Elliott Wave: Conclusion
  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
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, ...
  2. Rule Of 72

    A shortcut to estimate the number of years required to double ...
  3. Laissez Faire

    An economic theory from the 18th century that is strongly opposed ...
  4. Confirmation

    The use of an additional indicator or indicators to substantiate ...
  5. Put-Call Parity

    A principle that defines the relationship between the price of ...
  6. Alpha

    Alpha is used in finance to represent two things: 1. a measure ...
  1. How do I use the Zig Zag Indicator to create a forex trading strategy?

    The Zig Zag indicator operates as a filter for directional changes in price movements. Technical analysts and forex traders ... Read Full Answer >>
  2. How are Wolfe Wave patterns interpreted by analysts and traders?

    An extension of Elliott wave theory, a Wolfe wave pattern is often interpreted to mean that a fight between supply power ... Read Full Answer >>
  3. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  4. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  5. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  6. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center