Trading from Theory

Discussion in 'Trading' started by Joe Ross, Sep 8, 2009.

  1. I have been corresponding with a mathematically oriented gentleman who is quite brilliant in his approach to the markets but who is very close to going off the deep end. He wrote me the following email:

    “I have given the 45 degree - phenomenon a lot of thought. I pretty much would like to know how you figure out the inner workings.

    “What I think is:

    “(a) The route of the 45 degree cuts the Elliot 3 pivot and the 4 reverse pivot in half. The retracing swing from 3 to 4 (starting off with what looks like a congestion) is the playing field of the insiders. It quickly develops into a squeeze to the downside before the final 5th wave shoots up.

    “(b) Those who know what is happening, take full advantage of the less informed by jumping on their resting orders. The key is the knowledge that the 5th wave lies ahead. Then the load of contracts could be transferred to the public's ‘greed-panic.’”

    While I would like to agree with what he has stated above, I’m not really sure of what he actually said: Are you? I submitted the following answer:

    I know virtually nothing about how to count Elliott waves or the meaning of Elliott wave counts. I have no reason to believe in them and many reasons to believe that they are nothing more than a THEORY. Personally, I want to trade based on facts and the reality of what I’m seeing. My belief that Elliott Waves are virtually worthless comes from the results others have obtained from following them. I am very familiar with these results. I know that Elliott practitioners have been dead wrong about the stock market for over 12 years running. Elliott wavers missed the bull market of the 1990s. I know that they wrongly predicted the fall of the U.S. dollar this year. The U.S. dollar rose early this year. I know that people who follow Elliott Wave Theory were wrong about gold and silver for many year, predicting rises as those metals fell to multi-year lows. It is difficult for me to understand why anyone would want to trade based on a theory when they could trade based on what is plainly seen in the markets.
  2. 1) (I thought today is Tuesday)......Wait a minute Joe! You're not supposed to be here until Thursday or Friday.
    2) The 5th-wave that guy expects in the direction of the major trend could merely be a B-wave or 2-wave correction as part of a major reversal of trend. He's wanting to think in certainties instead of probabilities.
    3) The EWT "works better" when markets are making front-page news and longer-term extremes are taking place, not with short-term and intra-day noise. :cool:
  3. Good point nazzdack
  4. Geometry and behavioral finance never seemed to bode well for me.
  5. 45 degrees is significant...statistically... i really dont know why but it turns price more often at that degree than anyother degree.. test it youll see... gann dealt with angles and geom.. you should start there i dunno to much about it
  6. The 45 degree angle is entirely a matter of perspective. Elongate the chart and the angle will become greater than 45 degrees. Flatten the chart and the angle will change to less than 45 degrees.

    Gann must have been using a logarithmic scale in order to get a constant 45 degrees.
  7. All such angles are meaningless because the units of the the x and y axes are not the same.
  8. NoDoji


    You guys are getting way too complex here what with waves, angles, etc.

    Here's a simple alternative:

    Using a 12cm x 13cm sized chart in PowerEtradePro, short when price pivots after moving at least 1 cm above the 20-period MA; long when price pivots after moving at least 1 cm below the 20-period MA, placing your protective stop just above or below the pivot bar.

    I call this my "1 cm MAgnet" strategy.

    With some simple study of a few charts in your time frame, you can easily adjust the actual measurement unit to work with the size and style of charts you're using.

  9. Yes. All "angles" depend on reference frame conditions - relativity.

    Geometry is useless for market analysis. Time corrdinate is reference frame dependent. There is no proper time in the markets.
  10. Square scale your chart or use the Jenkins approach 45 from high/low/zero line.

    45's a timing line.
    #10     Sep 10, 2009