Trading Steem with Elliott Wave Theory

I am excited to join the second week of Season 20 of the steemit Engagement Challenge This week the focus is on the Elliott Wave Theory which is a popular method in technical analysis to help understand market trends and price movements. My goal in this challenge is to apply this theory to the Steem token identify key pattern and make predictions about future market cycle.

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As I participate I am looking forward to learning more about the Elliott Wave Theory and seeing how it can be use in real cryptocurrency trading. I will be analyzing past price data to identify important wave patterns and sharing my insight on how this approach can improve trading decision.

Whether you're an experienced trader or just starting out this challenge is a great opportunity to expand our knowledge and test our skill. I am eager to share what I discover and also learn from other participants in the community.

Five Impulsive Waves of Elliott Wave Theory: A Case Study with STEEM/USDT"

The Elliott Wave Theory is a popular technical analysis tool used to predict the market movements based on the idea that market prices move in repetitive cycles. according to this theory the market typically progreses in five Wave structure during an impulsive phase and a three-wave structure during corrective Phase. In this context we'll focus on the characteristics of the five impulsive wave and distinguish them from corrective wave Using the STEEM/USDT trading pair an example.

Characteristics of the Five Impulsive Waves

1. Wave 1 (Initial Move):
   • Characteristics: This is the first upward movement in uptrend (or downward in a downtrend). Its often characterized by small and subtle rise or fall as it is the beginning of a new trend.

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• Example: In the STEEM/USDT pair you might see this as the early rise after period of consolidation. For instance from July 15 to July 16 2024 we observed a slight increase from $0.1954 to $0.19519 marking the begining of an upward move.

1. Wave 2 (Retracement):
   • Characteristics: This wave corrects the gains of Wave 1 but does not go below the start of Wave 1. It is usually characterized by a moderate decline.

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• Example: For STEEM/USDT from July 16 to July 17 2024 the price dip from $0.19519 to $0.19487 representing minor correction after the initial rise.

1. Wave 3 (Major Move):
   • Characteristics: Wave 3 is typically the longest and most powerful wave in the impulse sequence. It often surpasses the end of wave 1 and shows strong momentum.

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• Example: From July 17 to July 19 2024 the STEEM/USDT pair saw a significant rise from $0.19487 to $0.203 demonstrating strong upward movement and a clear example of Wave 3.

1. Wave 4 (Correction):
   • Characteristics: This wave is a corrective phase that typically retraces portion of Wave 3’s gains. It is often less severe than Wave 2.

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• Example: In the STEEM/USDT data between July 19 and July 22 2024 there was a slight retracement as the price moved from $0.203 to $0.19966 indicating a corrective phase after Wave 3.

1. Wave 5 (Final Push):
   • Characteristics: Wave 5 is the final push in the direction of the trend. It often show diminishing momentum compared to Wave 3 and usually concludes with a higher peak.

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• Example: The STEEM/USDT pair from July 22 to July 26 2024 witnessed rise from $0.19966 to $0.20441 which may represent the final upward push before a new trend or correction begins.

Key Criteria Differentiating Impulsive Waves from Corrective Waves

• Direction: Impulsive waves move in the direction of the larger trend While corrective waves move against it.
• Structure: Impulsive wave are compose of five waves (3 impulsive and 2 corrective) While corrective waves are typically structured as a three-wave pattern (A-B-C).
• Momentum: Impulsive waves usually exhibit stronger momentum compared to corrective waves which generally experience less pronounced price movement.
• Length: Wave 3 is often the longest and Wave 5 is typically shorter than wave 3 but longer than Wave 1. Corrective wave on the other hand tend to be shorter and less volatile.

Example Analysis

To illustrate these concepts consider the STEEM/USDT data:

• Wave 1: Starting from a low point around $0.16955 on July 7 2024 the Price begins an upward trend.
• Wave 2: A minor dip occurs retracing slightly to $0.18134 on July 6 2024.
• Wave 3: A strong rally is observed with the price rising significantly to $0.24408 by June 9 2024.
• Wave 4: A slight correction follows with the price adjusting to around $0.23562 by June 8 2024.
• Wave 5: The final push is seen with the price reaching $0.24653 on June 7 2024 Marking the end of the impulsive phase before potential Consolidation or a new trend.

