Does Elliott Wave Theory actually work?

Discussion in 'Technical Analysis' started by Vincent S. Ashmore, Nov 25, 2015.

  1. expiated

    expiated

    I could not see myself trusting any kind of software. My system is based on the relationships and interactions between various factors, and I'm not confident software can handle that kind of nuanced assessment/evaluation.

    USDJPYM5.png
     
    #21     Nov 20, 2017
  2. expiated

    expiated

    Daryl Guppy had the right idea in developing a technique that combined two groups of moving averages with differing time periods. But while I have no problem with his conceptualization, I question the methodology he used to come up with the particular moving averages in each set in that I think it was somewhat arbitrary, or at the very least, a bit subjective.

    Guppy Multiple Moving Averages...
    ScreenHunter_6683 Nov. 21 12.35.jpg

    It’s my understanding that one set of moving averages is meant to reflect the activity of traders, and was selected because three days is about half of the trading week, five days is one trading week, eight days is about a week and half, etc.

    The other set is meant to track the activity of investors by starting at six weeks and increasing by one trading week until there is a jump of two weeks from 50 to 60 days in the final series due to the fact that Guppy originally used the 60-day average as a checkpoint benchmark for the long-term trend.

    However, in the system I use, the indicators comprising a given set of moving averages were selected based on a STATISTICAL analysis of price action to verify the SPECIFIC options that came CLOSEST to painting a TRUE picture of the paths ACTUALLY taken by price.

    And finally, it has been my experience that one is able to trade with much greater accuracy if an effort is made to MAXIMIZE the precision characterizing the environment in which one operates. Or in other words, I believe that applying the technique of using multiple moving averages when trading in time frames MUCH shorter than days, weeks and months VASTLY increases the percentage of trades one is able to execute successfully AND the frequency with which one does so.
     
    Last edited: Nov 21, 2017
    #22     Nov 21, 2017
  3. Guppy is another guy full of nonsense (well he was, don't know about these days).
    In my early years spent much time and money reading his books and studying his methods.
    The MMA I thought had merit but it doesn't.
    Guppy is very much an 'indicators' man.
    Indicators and cyclic waves are objects of wishful thinking, like very much most TA theory.
    Support, resistance, trends, speed of moves should be the mainstay for TA guys n gals.
    Maybe volatility to a degree.
    Volume to a small degree.
    MA's mainly rubbish but 200MA like 12 month returns have the backings of old timer institutions, therefore can be useful for reference points, eg, price on a old institutional favourite crossing up from under a MA200 will often spike.
    I think in the early days traders thought there was correlation between MA200 and 12 months of trading. Approx 250 trading days in a year.
     
    Last edited: Nov 21, 2017
    #23     Nov 21, 2017
  4. expiated

    expiated

    ScreenHunter_6691 Nov. 23 11.22.jpg

    Themickey wrote that “indicators and cyclic waves are objects of wishful thinking, like…most TA theory,” but then went on to write that “support, resistance, trends, [and] speed of moves should be the mainstay for TA guys and gals.”

    I think it would therefore be reasonable to say that indicators are NOT the “objects of wishful thinking” IF they reflect support, resistance, trends and speed of moves.

    Themickey also made the comment that “The MMA I thought had merit but it doesn't.” And yet, I’ve discovered that multiple moving averages DO have merit—but NOT necessarily in the way that Guppy used them.

    Guppy did not optimize his moving averages to correctly and precisely reflect the actual trends in lower time frames (in my opinion) and he also (as far as I know) failed to incorporate the use of moving average envelopes to measure speed of moves and statistical support and resistance as relates to average price ranges.

    Lylec305 commented that, “It works just like anything else. Even the flip of the coin works sometimes.”

    But I think that the truth of the matter is reflected by the diagnosis of Yeshua when he said, “You know how to interpret the appearance of earth and sky, but why do you not know how to interpret the present time?”

    Knowing how to interpret the cyclical nature of the Forex market correctly is the key to everything and should not only work sometimes, but pretty much ALL the time. Given that I felt I was on the right track, yet was not quite satisfied with my accuracy, I spent today recalibrating my settings.

    As you can see from the above visual, it took me six trades to get my parameters straight, but once I had them adjusted properly, all but one of my subsequent trades ended with success. Given that it’s a holiday in the United States and trading is relatively light, I’m having to be satisfied with smaller than normal moves, but I should still be back in profit territory before the day is over, God willing.
     
    #24     Nov 23, 2017
  5. Here is an observation.
    If you study and use for your trading decisions; EW, Gann, Fibs, MMA's, Cycles of any sort, any sort of TA indicator other than the simple S/R then you will suffer from the following trading issues.
    Lost time while you hum and ha, you will spend hours of wasted time trying to make sense of an impending trade because of doubt and indecision. You will plot lines and when your trades fail will be left insecure and nervous because the bottom line is, this type TA is nebulous in its smoke like habit of making you see figures out of random patterns.
    Believe you me, trading is not difficult if it is kept very simple.
    Do you think professional traders of old were standing on the stock exchange floor making trades while they were plotting EW or Gann, cycles predictions or MA's etc?
     
    #25     Nov 23, 2017
    MACD likes this.
  6. Elliot Wave Theory implies a random walk. Yes, it may work from time-to-time but it won't be optimal over the long-run.
     
    Last edited: Nov 23, 2017
    #26     Nov 23, 2017
  7. The more time you spend in doubt, indecision, fear while attempting to make senses of 'squiggly lines' which you have plotted, the more you will find your trades become shorter in time frame, smaller in size as fear becomes a bigger part of your analysis.
    It becomes a vicious circle.
     
    #27     Nov 23, 2017
    lcranston likes this.
  8. maxinger

    maxinger

    Traders suffer from indecision, anxiety, fear,
    and they hestitated far too long to pull the trigger.

    So they analyse more, they use more indicators, use Elliot Wave theory etc etc
    but ended up more confused.
    Because of lack of confidence, they must analyse even much more
    and suffers from analysis paralysis
    because they simply wanted a very accurate 100% trading system.

    By the time they think it is a perfect setup where all the planets are in alignment
    and they pull the trigger, it is far too late.


    Solution ?
    Be confident.
    have simple trade plan based on
    simple price action and chart pattern.
     
    #28     Nov 23, 2017
    MACD likes this.
  9. ironchef

    ironchef

    Can you give me some example of simple price action and chart pattern and define what simple means? In a different thread on AAPL H/S, someone thought the chart pattern was simple but the end result seemed different from what the pattern said?

    Regards,
     
    #29     Nov 23, 2017
  10. maxinger

    maxinger

    eg yesterday Hangseng index future.
    Price was coming down during China time, after lunch.
    blue line indicates resistance which has been well resisted 3 times.
    Enter as per the arrow.


    [​IMG]
     
    #30     Nov 23, 2017