EWT is one of my primary trading tools. I've been trading agricultural commodities since 1992, metals and oil since 1995, and forex starting in 2000. My trading has been profitable, although I am a 'penny-ante' trader. Personally, I have found the only useful text on EW is Prechter and Frost's original work. I personally believe that Frost did most of the work. It was FROST who originally predicted the price ranges for the 1974-1987 bull market. After Frost died (and his predictions were fulfilled) Prechter has been as wrong as anyone. As Louis Rukeyser said during a market meltdown in 1997: "Even a broken clock is right twice a day." I use EWT to help me spot trend reversal. It IS true that there's a bull count and bear count at every point--and I use that fact to construct straddles, when we approach major trendlines. As a matter of fact. I shorted the euro pretty heavily before bed last night, based on fibo numbers and EW count. I got out this morning because the price has returned to a longterm trend. As soon as I get an identifiable count, I'll construct a straddle that is biased toward the EW count. It helps me figure out stop placement and retracement areas, which are critical for big news. The trick about EW is that it is like a clockwork. Each element is individually simple, but the casual onlooker is confused by the apparent complexity. I have found EVERY rule applied as the original Prechter and Frost text shows, works nicely. But the vast majority of practioners make exceptions based on their own emotions. A lot of people poop on EW, and I certainly understand their prejudice. Wave theory is like fatherhood: it is in and of itself inherently good; the problem is that there's a jillion neanderthals f-ing up in practice and giving it a bad name. I don't particularly care that most people think it's useless. I would advise them to paper-trade before risking capital, and find a method that suits them.
for EW and magic fib numbers to work, markets would have to be mathematically "rigid". waves would have to be exactly 1,2,3,ABC etc... and numbers would always have to fall on fib numbers. It never always does because markets arent that efficient.
Dividend, the reason 'magic fib numbers' DO work is the exact opposite of what you state. The fibonacci ratio is fixed, but elastic, that is regardless of the 'LH' distance of a Wave, the ratio adjusts proportionally with the measurement and prices hit the fibo levels.
i can see how the golden ratio or fib numbers can work in rabbit reproduduction scenrios and cell division in nature and such but hard to consider its application in asset prices..... unless its a pure academic thing like the random walk. considering that stock prices are discrete, its not surprising that eventually one of the fib numbers will be hit.... i'm not for or against it. i just read the tape and news and use some TA to have a general idea of what other traders will do. i guess if it works for u then more power 2 it... i actually have the EW book by pretcher.
Connie Brown comments in her book 'Technical Analysis for the Trading Professional' that many people encountering Elliott Wave simply won't get it, essentially it's a visual method of price movement analysis. Personally I'm visually oriented and math dysfunctional, tho EW isn't much easier for that. I know of nothing that provides a more accurate prediction of future prices than the fibo tool, and tho not wanting to 'flog a dead debate', trust you'll view the attached chart and re-comment.
I will say that Elliott Wave and Fibonacci both seem to depend, in my own experience, on groups of very large numbers. I can show you where the corn market makes beautiful EW patterns, and hits fibonacci price targets within a precentage or two. On the other hand, I would never use them for a single stock, or even a medium sized index fund or something of that nature. EW DOES seem to work well on the DJIA and various other very broad averages. I remember trying to use it in coffee, oj and cocoa in the early 90's. Those markets are entirely too small. Personally, I think they are too small to speculate in, generally. EW works best in a market with a massive number of suppliers and a massive number of markets. Corn is an excellent example. Probably 35 states in the USA are corn producers, and another 75 nations worldwide. Oil though, has comparatively few producers, and the number of purchasers who can actually take delivery is limited as well. I have never met a EW enthusiast who could use it in oil or cattle. I suspect that it wouldn't work even within a single sector like IT or transports. I use volume to help me decide whether the bull or bear count is the one to listen to.
I'm quite new to trading, and I make my decisions based on both fundamental and technical analysis. My opinion with regards to technical analysis is that many of the indicators add value to a trader's decision making process, but that they should not be used individually as the sole reason for entering or exiting in a position.
As with most theories, over the years the Elliott Principle has been bastersized to fit in with other people's perceptions. If you really want to know about the Elliott Wave Prinicple, then Supertiming by Robert C Beckman is the book to read. This guy really knows his stuff. However, as he points out, the Elliot Wave Principle is useful BUT SHOULD NOT BE USED TO THE EXCLUSION OF EVERYTHING ELSE. As he quite rightly points out, the stock market is a non-linear dynamic system so using linear analysis to the exclusion of everything else is bound to end in tears.....
To all those who truly believe in the elliot wave,call up any of the sotware vendors who peddle the Elliot wave and ask them why they refuse to put in a simple backtester or a way to enter trades and account for the P&L... I hhad asked the folks at GET for years for that,and as much as they loved the idea,they knew it would be all too revealing... It shouldnt come as a suprise to anyone... Backtest candle formations,and you wot be thrilled with the results either