In trading, learning from your mistakes is an essential part of evolving and improving as a trader. In this article, we will dissect a recent trade that did not go as planned, to help you understand the importance of correct Elliott Wave Theory (EWT) analysis and the significance of following a sound risk management plan.
Mistakes are an integral part of the journey for any trader, and I would like to start by offering my apologies to any individual that used my TA to enter a position that did not go to plan. As traders, we must embrace these moments as valuable learning experiences that will ultimately make us better at what we do. This article is a debrief of my trade and an analysis of where I went wrong.
Debrief: Where I Went Wrong
In this debrief, I will detail why I took the position, the first signs that the position was incorrect, what the new count looks like, and which wave I believe price action currently resides.
I initiated this trade based on my analysis of the Impulse Wave labelled as Minutte Wave 1 at the Yellow arrow. I believed this would be a combination correction and, after spotting two Wave Xs on my chart, I mistakenly assumed that Minutte Wave 4 was complete, and price action had moved to Minutte Wave 5.
Upon reflection, I realised that I had started charting this correction before its completion, which means I did not have a complete picture of what price action was doing. My current assumption is that I mislabelled the first Wave X, indicated by the first green arrow, which ultimately threw off the entire wave count. This example underscores the importance of accurate EWT analysis.
However, it's crucial to remember that these are still assumptions, so let's delve into the chart and decipher what price action is revealing.
The Initial Analysis
Let's begin with my October Week 1 Analysis, which laid the foundation for this trade.
My EWT analysis placed the price action in Minor Wave C of Intermediate Wave 2 of Primary Wave 5. We concluded that Minutte Wave 3 was complete and made the assumption that Minutte Wave 4 would take the form of a Complex EWT Combination correction.
The first signs that this count was incorrect was the immediate retracement back to our entry. This move was much more dramatic than I anticipated, prompting me to question the count. In hindsight, I should have closed the position and re-evaluated my count.
Identifying the Mistake
To identify my mistake in this trade, I referred to the rules and guidelines of EWT. Firstly, I confirmed whether the price action resided within the accepted levels of a Wave 4 retracement. I moved the Micro Count Invalidation number to the top of Minutte Wave 1 and confirmed that the price action had not retraced past the top of Minute Wave 1. Until this number is broken, we can assume that the count up to the top of Minutte Wave 3 is correct.
I then cleared my Wave 4 count and commenced at the top of Minutte Wave 3. This correction turned out to be more complicated than expected, and I can not confirm if the count proceeding Minutte Wave 3 is correct.
I have decided to monitor price action behaviour on the next move down and in relation to the -0.236 FIB and the micro count invalidation number. Currently, the Wave 5 target and the micro count invalidation are intimately close.
The Corrected Count
My current interpretation of this correction is a combination Triple Zig Zag. The first Zig Zag is the ABC correction into Subminutte Wave W, the second Zig Zag is into Subminutte Wave Y, and I assume the third Zig Zag will complete the correction at the Yellow -0.236 FIB level indicated on the chart.
I believe I identified my mistake by incorrectly labelling Wave X, which subsequently threw off every subsequent measurement.
The Next Trade
I will not attempt to trade this until I have more confirmation from price action. I want to see an immidiate retracement on completion of Wave 5 which will develop into an Impulse. On completion of that impulse, if the completion of Wave 5 did not breach the count invalidation number, I will look at a set up for entry to a Long. Until then I am out of the market playing the waiting game.
Conclusion
In future, I will adhere to my risk management plan, which dictates moving the stop to break even as soon as the trade is in profit, and must remember the words of my mentor:
Learning from our trading mistakes is a crucial step in becoming a better trader. This trade debrief highlights the significance of accurate EWT analysis, constant evaluation of your trades, and the importance of following a solid risk management plan.
Embrace your mistakes as opportunities to grow and refine your trading skills.
Safe trading!
Mistakes are an integral part of the journey for any trader, and I would like to start by offering my apologies to any individual that used my TA to enter a position that did not go to plan. As traders, we must embrace these moments as valuable learning experiences that will ultimately make us better at what we do. This article is a debrief of my trade and an analysis of where I went wrong.
Debrief: Where I Went Wrong
I initiated this trade based on my analysis of the Impulse Wave labelled as Minutte Wave 1 at the Yellow arrow. I believed this would be a combination correction and, after spotting two Wave Xs on my chart, I mistakenly assumed that Minutte Wave 4 was complete, and price action had moved to Minutte Wave 5.
Upon reflection, I realised that I had started charting this correction before its completion, which means I did not have a complete picture of what price action was doing. My current assumption is that I mislabelled the first Wave X, indicated by the first green arrow, which ultimately threw off the entire wave count. This example underscores the importance of accurate EWT analysis.
However, it's crucial to remember that these are still assumptions, so let's delve into the chart and decipher what price action is revealing.
The Initial Analysis
Let's begin with my October Week 1 Analysis, which laid the foundation for this trade.
My EWT analysis placed the price action in Minor Wave C of Intermediate Wave 2 of Primary Wave 5. We concluded that Minutte Wave 3 was complete and made the assumption that Minutte Wave 4 would take the form of a Complex EWT Combination correction.
The first signs that this count was incorrect was the immediate retracement back to our entry. This move was much more dramatic than I anticipated, prompting me to question the count. In hindsight, I should have closed the position and re-evaluated my count.
Identifying the Mistake
To identify my mistake in this trade, I referred to the rules and guidelines of EWT. Firstly, I confirmed whether the price action resided within the accepted levels of a Wave 4 retracement. I moved the Micro Count Invalidation number to the top of Minutte Wave 1 and confirmed that the price action had not retraced past the top of Minute Wave 1. Until this number is broken, we can assume that the count up to the top of Minutte Wave 3 is correct.
I then cleared my Wave 4 count and commenced at the top of Minutte Wave 3. This correction turned out to be more complicated than expected, and I can not confirm if the count proceeding Minutte Wave 3 is correct.
I have decided to monitor price action behaviour on the next move down and in relation to the -0.236 FIB and the micro count invalidation number. Currently, the Wave 5 target and the micro count invalidation are intimately close.
The Corrected Count
My current interpretation of this correction is a combination Triple Zig Zag. The first Zig Zag is the ABC correction into Subminutte Wave W, the second Zig Zag is into Subminutte Wave Y, and I assume the third Zig Zag will complete the correction at the Yellow -0.236 FIB level indicated on the chart.
I believe I identified my mistake by incorrectly labelling Wave X, which subsequently threw off every subsequent measurement.
The Next Trade
I will not attempt to trade this until I have more confirmation from price action. I want to see an immidiate retracement on completion of Wave 5 which will develop into an Impulse. On completion of that impulse, if the completion of Wave 5 did not breach the count invalidation number, I will look at a set up for entry to a Long. Until then I am out of the market playing the waiting game.
Conclusion
In future, I will adhere to my risk management plan, which dictates moving the stop to break even as soon as the trade is in profit, and must remember the words of my mentor:
If price action does not immediately retrace in a dramatic way, it is still going in the same direction...
Learning from our trading mistakes is a crucial step in becoming a better trader. This trade debrief highlights the significance of accurate EWT analysis, constant evaluation of your trades, and the importance of following a solid risk management plan.
Embrace your mistakes as opportunities to grow and refine your trading skills.
Safe trading!
