waves and corrective waves can be identified, take into account the **Upward Module 5-3** of the EWT:
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> ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) chart drawn by the author with the Elliott wave (12345) and wave (ABC) tool of [TrandingView](https://es.tradingview.com/chart/)
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Elliott waves theory suggests that the market moves in a pattern of 5 waves up and 3 waves down, each wave may contain sub-waves.
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##### Bullish stage:
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> I proceeded to draw with a [TrandingView](https://es.tradingview.com/chart/) tool the Elliott impulse wave pattern (12345)
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This is a complete market cycle whose first bullish leg is represented by waves 1, 2, 3, 4 and 5.
* Waves 1 and 3 are ascending waves also called impulse waves, taking into account that "3" tends to be the largest wave, otherwise, it will never be the shortest or smaller than wave 1.
* Wave 2 is descending, it is the correction of wave 1 and will never be lower than "1".
* Wave 4 is also descending, it corrects or compensates wave 3 and can never overlap with the first wave (wave 1).
* Impulsive wave 5 is the last ascending wave of the bullish stage and is followed by the corrective waves a, b, c.
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##### Bearish stage:
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> I proceeded to draw with a [TrandingView](https://es.tradingview.com/chart/) tool the Elliott corrective wave pattern (ABC)
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* Wave A is the first corrective wave corresponding to the downside, it occurs after the end of wave 5. During this wave the volume increases because it is assumed that the bull market has not yet ended and it is difficult to assimilate the fall of the price.
* Wave B, the price rises again in an attempt to revive the market, however, the volume is lower than in wave A, therefore, "B" only corrects the price of "A", but the market fall does not stop.
* Wave C, has volume equal to or greater than wave A and is dominated by selling that seeks to reach a new low in price.
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[TrandingView](https://es.tradingview.com/chart/)
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> The chart represents the final set of Elliott waves in a complete market cycle and you can distinguish each of the parts that have been explained in detail. [TrandingView](https://es.tradingview.com/chart/)
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#### Conclusion
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It is concluded that each stage contains its own impulse waves and corrective waves, impulse waves are those that go in favor of the trend and corrective waves are those that go against the trend.
According to the studies carried out, I believe that the ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) is highly feasible since it takes into account technical aspects as well as psychological aspects to offer results. The behavior of the stock market involves human behavior even more when talking about the cryptocurrency market that being decentralized involves the intervention of people working directly in the Exchanges doing spot trading through smart contracts in a P2P system for 24 hours uninterrupted; this makes human behavior the main source of information as it is constantly affected by euphoria, tiredness, feeling of uncertainty, momentum, etc.
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> I believe that a trader should be trained extensively in "Chartism" to be able to apply this study, however, the results should optimize notably his financial efficiency since the ([EWT](https://es.wikipedia.org/wiki/Teor%C3%ADa_de_las_Ondas_de_Elliott)) generates the complete information data required for trading. Taking into account that this natural market behavior obeys physical and human laws that repeat themselves incessantly, then its usefulness would be incalculable and would be available at any time when it is required to find an entry point to the market.
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<center><sub>**@nachomolina2
Original content**</sub></center>
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<center><sub>**Venezuela
2021**</sub></center>
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