Trading Basics: Elliott and Fibonacci

[Music] the Bulls versus the bear get in the game ww tackle trading I was recently teaching a a class about trend analysis Fibonacci's and whatnot what I wanted to do is I wanted to do a very quick you know not extensive just a very quick video on kind of Elliott Wave Fibonacci gonna make it very very basic so you guys can understand it obviously it gets into a lot of detail it gets into some advanced techniques and whatnot but we're gonna leave that to another day what I want to talk about first and foremost is just Elliott Wave angelic in general Elliott Wave is a trend-following study you know we have basically two types of trench you have a bullish uptrend you have a bearish downtrend now in those trends according to Elliott Wave it moves in a series of waves and we'd like to call it a tackle trading a wave count and what the wave count is is it goes up one down two up three down four up five so it goes in series of five so it looks something like this up one down two up three down four up five and then typically we'll see some type of reversal or continuation pattern or something along those lines now understanding where we're at in the trend understanding where Wratten - in terms of the wave count can help us understand how we want to approach the stock do we want to be aggressive do we want to buy the stock do we want to swing trader do we want to position traded are we going to trade options or the stock are we gonna do credit spreads you know it just simple as a simple understanding of where we're at the trend where we're at in terms of the wave count can help us understand how to approach making money on the stock so when we're looking at the very beginning of a trend we're down here and the stocks going up a little bit down a little bit up a little bit down a little bit and then it breaks out and initially sets what is called the wave one so once the stock breaks out of neutrality this is now what we call way one now at the end of wave one is gonna establish a resistance on and what resistance is it's always above the stock price and it drives the stock back down in price it's basically the area on the chart where you know traders hedge funds institutions you and I we're all locking in profit because the probability is now for the short term for it not to continue to go up the probability is actually for it to start coming down now here we draw our Fibonacci and what we want draw is we want to draw the entire motive wave so this wave one this is called a motive wave so now I've clicked on a fibonacci retracement tool and over here you can see percentages the standard retracements that typically occur in the market are a thirty eight of fifty or sixty one percent retracement a twenty-one percent retracement certainly can be considered a retracement however I see these more is a high base type pattern that I do a retracement I'm looking for the stock in terms of what I want to buy I want to buy it after 38 or a fifty percent retracement that that's what I consider my zone that's that's you know that that strikes coming right down the plate the pinch to down the middle and I'm gonna pick up that big old big old bat and hit a homerun I don't mind this 61 percent retracement but anything under 61 I automatically start thinking something else I automatically start thinking oh my goodness is this reversal oh my goodness is this a is this something is this some other type of movement that word that I was not anticipating so I tend to shy away from anything that drives past the 61 percent retracement level so now the stock will drive down into its 50% retracement and once it starts going back up once again that's called confirmation that is confirming that we now have support it is now time to buy so now I'm gonna draw what is called a Fibonacci extension to help me understand where wave three will go into and wave three is the longest of the wave counts there's a lot of reasons for this but think about it like this once the stock breaks out it's not in the news a lot you know not giving a lot of information it's not getting upgraded none of this but once it's been in a trend for some degree of timeframe you're all of a sudden you get this news out there you get this information out there and it's like oh my goodness and it drives all the way up to 161 and then at 161 people start to once again lock in profit and as you can see there we're gonna now draw our Fibonacci retracement tool and then the next retracement is back down into the 50 percent retracement again wait for it to go back up and it's time to everybody say it with me bye it's time to buy because now you know the stock is telling you say listen this is a really good moment in time we should get out there and make some money on it now go ahead and draw your Fibonacci extension tool and now because this is the longest of the wave counts we are gonna see what it's called slowing momentum and it's gonna drive into the 61.8% ring now that drives into the 61.8% range we're now good at once again lock in profit and we're gonna lock a profit because you don't have any more probability and it's going to retrace once again into the 50% range now in looking at understanding all of this we love retracements we love breakouts but when you're at the beginning of a trend because you have so much more time left in that you can approach that stock in a lot of different ways you can put a position trait you can invest you can you know the start bragging cover calls again see you can still make it puts against it you can you know buy options a little bit longer term and whatnot but when you start getting into they tell and of the trend you are really kind of limited in in your approach as a trader instead of you know investing here because really what can I expect I can only reasonably expect for the stock to come back into resistance because we're at the end of the trend now I'm not saying that a reversals gonna form it certainly could form a continuation pattern breakout and start it again but again I don't know what the probability is any longer so here if I'm a buyer right there I'm gonna be a seller right there which means I'm going to swing trade it if I'm a buyer right here I'm going to swing trait this up into right there because I don't really have it but if I have a buyer back here or here I can be a little more aggressive I can be a little more I can get my stop losses a little bit more room I can hold I can hold the trait through longer I can I can approach in a lot of different ways and it's just because you're at the beginning of a trend versus at the end of the trend so once again this this approach technical analysis in general but an Elliot wave theory notch ease understanding where we're at in the trend can help us determine that with the style of trade and the type of trait it can also help us understanding how aggressive or conservative we want to play stomp losses and it is absolutely I you know vital in understanding where to target if I have a buyer right here going into weighing three I'm gonna be a very aggressive on my target of 100 to 160 150 extension level versus going into way five I'm gonna go I'm gonna be a little more conservative on the duyst for momentum target versus coming in at the end of wave I'm I'm just gonna target the previous areas of resistance ladies and gentlemen so once again Matt justice for tackle training hope you enjoyed the the quick discussion on Elliott Wave Fibonacci's and how we can utilize it in our [Music] [Music] [Music] [Music]

Channel: Tackle Trading

Views: 33,208

Rating: 4.9175758 out of 5

Keywords: Investing, Finance, Stocks, Market, Stock Market, Trading, Tackle Trading

Id: Zusv7D5IAbQ

Length: 8min 51sec (531 seconds)

Published: Wed Oct 01 2014