Registered User Joined: 12/8/2004 Posts: 1,301
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1e. Elliot theory says stocks move in waves. Motive waves move up, correction waves move down. Motive waves have a 5 wave structure, and correction waves have a 3 wave structure. There are exceptions to these rules. 1hnc. HNC theory says stocks move in waves. Up, down, or sideways. There are no exceptions.
2e. You cannot confirm wave 1 until the completion of wave 2. If wave 2 retraces wave 1 by less than 61.8 then chances are you are moving into wave 3 unless of course it is much less than 61.8% which means you may still be in an extension of wave 1. If wave two retraces more than 61.8% you may, or may not be in a corrective wave. There are exceptions to this rule.
2hnc. If the stock moves up you are in an upward trend. As long as there are no downward trends which go lower the the start of the upward trend you are still in an upward trend. There are no exceptions.
3e. The most common motive wave is the impulse wave. Most impulse waves follow the 5 and 3 wave structure, and most have extensions which enlongate the wave so that you cannot tell its in a 5 or 3 wave structure until long after the move is finished.
3hnc. What can I say? Up, down, or sideways. You only have 3 choices. Buy stocks when they are going up, and try to sell them before it returns back to your purchase price. Sell short the stocks that are going down and buy them back before they go up to point where you sold them. You may go long or short on sideways moves. Add to your position if the next move turns out to be in the direction of your trade.
4e. Average price of Elliott Wave Theory books 38.95, and of course, there are exceptions. 4hnc. HNC theory is free, and there are no exceptions.
HNC wave theory works EVERY SINGLE TIME as long as you know up from down. Elliott theory works as long as you own a time-machine and can go back in time to invest after confirmation of cycle.
For all of you elliott guys, this was tongue and cheek, but I have to say this is the most frustrating theory I have ever encountered.
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Registered User Joined: 1/28/2005 Posts: 6,049
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HNC
Lets not forget sports fans, oceans, and sound also move in waves.
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Registered User Joined: 12/19/2004 Posts: 457
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HnC,
A few misconceptions:
"1e. Elliot theory says stocks move in waves. Motive waves move up, correction waves move down. Motive waves have a 5 wave structure, and correction waves have a 3 wave structure."
1. So-called "motive" waves do NOT have to trend up. This is one of the biggest misconceptions regarding Elliott Wave--something that Posner goes into in detail.
This is especially true when you apply Elliott to interest rates or various sorts of futures. Three wave moves (corrections) are common.
I simply interpret it this way--the major trend should unfold in 5 wave moves. If you can't count it, it isn't an impulse. Any pullbacks within the major trend should subdivide in some form of Elliott corrective pattern.
As for Elliott being frustrating--I agree. It can be when you are trying to follow a correction. Just try to put a good count on the Dow since 2000. It is a mess.
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Registered User Joined: 12/8/2004 Posts: 1,301
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You're right, motive waves go in both directions, I guess my tongue and cheek missed an important point.
I am enjoying poser's book much more than the other two. At least so far (120pages), it makes some sense.
The software MT Predictor takes charts and puts the waves on their automatically. It's kind of pricey at $1795 without data, but it does work with tc2005.
I find it interesting that it bases its total trading system on indentifying ABC correction waves and trades only off of the completion of the C-Wave.
I would think we could come up with a pcf that would at least come close to giving us something that resembled this.
The only problem is I don't know anyone who trades this style or it's success rate, but it would prove interesting to find out.
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Registered User Joined: 12/19/2004 Posts: 457
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I don't think Elliott software would do a good job of finding waves, at least at this point.
The problem is that waves are nested within waves, and beyond a certain point, the complexity is too much for the human brain to handle.
Elliott is a tool to use with other technical concepts. It does nothing to refute the idea that you should trade with the trend, or that volume expands in the direction of the trend. It merely helps to find lower risk times to implement these concepts.
Elliott is really an elaboration on Dow theory. Dow's primary trend is 3 swings with 2 intermediate corrections (5 wave sequence), with the intermediate corrections retracing 1/3 to 2/3 of the prior move.
Elliott's contribution is the use of Fibonacci numbers, and the description of corrective patterns.
Everything in Elliott was taken from Dow theory. Keep this in mind when you think that Elliott was full of it.
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Registered User Joined: 4/6/2005 Posts: 239
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A couple of additional Elliott Wave books I found interesting are; "How to identify high-profit Elliot Wave trades in Real Time" by Myles Wilson Walker a New Zealand currency trader. This book has some interesting and rather simple (simpler than Prechter) methods for identify wave counts. Ihavent finished the book or practised enough to feel comfortable with his methods. The second book is Reviews. Elliott Wave Explained : A Real-World Guide To Predicting & Profiting From Market Turns by Robert Beckman a trader on the London exchange. He goes into quite a bit of detail without enough charts to show what he is talking about, in my opinion; he also mentions calling Prechter on being a mutual fund investor and not being a trader.
