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. Endowment Effect

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

    The self-enhancing bias is the tendency for individuals take ...
  3. Gamification

    Gamification describes the incentivization of people's engagement ...
  4. Anchoring and Adjustment

    Anchoring and adjustment is a cognitive error described by behavioral ...
  5. Sample Size Neglect

    Sample size neglect occurs when an individual infers too much ...
  6. Indicator

    Indicators are statistics used to measure current conditions ...
  1. What does the efficient market hypothesis assume about fair value?

    Found out what the efficient market hypothesis says about the fair value of securities, and learn why technical and fundamental ...
  2. How do I implement a forex strategy when spotting a Triple Bottom Pattern?

    Learn about the triple bottom pattern and how it is used to create effective trade strategy in the forex market, including ...
  3. How are Upside Gap Two Crows patterns interpreted by analysts and traders?

    Learn about the upside gap two crows chart pattern and how analysts and traders interpret this pattern as an indicator of ...
  4. How do I build a profitable trading strategy when spotting an Upside Gap Two Crows ...

    Learn about the upside gap two crows pattern and how this reversal signal is used to create profitable trade strategy, including ...

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