exc-64a111ddaa2d360452f520a5
12 for 13 as verified by Profit.ly!
Day trading is a high-risk, high-reward venture that requires a strategy, and one such strategy that has gained popularity is the Elliott Wave Theory. This theory has been utilized by successful traders worldwide, including Ted Aguhob, to predict market movements. This article will walk you through a successful day trading experience using the Elliott Wave principle.
Understanding the Elliott Wave Principle
The Elliott Wave theory, developed by Ralph Nelson Elliott, is a form of technical analysis that traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs, and lows in prices, and other collective factors.
The Trade That Brought The Turnaround
The Initial Hurdle
Monday started with a somewhat miscalculated trade. An initial investment was made in TQQQ at 39.40 for 800 shares. However, the market didn’t behave as expected, and TQQQ plummeted throughout the day. I was, in essence, stuck with a sinking ship.
The Counter-Strategy
To counteract the falling prices, I decided to average down twice, bringing the average purchase price down to 39.07. Despite this move, by the end of Monday, the trader was staring at an $1890 loss.
Spotting the Support
However, throughout the day, I noticed that there was support at the 13,330 range in NASDAQ at .382 fibonacci retracement (low was 13,335). This was identified due to completed zigzag formations, a key concept in the Elliott Wave theory.
NASDAQ Support
The Decision to Swing Trade
Based on the support identified, I decided to swing trade the TQQQ for Tuesday. This decision was backed by the futures moving up 40 at 8 PM ET.
The Market Opening
When the market opened, the gap up was minor—NASDAQ up 50-60. But I knew this was a bottom formation and reiterated it in the chat room.
“When NASDAQ started to sink to only +20 I knew it was just a Wave 2 before Wave 3, so I kept holding TQQQ.” – Ted Aguhob
The Wave 3
Wave 3 in the Elliott Wave principle is usually the longest and strongest wave. As forecasted, it did start. I predicted a 200+ point up day when it was up just 80 at that point.
The Turnaround
With the start of Wave 3, I averaged down again with 500 shares to have a 1600 share TQQQ position. Despite me being down about $1100 at that point, within an hour, the position had broken even. The 1600 shares were sold for a measly $5 profit. But this was a significant comeback from being down $1890!
The Additional Trades
Earlier in the morning, a $160 BITO profit trade was made to eat away at the loss. Later trades included TQQQ for $40 and TQQQ for $180, followed by SOXL for $390 at the close.
Conclusion
The Elliott Wave principle can be a powerful tool in a day trader’s arsenal. This journey of a successful trade demonstrates how understanding market support, anticipating market waves, and making strategic decisions can turn around even a loss-making trade. It is a testament to the power of detailed analysis, patience, and strategic decision-making in day trading.
