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Does Elliott Wave Theory actually work?

  1. A lot of talks about this old-new method. Is this stuff actually work? Has anyone tried it yet? What books would you recommend to find more specific about this stuff. Thanks.
     
  2. Lots of methods work in a sense. It's just a matter of being lucky in cherry picking the best signals.
     

  3. "Why People Believe Weird Things" by Michael Shermer.

    Seriously - not joking or trying to be sarcastic. From the perspective of what to look at and what to spend time on, to help me to trade, it's been one of the most useful books I've ever read.

    By the time you allow for "extensions", "alterations", "truncations" and the interpretation of all of this stuff that Elliott adherents have dreamed up to be able to justify their perspectives, there isn't a single chart in the world that an Elliott Wave enthusiast can't fit in with his existing preconceptions. (But are they making any money from it, apart from by trying to teach it to other people???)

    (Nassim Nicholas Taleb's "Fooled by Randomness" is also strongly insightful and helpful, in these and similar contexts.)
     
  4. I was thinking some people actually making good money from it. Was I wrong?
     
  5. Can you please name some of them so I can compare it to EW.
     
  6. This method is not actually perfect, there are some cases where it does not work. But, I've been using EW for a while and I'm very pleased.
    First of all, you need to master it. There are tons of webinars/ books out there - just google it. My favorite is "Elliott Wave Principle: Key to Market Behavior". It's quite difficult to read, but it's totally worth it. It took me two months to read, understand and apply this book in my day-trading.
    Also, there are some youtube videos to get the basics.
    Good luck.
     
  7. There is only one problem - it's software. I've used motiwave software and it's not good enough. I'm looking for reliable soft right now. Any recommendations, folks?
     
  8. May I ask why you dont like the Elliot Wave in Motivewave? There are two versions, manual and auto-which one do you have? Have you tried using the scanner? Do you have full version-reason Im asking is Im thinking about purchasing...thx
     
  9. I didn't say that I don't like Motivewave. I just said that it's not good enough for me. I'm just looking for something better but I'm not sure if I can find it.

    I used automated EW to get a quick plotted wave count and then I had to adjust the points for my own analysis.

    But overall, they have really nice instructional videos that explain key features and really nice support. And many people really like their soft. Maybe you'll like it too.

    p.s. the auto wave counter is really a waste of time
     
  10. "I'm just looking for something better but I'm not sure if I can find it."...You'll find the Holy Grail someday
     
  11. In 1994, a small team from Perth led by Rich Swannell began designing Elliott Wave computer programs for traders. Swannell was a programmer first and trader second. Very few in the world of trading are good at both.
    You can find this information useful. http://www.investopedia.com/university/advancedwave/elliottwave4.asp
     
  12. Nice tutorial. Thank you. I'll check it out.
     
  13. Sure, like Astrology...
     
  14. Everything works until it doesn't-the way to test a system is to try and break it-you need to eyeball the bad trades and you will see that nothing works most of the time. Try a single Ma- buy when it moves above,and vice versa
     
  15. From my point of view, it seems kind of self-evident that the market moves in waves, nonetheless, I have always viewed Elliott Wave Theory in a light similar to the sentiment expressed above, and the same is true to a lesser extent when it comes to harmonic patterns and Fibonacci ratios.

    What I’m hoping to do starting this week is to define price waves in accordance with my own answers to two key questions: (1) Where is priced likely to initiate a new trend; and once I know where to look, (2) how do I establish that the process of forming a new trend has actually begun to take place?

    The answer to the first question is a matter of determining something I call “statistical support/resistance” or how far price is willing to separate itself from what I view as its unadulterated trajectory (or its overall average direction as measured using the most representative intervals within a given time frame) before it can no longer resist the pull to return to more typical “degrees of separation.”

    When I notice price has reached one of these levels (I use three), I answer the second question (I determine whether the process of forming a new trend has actually begun to occur) by relying on a moving average that is not so short as to return frequent “false positives” or “head fakes,” yet not so long that it lags behind the trend to such a degree as to seriously compromise its validity.

    There is no wiggle room with this method. The deviation levels are precise and the moving averages are specific. There are no extensions or alterations. The system will either work or it won’t. Charts will either fit perfectly or not at all.

