Elliott Wave Theory is a technical analysis method that Bitcoin merchants look for long -term recurring patterns of Bitcoin (BTC). Elliott’s wave theory says that a cryptographic active such as Bitcoin (BTC) price movements can be predicted as they move in the repetition of patterns from top to bottom called waves created by investor psychology.
Keep in mind that Elliott Wave or patterns do not provide any child or certainty about the Bitcoin future price movement (BTC), but serve to help find the probabilities for future BTC market action.
The theory identifies two different types of waves: impulse waves and corrective waves.
Impulse wave:
The impulse waves consist of five sub-warehouses that make the net movement of Bitcoin (BTC) in the same direction. However, he has three rules that define his training. These rules are unwavering. If the pattern violates one of these rules, then the structure is not a wave of impulse. The three rules are:
- The two wave cannot return to 100 percent of the one wave;
- Wave Three can never be the shortest of the waves one, three and five.
Corrective waves:
In the Elliott wave model, the corrective wave consists of three, or a combination of three, sub-warehouses that make the net movement of Bitcoin (BTC) in the direction opposite to the trend. Like a impulse wave, each diagonal sub-wave never returns completely on the previous sub-Anda, and sub-wonders of the diagonal may not be the shortest wave.
In a nutshell, the movement in the direction of the trend is developed in 5 waves called impulse waves. While any correction against the trend is found in three waves known as the corrective wave.
And three wave correction is labeled as A, B and C.
The Elliott wave model suggests that an asset such as the Bitcoin market price (BTC) can alternate between impulse and a corrective phase in all time scales of the trend. These impulsive and corrective waves are nested in a self-superillary fractal to create larger patterns. That is, narrower patterns can be identified within larger patterns.
These patterns can be seen in the long -term graphics and short -term. For example, a one -year table may be in the middle of a corrective wave, but a 30 -day graph can show a development impulse wave. Therefore, a merchant could have a long -term bearish perspective with a short -term bullish perspective.
In the image above, wave 1, 3 and 5 are divided into 5 smaller impulses labeled such as I, II, III, IV and V. Waves 2 and 4 are corrective waves and are divided into 3 narrower grade waves marked as A, B and C The 5 waves move in waves 1, 2, 4 and 5 constitute a wave of impulse of greater degree (i).
Corrective waves subdivide in 3 smaller waves, denoted as ABC. Corrective waves begin with an impulse against 5 wave trend (wave A), a setback (wave b) and another impulse (wave c). The 3 waves A, B and C constitute a greater degree corrective wave (II).
