Mastering execution

The Unexpected Benefits of Elliott Wave Analysis in Active Investing

Hi,

As you know I am a fan of Elliott Wave Analysis as a technical tool to aid my investing decisions.

Actually, that is a key point to remember: all technical analysis is a decision-making aid, it is not a guarantee of price movement prediction. Otherwise, all trading algorithms would profit 100% of the time and we wouldn’t even bother investing actively.

It is quite obvious from fundamental analysis that past behavior doesn’t guarantee future performance.

For some reason when it comes to technical analysis, expectations are often higher for the predictability of price movements.

They are still only decision-making aids.

This is where I realized Elliott Wave Analysis comes with valuable benefits.

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Getting started with Elliott Wave Analysis has a steeper learning curve than using other technical indicators, mainly because the literature available is not the best.

Could also be that there is an interest in selling fish more than teaching how to fish. Who knows.

Anyhow, once you decide to learn and go through the various wave patterns and how to count them, it is quite easy to apply.

This is where you come to the next realization: this is time-consuming!

Well, there are no shortcuts, so suck it up. Just kidding.

The fact that Elliott Wave Analysis is time-consuming is actually a huge benefit.

It forces you to focus on a limited amount of assets.

Because of this, you will have to pick the assets where you have the highest chance of winning big while also the lowest chance of losing big.

When you trade actively you manage your risk by effective execution on top of the usual single trade risk management strategies.

Diversification can become a liability because you spread yourself thin in terms of time and money resources.

While you are surfing the Elliott waves of your chosen asset the other benefit is that you are automatically tuning yourself to the moods of the asset.

Eventually, you develop a strong feel for what the market will do and the longer you track an asset the stronger your sixth sense becomes.

It’s quite spooky when it happens.

I have experienced this every time I have started trading a new asset with Elliott Wave Analysis.

First the S&P 500 before the pandemic-related market crash. I didn’t predict anything because everything seemed fine, but according to the analysis, something was about to happen soon. Similarly in the summer of 2021, I realized it was time to start playing it safe.

In a recent newsletter, I shared a conversation between me and one of my brothers where I was predicting successfully what Bitcoin was up to in the short term. I had been tracking the asset with Elliott Wave Analysis for a couple of months.

Does this mean I can predict the markets? Hell no.

What it means is that combined with my execution strategy I can adapt to the market developments and extract profits.

Elliott Wave Analysis is what puts me on a track to hone my execution skills while providing the cues for when to act and when not.

This applies to any other method you choose.

Don’t stop at doing analysis, entering a position, and simply sitting on it or exiting.

You need to follow up and keep executing on the same asset.

This week, think about how you execute your trades.

Have a good one,

Chris

Thank you for reading! :)

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