    AUDJPYM1.png

    Though not the greatest example, I executed the above AUDJPY trade simply for illustrative purposes. If it actually pans out I will find it very encouraging since I’m making the trade under less than optimum circumstances simply as an example. Price is falling below my designated MA (not pictured) after having breached the first of three levels of statistical resistance (represented by the three red diagonal lines).

    (P.S. One of the advantages of such a system is I know immediately if things go awry, so when price reversed direction back above my MA, I instantly exited the position to lock in the four pips of profit I still had at the time.)
     
  16. Does Elliott Wave Theory actually work?

    There is no way to verify that it does or doesn't because the theory is not based on any kind of rigorous scientific or engineering principals. No mathematical rigor is ever presented. It's just predicated on an observation that market prices look wave-like, or cyclical in nature.

    If you must model financial data as a wave-like signal plus additive white noise, for god's sake use DSP (digital signal processing) methods. At least DSP has a solid scientific and engineering foundation, and mathematical rigor. Just be aware the DSP was developed for use with physical systems, and financial systems are sentient.
     
  17. I had to hop off the wave on the way down, but I’m hoping to be successful in riding it back up! (Note how price bounced off my second level of statistical support right to the pip!)

    ScreenHunter_6678 Nov. 19 18.53.jpg

    (P.S. A second benefit to my system is that I know when there is good reason to exit a position. Price began to stall around 84.64, so I checked my charts and saw that this was a level of minor statistical resistance, so I went ahead and took the six pips profit I had, even though it was five pips away from my target, because, mathematically speaking, it was the prudent thing to do.)
     
  18. At the risk of offending someone I've never seen traders have much luck with EW or other variations and permutations of wave count or predictive market cycle software on real markets on a real portfolio. If someone knows otherwise by all means please let us know. YMMV
     
  19. It works just like anything else. Even the flip of the coin works sometimes.
     
  20. 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. 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.
     
  22. 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.
     
  23. 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. 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. 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.
     
  26. 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. 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. 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. 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. Or climax and test. Happens again and again, nearly every day.
     
  31. Not really a good reply maxinger. Hindsight is a wonderful thing, do you have any real time calls? Anyone can pull up a zillion hindsight charts to back up a theory, that's what this EW discussion is largely about, debunking past wave counts/ trades moves which can be curve fitted to a ideology.
    Back to the OP's original query, in sum, there is no magic indicator or magic number for wave counts or Rsi, Stochastic, OBV, MA, or any TA indicator for that matter. Throw out all your indicators and stick to simple trading basics and you will get yourself much further ahead.
     

  32. fortunately whether I pulled the trigger or not,
    whether this trade is based on forsight or hindsight,
    whether I entered with 5 or 10 lots,
    whether I notified others about this trade or not,

    I answer to no one except myself.
     
  33. Lovethetrade mentioned that Elliott Wave Theory implies a random walk, so I guess that’s one more aspect in which the system I use, which views the Forex market as being relatively predictable, differs. (I have never witnessed anything that causes me to believe that Elliott Wave Theory, as developed, actually works.)

    Themickey mentions doubt, indecision, fear, and making sense of squiggly lines; which I am not sure is a fair characterization of Guppy’s Multiple Moving Averages. However, I do know that the multiple moving average system I use sets very specific criteria for entering and exiting positions, none of which involve doubt, indecision, or fear.

    For example, I am currently waiting to short CADJPY and/or buy NZDUSD.

    CADJPYM15.png

    If and when I do so will have nothing to do with doubt, indecision, or fear, but rather, when the statistical probability of price having reversed direction to join what I deem to be the pairs’ dominant trends is sufficient to justify making the trades.

    CADJPY presently has an exchange rate of 87.62. I already know that my take profit target will be 87.46, not based on fear, but based on an objective analysis of price action. Likewise, NZDUSD is currently at 0. 6873, and I already know that my take profit target will be 0.6890.
     
  34. ScreenHunter_6692 Nov. 24 00.26.jpg
     
  35. Basically, Elliot wave theory is a mix of Dow and Mandelbrot.
    But would you make money in practice? I doubt. Too many interpretations and zero timing.
    IMO, the only interesting point is that at a start of a new bull market, the 2nd wave would retrace at least 2/3 of the 1st. Actually, it works.
    Other stuff is too imprecise and without timing = non-tradable.
    I highly recommend to study Stan Weinstein's stages rather than Elliot Waves.

