Hi.
After i wrote yesterday post, i browsed around the steemit pages to take a look what People write around here.
Coincidentally, i noticed one prolific trader that seems to be famous around here. It drew my attention to what he was saying, and i found it... interesting...
First, this trader say that he use Elliot Waves Theory to predict the price movements of the cryptocurrencies markets.
Elliot Waves isn't one of the tools i use during my operations, because what i learned about it is that the results are very controversial among the traders.
Here is some goood articles from Investopedia about Elliot Waves that are definetly worth a read:
Elliot Wave Theory
Elliot Wave In the 21st Century
If you read the article, you will noticed that Elliot Wave technique have it's merits, but is a very subjective skill. There is no established consensus about the right way to count the waves.
Another thing that striked me as interesting is this phrase:
"please allow me to offer a primary and an alternate view of how sentiment might move price and how price can move the news and events but never the reverse."
I think there is a total misconception here about how prices on markets work.
Yes, sentiment affect the prices, but only because the sentiment will make people buy or sell.
What move prices in a market is volume. If there is more money buying an asset, the price will rise. If there is more money selling an asset, the price will fall.
Nothing else.
Another statement on the same phrase, "price can move the news and events but never the reverse.", is totally false.
Price don't move the news. A lot of People on the markets (specially those that are new to it) do trading/investing based on news.
People react to the News. They buy or sell based on what they see or read.
The good traders act before the news reach the headlines. The bad trader react to what appear on the news.
Another fact that i don't see in his considerations is that Technical Analysis have some problems to be effective on the cryptocurrencies markets:
1 - Low volume. All money flowing in the cryptocurrency markets is way lower than any other asset Market. That makes them very succetible to sudden movements. Specially cryptocoins that have a market cap below 1 million.
2 - There is not much historical data on the cryptocurrency markets. Technical alanysis is a technique base on statistical data. If there is not much data, the error margin is too big.
3 - Cryptocurrency markets are easy to manipulate. There is a lot of Pump and Dump schemes around. Basically, some people buy a lot of a certain coin, then i many ways (including giving technical analysis advices), increase the demand for that coin, and then sell them at a good profitable price, while lots of people lose money entering the market only because they saw the price rising. Then the price plummets again, back to where it was.
For a good reference how this works, check the Wolf of Wall Street story. This is exactly what he was doing with the penny stocks.
Anyway, this guy got my interest. I am going to apply what i talked about yesterday, on how to know if a market guru is actually a good trader.
I will start to track his performance, and see how it goes.
More details will be avaiable later, when i will define the rules of the tracking, and describe how it will work.
See you around.