Elliott Wave: Conclusion
AAA
  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: Conclusion


By Matt Blackman with Mike Green
Contact Matt

Here are some principles about Elliott Wave we discovered in this tutorial:

  • The Elliott Wave theory requires a high degree of subjectivity, which is one reason why using the theory can be so problematic - finding agreement among Elliott Wave practitioners can be rare.
  • The most basic tenet of Elliott Wave theory is that market movements are based on crowd behavior, which can be predicted. Traders, however, may often discern a market move only after it has occurred.
  • Robert Prechter, leading expert of Elliott Wave, has made some accurate forecasts using the theory, particularly in the '70s and '80s. Specifically, he forecasted the crash of 1987. But Prechter's record at the end of the twentieth century has not been so perfect: his book "At The Crest Of The Tidal Wave" (1995), calling for the end of the great bull market in 1995, was nearly five years and many Dow points premature.
  • Trading with Elliott Wave means applying a principle that is true for all trading in general: expectations must be realistic, and money management is key to profitability over the long-term; that is, losses must be kept small and profits must be allowed to accumulate.
  • One way to use Elliott Theory is to find specific parts of the theory and transform them into a workable trading system in which risk can be carefully controlled.
  • Approaching Elliott Wave may also mean putting less emphasis on the correct wave count, and more attention on determining the count that has the least penalty for being wrong. A trader can still be profitable if he or she determines the primary direction of the trend, properly differentiates between the primary and corrective waves, and uses tight stops and realistic profit targets.
  • Computer power has helped take the subjectivity out of the Elliott Wave theory. Intense statistical analysis of wave reliability has proven mathematically that the theory developed more than seventy years ago by R.N. Elliott is based on sound principles of market behavior.
  • Computer programs such as the Refined Elliott Trader, which is based on the premise that a pattern is reliable if it is confirmed in the same time period (that is, one day) over multiple date ranges - may have solved some problems associated with using Elliott Wave in trading. Using the computer program, however, still demands a thorough understanding of Elliott Wave patterns.

  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. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  2. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  3. Annuity

    A financial product that pays out a fixed stream of payments ...
  4. Einhorn Effect

    The sharp drop in a publicly traded company’s share price that ...
  5. Endowment Effect

    The endowment effect describes a circumstance in which an individual ...
  6. Self-enhancement

    The self-enhancing bias is the tendency for individuals take ...
  1. How do I use the Zig Zag Indicator to create a forex trading strategy?

    Take an in-depth look at how to apply the Zig Zag indicator to a forex trading strategy. See why many traders use the Zig ...
  2. How are Wolfe Wave patterns interpreted by analysts and traders?

    Read about how technical analysts and traders interpret the Wolfe Wave, a 5-point wave pattern used to predict a new equilibrium ...
  3. What does a strong null hypothesis mean?

    Find out what null hypothesis is and why it is important to the scientific method. See how statisticians and economists use ...
  4. How does disposable income influence the marginal propensity to consume (MPC)?

    Learn about the relationship between disposable income and marginal propensity to consume in the classic Keynesian consumption ...

You May Also Like

Related Tutorials
  1. Fundamental Analysis

    Ethical Investing Tutorial

  2. Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  3. Economics

    Macroeconomics

  4. Investing Basics

    Capital Budgeting

  5. Active Trading Fundamentals

    Introduction to Stock Trader Types

Trading Center