    CM
     
  36. I recall Guppy in his book re MMA's saying (long time ago now) that when all the MMA's converge tightly then expect price to "explode". The theory being apparently that all this pent up demand would result in this violent breakout. Well on my Amibroker I set up the MMA's then went finding these stocks where MMA's converged and backtested the results. The so called explosions were random and not at all of any probability. Guppy is old school now but at the time he was a so called TA guru. I bought and read many of his books but Guppy was famous for writing books and in those days people were sucked in easier by 'teachers'.
    So over the years I kinda kept an eye on MMA's and they are bollocks imo from being aware of this bs Guppy theory. Throwing a monkey at the dart board will give similar results, or was it you throw the dart board at the monkey?
     

  37. You need to read carefully before you anyhow shoot and respond garbagely.

    I was responding to ironchef question, not the creator of this thread.
     
  38. Having a good stew? Diddums.
    Did mickey hurt your feelings, big bad mickey! :(
     
  39. Years ago I bought an Elliott Wave software program... was supposed to "consider all possible wave counts and then indicate its 1st and 2nd picks for current count". It would run for hours... one time I recall it tested "94 million" possibilities.

    Was almost never correct (perhaps it was the software... perhaps it's Elliot in general... I dunno), but I remember one time when it got a big one right.

    Still, there seems to be some correlation to the notion of "5 waves up" if you can get the count right.

    FWIW....
     
  40. Yup, have seen on many occassions sometimes a minor wave is counted, sometimes a minor wave is excluded, it all depending on the hindsight curve fitted analysis at the time.
     
  41. I call my trades in advance to attest to the fact that my wave theory is anything but a bunch of baloney!

    ScreenHunter_6695 Nov. 24 17.37.jpg
     
  42. This was incorrect. However, I still don't like it, it's not the best way of capturing price movements.
     
  43. I am not understanding how moving averages show what investors versus traders are doing? A bigger moving average doesn't mean buy and hold, it just means it's calculating figures from further away.

    The preferred way to use loads of moving averages is to calculate the area between them and graph that however you have to make sure this is increasing or decreasing for all of them. By checking if it's above or below zero you know either buy or sell. Or just graph the slope of them. I'm not sure which one it was. Some person said it's possible to do this for a hundred moving averages together. Each indicator is the same anyway. Every formula shows the same thing. This shows expanding trends and stuff. All the moving average reduced to a single indicator. And still useless.
     
  44. As best I could tell, this was just an assumption made by Guppy. My impression is that it was simply based on gut intuition and that there was almost nothing mathematical or scientific about it.

    Personally, I use one specific moving average to give me the average overall direction of price from day to day. I use another to signal when the general intra-day direction of price reverses direction to join the overall day-to-day trend, and yet another to identify when this is happening on a minute-to-minute bases.

    For example, when EURUSD fell from around 1.1957 to about 1.1895, it was going against the longer trend, but it corrected this contrary behavior somewhere between 1.1895 and where it is now, which is why I bought the pair.

    (This is an oversimplification because I use one additional moving average and also incorporate moving average envelopes as well.)

    EURUSDM30.png


    From my point of view, Elliott Wave Theory seems to involve a lot of “guessing” and it, along with Gupy’s Multiple Moving Averages, strikes me as approximating how price is behaving as opposed to relying on measurements that reflect price direction based on a statistical analysis of all the possible options to arrive at the single BEST option at a particular point in time and for a particular set of circumstances.
     
  45. When I was starting to trade I sat in an EWT class for an hour a week for ~3 years.

    I rarely use it anymore. When it fits, it works beautifully. IMO there is a general truth/usefulness to it, but...

    I don't think it matters if you are trading indicators, EWT, patterns, simple Price Action. There are successful traders using each of those.