Identifying Impulsive and Corrective Waves on STEEM/USDT Weekly Chart

As someone actively engaged in cryptocurrency trading Understanding the distinction between impulsive and Corrective waves is crucial for making inform decisions. In this analysis I will walk through the STEEM/USDT weekly price data from June to September 2024 identifying key impulsive and corective waves. By distinguishing these waves I aim to explain the dynamics of price movements and how they Align With broader market trend.

Analysis of the STEEM/USDT Weekly Data (June - September 2024)

1. Impulsive Wave : July 14 2024 - july 21 2024
   • price increase from $0.18384 to $0.20441 (+11.35%).
   • This week shows strong bullish momentum marking significant price rise.

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• Reason: The sharp increase in price indicates continuation of the broader bullish trend making this impulsive wave.

1. Corrective Wave: July 21 2024 - July 28 2024
   • price decrease From $0.20441 to $0.16454 (-19.50%).
   • Following the impulsive move the price correct downwards.

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• Reason: This wave represents temporary pullback or consolidation after a strong upward move making it corrective wave.

1. Impulsive Wave: August 18 2024 - August 25 2024
   • price increase from $0.16795 to $0.19211 (+14.38%).
   • Another powerful upward movement shows the markets continuing its bullish trend.

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• Reason: The strong price gain in this period signifies the return of bullish momentum defining it as impulsive wave.

1. Corrective Wave: August 25 2024 - September 1 2024
   • price decreased from $0.19211 to $0.16185 (-15.75%).
   • After the impulsive wave the price Retraced again.

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• Reason: This is a corrective wave where the markets temporarily reverse direction pausing before the next Upward movement.

1. Impulsive Wave: September 1 2024 - September 8 2024
   • Price increased from $0.15628 to $0.17157 (+9.78%).
   • A smaller but clear impulsive wave indicating renew bullish activity.

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• Reason: The price recovery following the corective phase confirm this as impulsive wave consistent with the Overall upwards trend.

In this period I identify three impulsive waves (July 14-21 August 18-25 and September 1-8) and two corective waves (July 21-28 and August 25 September 1). Impulsive waves show strong upward momentum in line with the overall trend while corective waves represent temporary retracement before the next price surge. Recognizing these patterns is essential in analyzing price movement and making strategic trading decision.

Explaining the Alternation Rule in Corrective Waves

As someone who actively trades cryptocurrencies like Steem understanding the Alternation Rule in Elliott Wave Theory can Enhance my trading strategy by improving how I anticipate market corrections. In Elliott Wave Theory corrective waves follow impulsive waves and often take different form. The Alternation Rule states that if one corrective wave in sequence is simple the next corrective wave is likely to be complex and vice versa. This alternation helps balance market behavior and provides a framework for predicting price movements.

Types of Corrections: Simple vs. Complex

• Simple Correction: A simple correction typically follow a Clear ABC pattern where the price retraces in straightforward manner often seen in zigzag or flat formation. These correction are easy to spot and are often shallow.

• Complex Correction: A complex correction involves more than just a basic ABC Structure. It can include multiple zigzags flats or even triangles making it harder to predict. These corrections may take longer to resolve and often involve sideway price action.

Applying the Alternation Rule to Corrective Waves

According to the alternation rule if the first correction is simple the second one will likely be complex. This knowledge is vital When planning a trading strategy because it provides a clue as to what kind of price action to Expect next.

Example: Using the STEEM/USDT Weekly Data

Let’s apply the alternation rule using recent STEEM price data:

1. Simple Correction: July 21 2024 - July 28 2024
   • Price movement: From $0.20441 to $0.16454 (-19.50%).
   • Structure: This correction shows straightforward decline after an impulsive wave. The price retraced in clear downward movement which can be classified a simple ABC zigzag correction.

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1. Complex Correction: August 25 2024 - September 1 2024
   • Price movement: From $0.19211 to $0.16185 (-15.75%).
   • Structure: This correction involves a more erratic price movement where the price didn't simply retrace in a linear fashion but instead exhibited sideway volatility before continuing the downward movement. This is a typical example of complex Correction where the price action becomes harder to predict.

