Elliott - Wyckoff Breakdown (1) of (2)

After spending now 21 years trading, It's clear to see that a lot of the old ways work just as well as when I was first introduced to trading. There's a reason names like Wyckoff & Elliott are still popular terminology in the trading communities. Even Fibonacci now centuries old.

I wanted to share a quick top-down breakdown of the market setup using simple but effective tools.

Starting off - I have software called Advanced Get - this paints the Elliott wave patterns on the chart. There are plenty of tutorials available on the exact workings of Elliott wave theory. This is not the point here, it's just to illustrate the concept of how to use them in confluence. There are also some great books out there that go into a lot of detail such as Profits in the stock market and How to Identify High-Profit Elliott Wave trades in Real Time.

Once you have identified the wave levels (even the current wave) you can measure using Fibonacci retracements & extension tools to get areas of interest as I like to call them. (You often find these to also fall into categories of supply/demand and order block levels, imbalance. So they act like a magnet pulling the price. Bear in mind the two charts above are monthly and weekly.

After identifying major trends on the monthly and stepping down to a weekly view - you can now focus on finding these key levels before dropping to the daily.

At this point - personally, I look at how close the move is to the weekly levels and then look at COT along with sentiment data to get a feel for the "great professional" - strong hands and compare it to the weak hands, being retail sentiment. It is no secret that on most broker platforms over 70% (being generous) of retail traders lose money. Smart money is playing the game and throwing the crumbs.

What you might see is one of a few likely scenarios' ;-

1) COT data shows more longs than shorts (assume this NZDUSD example) - which means the move to level 3 wave is more probable.
2) Sentiment shows retail thinking the trend is exhausted and already for the drop at the time of writing 62% of IG sentiment is short.

other info could show that some net long positions have been closed (1) meaning the drop is coming and the wave 3-4 pullback on the weekly is about to take place.


looking at key levels, it's clear to see the (3) high on the weekly is in confluence with a major supply zone.


I will post part two of this idea later today.



Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.