    IMO success is more likely to come from what Xela and The Mickey might be talking about -- getting the psychology/perspective right and having a simplified system.
    ....
    For years I had "trading plans" that were mostly technical. Indicators or EWT or Patterns or PA. Whatever.
    Very little about the process of learning to trade: Getting the perspective that deals with greed/fear, and also making the shift mentally/emotionally to... where what originally is counter-intuitive becomes the obvious and easiest way to trade.

    Dealing with Greed/Fear and counter-intuitive thinking is not easy.
    Until I dealt with those things, no trading plan or system worked.

    How many beginning traders consciously put those things in a plan?
    Without them do you even have a plan?
    Each is a process and takes time to master.

    Soooo... how would you put these in a plan? Set goals? Break things down into small steps with measurable outcomes?
     
  46. All is said.
    A simple (but not simplistic) system and good attitude (humility / discipline / self-control) are roots to success.

    First step : find a system that works and that you can apply. Test it / refine it during weeks / months / years. Backtest / Demo
    Second step : when you are confident, play small, increase regularly your stack, don't be greedy.

    CM
     
  47. Unfortunately, according to my numbers, EURUSD turned bearish at about 7:55 a.m. GMT.
     
  48. Of course not! Does witching for water actually work. Of course not. But you can find water by witching (sometimes :D) .
     
  49. Six bite-sized posts on conquering fear: About fear . . .
     
  50. Incredulous as it may seem, accomplished dowsers can find water when others cannot. It requires a methodology and diligent practice. Certainly a path less traveled but dowsing can provide accurate answers in the oddest of circumstance much to the disbelief of the disinclined.

    As with any inquiry, the domains can be distinguished between the verifiable and unverifiable.

    With that said, as the above relates to fibs points to the fundamental difference in energy in what one brings to the party.

    Personally, I’m neutral to fibs as they apply to financial markets for I’ve not done any due diligence on the matter.

    Contemplating fib ratios as they apply to various structures and growth patterns in the natural world, either inspires awe in one or is diminished to circumstance.

    Observing patterns, whether projected or not leads to a deeper understanding of oneself and of life processes.
     
  51. :rolleyes:
    I'll become a believer when there is a well designed test under controlled conditions. Right now all I've got is articles in Argosy Magazine I read in the Barber shop.
     
  52. Barber shops offer the best information for sure...
     
  53. %%
    Some can find some hints from it; but 50 day/200 day moving aVerage helps me much more.:cool: Not a prediction as you noted LOL
     
  54. Does Elliott Wave Theory actually work?

    No.
     
  55. Make sure you pronounce Elliott wave Theory properly.

    If not, it becomes Idiot Wave Theory.

    Of course it doesn't work in real life.
    That's why it is called Elliott Wave THEORY.
    It only works in Theory.
     
  56. Yep, I can't see anywhere Elliot actually traded.
    https://en.m.wikipedia.org/wiki/Ralph_Nelson_Elliott
     
  57. Everything works in theory as long as you're on the right side of the fence
     
  58. If someone out there is using EW or some other cyclical count study successfully then by all means please share specifics.
     
  59. If one can't do it, it doesn't mean nobody can. How many of you read Chinese?
     
  60. A flip of coin works also. So does head lump reading.
     
  61. Authors, perhaps?
     
  62. You can translate Chinese to any language on earth.
    And then, you can translate it back.
    And you can do this again and again and again.
    And aside from some "slippage" of vocabulary or tenses and such, the same story will be repeatedly told.

    So you see the problem with your analogy?
    You can't do that (translate back and forth, expecting same/similar outcomes)
    with Mr. Elliot's waves.
    You can't *predict*, but only *diagnose* on dead, already-happened, data:
    "post mortem."

    To put it *very* simply: to have predictive utility, a method must first be, predictive.
     
  63. The title of the thread is correct: it is a theory..., not a trading method and that applies to any type of market analysis.

    One has to create the trading method oneself ! And while doing that, one may utilize the theory (including Eliot's) to the extend that one thinks is useful.

    Looking for the books explaining the working method someone created based on Eliot ways (or any analysis) - good luck with that.
     
  64. Isn’t one the telling of a story in the past and the other more of a telling of an unfolding story in the present?

    The present always contains multiple possibilities of what the future might bring.

    Meteorologists appear to forecast based on trends of what is happening in the present extending into the future. Meteorologists frequently get it wrong but does it discount the method’s utility?
     