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How the Alternation Rule Influences a Steem Trading Strategy

When trading Steem or any asset understanding the alternation rule helps in making more informed decisions during corrective phases. Here how:

1. Anticipating Market Behavior: If a trader identifies a simple correction they can expect the next correction to be more complex. This helps in preparing for a more drawn-out and unpredictable price action guiding the timing of entries and exits.

2. Risk Management: During a complex correction where price action is less predictable traders might reduce position size or avoid entering new trades until the market stabilizes.

3. Adjusting Strategies: In a simple correction trader might confidently enter positions early in the correction expecting a clear ABC structure. In a complex correction patience is key as the correction may last longer and involve sideways movement.

The Alternation Rule provides valuable insights into how corrective waves behave helping traders like me anticipate market movements more accurately. By recognizing whether a corection is simple or complex I can adjust my strategy for the Steem token accordingly either entering trade early or waiting for clearer market signals.

Trading Scenario for Steem Based on Elliott Waves

As a trader using Binance and analyzing the Steem/USDT pair I will outline trading scenario based on Elliott Wave Theory. This scenario will follow the complete formation of the 1 2 3 4 5 impulse waves followed by an ABC correction. I’ll also incorporate Fibonacci level to determine entry and exit points. Here a detailed strategy based on recent data from September 2024.

Plotting the Elliott Wave Formation

1. Identifying the Impulse Waves (1-2-3-4-5)

1. Wave 1 (Bullish Impulse):
   • Date: July 7 2024
   • Price Movement: From $0.18134 to $0.2047.
   • Strategy: Enter long at the breakout point of wave 1 using the Fibonacci extension level to set target.

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1. Wave 2 (Corrective Wave):
   • Date: July 14 2024
   • Price Movement: Retraces from $0.2047 to $0.20441.
   • Strategy: watch for retracement to the 50% or 61.8% Fibonacci level of wave 1 to identify potential buying Opportunity.

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1. Wave 3 (Extended Impulse):
   • Date: July 21 2024
   • Price Movement: From $0.20441 to $0.20454.
   • Strategy: Enter long again at the breakout of Wave 3 setting target based on the 1.618 Fibonacci Extension level of Wave 1.

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1. Wave 4 (Corrective Wave):
   • Date: August 4 2024
   • Price Movement: Retraces from $0.17428 to $0.19211.
   • Strategy: Looks for retracement to the 38.2% or 50% Fibonaci level of wave 3 for potential buying Oportunity.

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1. Wave 5 (Final Impulse):
   • Date: August 11 2024
   • Price Movement: From $0.19211 to $0.16795.
   • Strategy: Enter long at the start of Wave 5 using Fibonacci extension to set exit targets.

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2. Identifying the ABC Correction

• A Wave (Initial Decline):
  • Date: August 18 2024
  • Price Movement: From $0.19211 to $0.16185.
  • Strategy: Prepare for a buying opportunity after Wave As decline looking for support levels around the 61.8% Fibonaci retracement level of the previous impulse wave.

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• B Wave (Partial Recovery):

  • Date: August 25 2024
  • Price Movement: From $0.16185 to $0.17433.
  • Strategy: Watch for a resistance level around the 50% Fibonacci retracement level of Wave A to potentially enter short position or set tight stop Loss order.

• C Wave (Final Decline):

  • Date: September 1 2024
  • Price Movement: From $0.17433 to $0.15628.
  • Stratagy: Enter long at the end of wave C using Fibonacci extensions to set target for the next impulse wave.

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Trading Strategy for Each Wave

1. Wave 1:

   • Entry: Buy at the breakout above the start of Wave 1.
   • Exit: Set target level using Fibonacci extension (e.g. 1.618 of Wave 1).

2. Wave 2:

   • Entry: Buy at the 50% or 61.8% retracement level of Wave 1.
   • Exit: Target the end of wave 3 using Fibonaci extension level.

3. Wave 3:

   • Entry: Buy at the breakout above the start of Wave 3.
   • Exit: Set targets at Fibonacci extension (e.g. 1.618 of Wave 1).

