Elliott Wave In The 21st Century
  1. Elliott Wave: Introduction
  2. Elliott Wave: Challenges Faced By An Expert
  3. Elliott Wave: The Best Of The Theory
  4. Elliott Wave: Shifting Into Trading Gear
  5. Elliott Wave: Solving The Probability Problem
  6. Elliott Wave: Conclusion

Elliott Wave: Introduction


By Matt Blackman with Mike Green
Contact Matt

There is a standard joke shared by technical analysts that if you were to put twelve Elliott Wave practitioners in a room, they would fail to reach an agreement on wave count and the direction in which a stock is headed. There is no doubt that the Elliott Wave theory has posed some interpretive challenges, but is such skepticism fair?

Robert Prechter, the undisputed leading expert of Elliott Wave, has made some excellent forecasts using the theory, particularly in the '70s and '80s - he forecasted the horrific crash of 1987. But Prechter's record at the end of the twentieth century has not been stellar. In fact, his book "At The Crest Of The Tidal Wave" (1995), which publicly called for the end of the great bull market in 1995, was nearly five years and many Dow points premature; he was advising clients to exit the market even though the ascent was nowhere near its end.

If even the leading Elliott Wave expert finds Elliott Wave theory and its application so challenging, what hope is there for the rest of us? The high degree of subjectivity involved in using the theory is one reason why it can be so problematic and why it is rare to find agreement among practitioners. This leads to uncertainty, which in trading or investing leads to inaction. This may explain why so many traders opt to trade without Elliott Wave or give up in frustration after using it for a while. But is such an attitude akin to throwing the baby out with the bath water?

In this feature, we hunt down and use Elliott Wave-based programs and products that greatly streamline the process of taking the theory and applying it to trade. Think of these as applications that help bring Elliott Wave into the twenty-first century.

Our goal is to familiarize readers with the new millennium version of Elliott Wave theory. For those who may have rejected the theory out of frustration, this tutorial will demonstrate how new developments in technology have transformed this application, which was developed more than sixty years ago.

First, let's take a look at the history of Prechter's application of Elliott Wave and how it demonstrates both the successes and challenges of the theory.

Elliott Wave: Challenges Faced By An Expert

  1. Elliott Wave: Introduction
  2. Elliott Wave: Challenges Faced By An Expert
  3. Elliott Wave: The Best Of The Theory
  4. Elliott Wave: Shifting Into Trading Gear
  5. Elliott Wave: Solving The Probability Problem
  6. Elliott Wave: Conclusion
RELATED TERMS
  1. Elliott Wave Theory

    Theory named after Ralph Nelson Elliott, who concluded that the ...
  2. Corrective Waves

    A set of stock price movements that occur against the main trend ...
  3. Impulse Wave Pattern

    A term used in the Elliott wave theory to describe the strong ...
  4. Accelerator Theory

    An economic theory that suggests that as demand or income increases ...
  5. Coverage Trigger

    An event that must occur in order for a liability policy to apply ...
  6. Wave

    A pattern of behavior marked by noticeable increases and decreases. ...
RELATED FAQS
  1. Why are corrective waves useful for technical analysis?

    Discover what role a corrective wave plays in the Elliot wave theory of stock market trading and how technical analysts spot ... Read Answer >>
  2. How was the Fibonacci retracement developed for use in finance?

    Learn about the history of the use of Fibonacci retracement levels in stock trading, including the influence of technical ... Read Answer >>
  3. What is the chaos theory?

    The chaos theory is a complicated and disputed mathematical theory that seeks to explain the effect of seemingly insignificant ... Read Answer >>
  4. What's the difference between agency theory and stakeholder theory?

    Learn how agency theory and stakeholder theory are used in business to understand common business communication problems ... Read Answer >>
  5. How are corrective waves created?

    Learn how traders and analysts identify corrective waves in the Elliot Wave Theory, a controversial and complicated market ... Read Answer >>
  6. What are the differences between weak, strong and semi-strong versions of the Efficient ...

    Discover how the efficient market theory is broken down into three versions, the hallmarks of each and the anomalies that ... Read Answer >>

You May Also Like

Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center