  65. You missed my point: "If one (you) can't do it (i.e. speak Chinese, trade profitably), it doesn't mean nobody can (speak Chinese, trade profitably)".

    We all look at the same data (Chinese characters, price data), but we can't see what others see, even when we're given hints. If you can't do it, it doesn't mean others can't do it. But, be sure that if you think it can't be done, you won't be able to do it. Keep an open mind!
     
  66. The whole idea isn't to predict, but to look at what happened until this moment, to analyze it, gauge the market breath at the moment, and act accordingly. Then don't get stuck with your past assessments; just keep reassessing and acting accordingly.

    Elliott Wave Theory, and others help you make that assessment. They give you an edge if you understand what they are (including their limitations), and what they tell you.
     
  67. Elliot's method is interpolation; prediction depends on extrapolation.
     
  68. Elliot's Wave Theory works for Elliot. -- you should develop your own theory, and call it McGinnis' Theory.
    Too many people look directly at someone else for their instant overnight gold mine market success riches, :confused:

    Make Trading Great Again 2018, High-Five`
     
  69. Those patterns and theories are all sooo yesterday.
    Anybody that knows anything is trading the ATS-320XXX.
    300% annually with no losses.

    tanti.jpg
    s-l640.jpg
    Felonious Gru... the talking genius
    He even has a "Try Me" button.
     


  70. Personally, I think it worked much better in the past, before computers. Nowadays it is probably a coinflip.
     
  71. Technical analyst David Aronson wrote:

    The Elliott Wave Principle, as popularly practiced, is not a legitimate theory, but a story, and a compelling one that is eloquently told by Robert Prechter. The account is especially persuasive because EWP has the seemingly remarkable ability to fit any segment of market history down to its most minute fluctuations. I contend this is made possible by the method's loosely defined rules and the ability to postulate a large number of nested waves of varying magnitude. This gives the Elliott analyst the same freedom and flexibility that allowed pre-Copernican astronomers to explain all observed planet movements even though their underlying theory of an Earth-centered universe was wrong.
     
  72. My understanding is that he was of limited financial means when he passed. So perhaps it worked even better before he discovered it...
     
  73. Precisely. Constructing evidence after the fact.
     
  74. Paul Tudor Jones and Elliott Wave Theory
    By JLTrader | September 12, 2015

    A few months ago I wrote an article addressing the magical powers attributed by some to Fibonacci analysis. What I had planned to write next about was Elliot Wave Theory, which I consider to be an equally ridiculous and degrading part of technical analysis. But, a couple of things held me back. Firstly, there’s much more haziness here compared to Fibonacci. Secondly, and most important, Paul Tudor Jones is quoted in Market Wizards (1988) as being a supporter:

    Are there any market advisers that you pay attention to ? Bob Prechter is the champion. Prechter is the best because he is the ultimate market opportunist.
    What do you mean by opportunist ?
    The reason he has been so successful is that the Elliott Wave theory allows one to create incredibly favorable risk/reward opportunities. That is the same reason I attribute a lot of my own success to the Elliott Wave approach.
    Whenever I wanted to criticize the Elliot Wave aficionados, I got stopped in my tracks by the quote above. Well, this week I’ve been reading More Money Than God, a book which provides a history of hedge-funds. Paul Tudor Jones is of course mentioned, and new light is shone on a couple of things: the attribution of his trading success to Elliot Wave; the fact that together with his chief economist and statistician, Peter Borish, predicted the 1987 crash by noting an eerie parallelism when they superimposed the charts of the 1980s on the 1920s.

    Firstly, as it can be seen in Trader: The Documentary (1987), Borish predicted that the crash would arrive in the spring of 1988. This forecast was no better than the many others made at a time when a lot of Wall Street players were expecting a market break – unsurprisingly after a five year bull run. Secondly, in an interview in Barron’s in the first half of 1987, Peter Borish admitted to fudging the results of the 1980s-1920s comparison, juggling with the starting points for the two lines until he got the fit he wanted.

