My Favorite Trade Setup!

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Just like there are multiple ways to skin a cat...there are multiple ways to trade the crypto markets.

Over my many years trading, I have tried many forms of technical analysis. Ranging from breakout trading to patterns trading. More often than not, these forms of TA would just lead to failure and frustration. 

After a lot of painful losses (losing more than winning), I decided to dig deeper and find the right trading style for me.

I stumbled across Elliott Wave Theory (EW) and Price Action (PA).  Since then, I have built my foundation upon these two forms of analysis. These two forms of TA coupled together have provided me with the highest probability trade set ups. 

The Setup:

First and foremost, if you do NOT have a Risk Management Strategy you need one NOW!  Get my free guide here.

What To Look For?

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First you need to find an important higher timeframe low or a reversal point of the market.  Once we find the low we need to identify the initial swing which would be labeled as wave 1. 

Where do I enter?

Once we have identified this initial 5 wave impulse (marked as wave 1 in the above picture) we then need to patiently wait for a 2 wave correction.  2 wave corrections typically retrace down to .5 to .786 Fibonacci retracement level. I will average in from those levels.  I will start with 25% of my initial postion at the .5 level and add 50% at the .618 level and finish the remaining 25% at the .786 level.

 Where do I place my stop loss?

Stops can be placed anywhere from just under the origin of the 1 wave or slightly under the .786 retracement level. 

Stop loss placement can be tricky.  In crypto markets we tend to have deep 2 wave retracements.  So a stop loss just under the .786 level will hit more often than if you place your stop under the origin point of wave 1. 

The more confident I am in the trade the more loose I am with my stops.  So if I am EXTEMELY confident in the trade I will place my stop under the origin of wave 1 knowing if the trade goes against me I could lose more % then if I place it slightly under the .786 level.

This is where your personal Risk Management Strategy comes into play. 

Where do I exit?

Now that you have entered you need to have a plan to exit. 

I find my exits based off the trend based Fibonacci extension tool. I will average out just like I average in.  I start to average out with 25% of my position at the 1 to 1 fib level.  I will exit the remaining position at 1.618 fib extension level. 

I will keep increasing my stop as a trailing stop as we increase in price.

Final Step:

Enjoy your profits!