4. Wave 4:

   • Entry: Buy at the 38.2% or 50% retracement level of Wave 3.
   • Exit: Target the end of Wave 5 using Fibonaci extensions.

5. Wave 5:

   • Entry: Buy at the start of Wave 5.
   • Exit: Set target levels using Fibonacci extension (e.g. 1.618 of Wave 1).

6. ABC Correction:

   • Wave A: Prepare for potential buy near support level (61.8% retracement of previous impulse wave).
   • Wave B: Watch for resistance level around the 50% retracement of Wave A.
   • Wave C: Enter long at the end of Wave C with targets based on Fibonacci extension for the next impulse wave.

Analyzing Steems Current Market Trend Using Elliott Waves

Date Range: September 10 2024 September 18 2024

Overview of the Current Market Trend

Based on the latest price data for Steem/USDT here my analysis of where the Steem token stands in its Elliott Wave cycle and what movement we might expect:

Recent Price Data:

• September 18 2024: $0.16818
• September 17 2024: $0.16586
• September 16 2024: $0.16036
• September 15 2024: $0.16489
• September 14 2024: $0.17157
• September 13 2024: $0.17312
• September 12 2024: $0.17238
• September 11 2024: $0.16858
• September 10 2024: $0.16859

Elliott Wave Analysis

Current Wave Structure:

• Trend Observation: The recent price movement shows downtrend from $0.17312 on September 13 to $0.16036 on september 16. This suggests that Steem might currently be in a corrective phase specifically Wave C of an ABC correction.
• Wave Cycle Analysis: It looks like we’re in the midst of corrective phase following a previous 5-wave impulsive Sequence. The corrective phase (ABC) typically involves a retracement of the prior trend.

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Where Steem Might Be in the Wave Cycle:

• Corrective Phase: Given the recent downtrend it seems Steem could be completing wave C of an ABC correction. This phase is characterized by three waves: Wave A and Wave B are corrective while Wave C usually extends beyond the end of Wave A.

Technical Indicators and Moving Averages

1. Moving Averages:

• Short Term Moving Average (SMA 10): The curent price ($0.16818) is below the SMA 10 Which might indicates bearish momentum in the short term.

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• Long-Term Moving Average (SMA 50): If the price is also below the SMA 50 it reinforces the bearish trend in the longer term. monitoring the relationship between the Price and these moving average can help asses the strength of the trends.

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2. Relative Strength Index (RSI):

• RSI Calculation: The RSI for the 14 day period help measured the speed and change of price movement. The recent downtrend could push the RSI lower.
  • RSI Below 30: If the RSI drops below 30 it could indicate that the market is oversold potentially signaling a buying opportunity if we are nearing the end of the corrective phase.
  • RSI Above 70: Conversely if the RSI rises above 70 it might suggest overbought conditions pointing to posible reversal or continued correction.

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Example Analysis and Next Possible Movement

1. Corrective Phase Insights:

   • Buy Signal: If the RSI indicates oversold conditions (below 30) and the price approache key support levels it could signal a potential buying opportunity as We might be near the end of the correction.
   • Sell Signal: If the RSI shows overbought conditions (above 70) or if the price struggles at resistance levels it might be a signal to sell or prepare for further correction.

2. Technical Indicators:

   • Resistance Levels: Watch for resistance around recent highs ($0.17312). If the price approaches these level it will be important to monitor for resistance and possible selling signals.
   • Support Levels: Keep an eye on support levels around recent lows ($0.16036). A break below this could suggest further downside Potential.

Trading Strategy:

• Entry Points: Looks for buying opportunitie if the price shows signs of stabilizing near support level and the RSI indicate over sold condition. This could be a signal that we are nearing the end of the current correction.
• Exit Points: Set target near resistance levels or use Fibonaci extension levels for exits. If the price trends up ward and surpasses resistance consider using trailing stops to lock in profit and manage risk.

Based on my analysis Steem appear to be in a corrective phase likely forming Wave C of an ABC correction. Using technical indicators such as moving averages and RSI will help refine trading strategies and identify potential entry and exit point. Keeping track of these indicator will provide insights into the next potential movements and help in making informed trading decision.