    How about the connection between Paul Tudor Jones, Elliott Wave theory and Robert (Bob) Prechter ? It must be said that Prechter was an investment guru in the 1980s, mainly because he had correctly predicted the start of the bull market in 1982 (by using Elliot Wave). After the crash, expecting the stocks to plunge at least 90%, he became a perma-bear and remains one to the present day. It’s clear that the stellar performance Paul Tudor Jones had in 1987 (200%) can’t be attributed to Prechter. Not only he didn’t pinpoint the date of the crash, but Jones said in an interview to Barron’s that he decided to fade Prechter (in other words, fade Elliot Wave), due to Prechter’s becoming such a large market force.
    But the author knows better than Paul Tudor Jones what is the source of PTJ's success. (ridiculous!)

    A quote from More Money Than God offers what I believe to be the real reason for PTJ’s success:

    The truth was that Jones’s trading profits came from agile short-term moves, not from understanding multidecade supercycles whose existence was dubious. Like the traders at Commodities Corporation, Jones was adept at riding market waves; he would get up on his surfboard when a swell seemed to be coming, ready to jump off quickly if the market turned against him. “When you take an initial position, you have no idea if you are right,” he once confessed, undermining the notion that any long-range analysis could explain his success. Rather, as he explained in his more candid moments, his method was “to write a script for the market,” setting out how it might behave; and then to test the hypothesis repeatedly with low-risk bets, hoping to catch the moment when his script became reality.

    This sounds very similar to Jesse Livermore’s method of placing ‘exploratory bets’ until the market confirmed its direction and allowed him to add to the original position.

    To conclude: although Paul Tudor Jones might have genuinely believed that his success was due to Elliot Wave, as he’s quoted in Market Wizards, all the evidence points to the contrary. Again, from More Money Than God:

    In one example of Jones’s loose grip on the causes of his own success, analysis by Commodities Corporation, which had seeded Jones, determined that he tended to lose money on cotton, the market he believed he knew best. When the Commodities Corporation analysis was presented to Jones, he had difficulty accepting it.
    That's a ridiculous, but typical conclusion, isn't it?

    A better conclusion: Those who can, do; those who can't, write :)
     
  75. Another *inspired* post, V.
     

  76. By the way this is NOT an evidence for EWT itself. 2 charts being similar is one thing, having waves with predicting power is another.

    I also notice a similarity between the Dow Jones chart and Bitcoin's chart:

    [​IMG]
     
  77. you can lead a horse to water, but you can't make him drink
    saying; emphasizes that you can make it easy for someone to do something, but you cannot force them to do it
     

  78. (Richard Prechter)"His visibility increased further after he won the U.S. Trading Championship in 1984, with a then-record 444% return in a monitored options trading account."

    His company EWI, is still in business after 35 years, employing 80 people:

    https://www.marketwatch.com/story/w...ning-of-a-sharp-collapse-in-stocks-2015-06-08

    Edit: This is a shitload of BAD predictions:

    https://macromon.wordpress.com/2010/10/28/robert-prechters-100-predictions-7-years-later/
     
  79. What time frame, or how long or short, was the duration of that trading competition?

    I don't want to sound arrogant or cocky or anything, but I think I can maybe beat that.

    All these trading competitions are from the 80's; you rarely, if ever, hear about someone currently winning something like that in today's day.

    Make Trading Competitions Great Again,
    kind of like the Olympics or various sports annual Final competitions....Star Traders should stick out and be recognized somehow by some official monitoring organization.
     
  80. Selling software and hope always makes good money.
     
  81. That reminds me of Joe Granville and some of his crazy predictions such as southern California would fall into the sea at 5:30 A.M. Pacific time or his 2012 prediction a pending 50% market plunge.

    But you gotta give him credit for entertainment: bringing a trained chimpanzee to appearances, or dressed as Moses and holding a hand grenade for speeches. My favorite was wearing a toga and having a wooden plank installed just beneath the surface of a swimming pool so he could appear to walk on water.
     
  82. %%
    I thought of that also. By the way if Mr PT Jones wants to trade cotton, reguardless- i think he earned the right LOL-True.[Unless CC put numbers on the cotton trading % i may not find that helpful, but great post] Other side of the coin, another top trader interviewed by Jack Schwager , who benefited from E-wave said 'Mr Elliot is sitting by the pond, waiting years for the tidal wave '' LOL. Thanks; great read