Like many other postings lately I too feel we are on the precipice looking at a big drop. 10% will just be the first step.
HNC, keep the $1795 in your account, until we get true AI the current state of computers and programs will never do an adequate job of wave identification; and as RMR poins out there are waves within waves, humans have problems identifying after lots of studying wave theory a programmer would have to understand wave theory inside and out before he could even begin to write a program; and if he were good enough, he would use that knowledge to be trading and not writing the program.
Baten down the hatchs and shorten your stops its only a question of when and how bad, not a question of if.
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Registered User Joined: 1/28/2005 Posts: 6,049
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S2
Quote : "Baten down the hatchs and shorten your stops its only a question of when and how bad, not a question of if."
This is the type of sentiment "never" seen at market tops. Its the "job" of the market to break the backs of bears. To turn the doubters in believers. When everyone is turned into believers. When people buy the dip (its always worked before). When every selloff is an opportunity. That's when trouble usually strikes. The "job" of the bear market is to take as many investors along for the ride as possible.
Good Luck
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Registered User Joined: 12/8/2004 Posts: 1,301
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Believe me, telechart is all the program I need. The fun of investing is finding your own stocks,predicting their movement, and then profiting by your judgement. This MT Predictor software is interesting though. Go to their site and view the video demonstrations.
I like their idea. I agree that it is difficult to determine wave counts, but it is not difficult to find A-B-C correction modes, and why mess with anything that is not clear. I look at a lot of charts anyway, it should be easy to find an occasional perfect elliott pattern without actually searching. Heck we can even post obvious elliott waves on this board.
The beauty of MT is that you only invest in stocks that follow SIMPLE AND EASY TO SEE ELLIOTT WAVES. We can do this is telechart. As I find them, I am going to put them in a watchlist, predict their movement, and see if there is anything to elliott or not. I think there IS something to elliott wave theory, but ONLY WHEN THERE ARE FAIRLY OBVIOUS WAVEFORMS. Trying to make something out of waves that are not there actually make the elliott community look like a bunch of freaky cult members.
Take a look at motorola in a daily zoom=3. Right now, it is classic, and obvious elliott. It is most likely completing wave c and entering wave 1. We don't have to do anything until we are relatively sure wave 2 is over, and then backup the truck if you're a true believer.
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Registered User Joined: 12/19/2004 Posts: 457
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"I think there IS something to elliott wave theory, but ONLY WHEN THERE ARE FAIRLY OBVIOUS WAVEFORMS"
I completely agree with this, and this is how I use EWT.
Just take a look at some of these stocks/indexes: HOV, NEW, NEM, XGLD, DXY0,
I focus mostly on the indexes, and develop my outlook using a variety of tools, primarily technical, some fundamentals/intermarket relationships.
Elliott Waves take place within the context of economic fundamentals. These ridiculous multi-century forecasts are just ridiculous. I'm happy if I can see one quarter ahead.
Even granting that market behavior (and by definition, social behavior) is fractal in nature, there is no consistent data set where we could see where we are in the grand scheme of things.
Interest rates, however, might be an interesting area to study further.
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Registered User Joined: 12/8/2004 Posts: 1,301
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I don't think the sp-500, the dow, or the russell 3000 have obvious eliott waveforms. Of course I am very inexperienced in this area, but I couldn't even venture an educated guess.
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Registered User Joined: 12/19/2004 Posts: 457
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Well, they are obvious if you know how to count corrections.
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Registered User Joined: 1/28/2006 Posts: 291
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Ahhh....HNC (or Elliot) makes a simple concept complex. Forget wavecounts...accept what you see. Elliots' attempts at pattern recognition can be skewed by subjective fractal algorithm choice. Learn the classics.
I wonder...did Elliot trade with greater than 90% accuracy in all time frames? If so, why are so many of his adherents mired in minimal returns?
Did he ramp $130 to $12000 in a single month?
Things to ponder...
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Registered User Joined: 12/19/2004 Posts: 457
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awshucks,
You should keep in mind that you can have a great method, and still lose money, if you bet too much.
Ralph Vince, who had done a lot of work with trying to modify Kelly's criterion for futures traders, has demonstrated as much.
For any trading method, there is a certain percentage of your bankroll that will give you the best growth after reinvestment (geometric growth). Should you exceed that fraction (the optimal f), your playing a negative expectation game, even if your system is good.
I suspect this happens to the vast majority of traders. The other problem: the optimal F for your method is likely to be unstable over time.
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Registered User Joined: 1/28/2006 Posts: 291
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Hi RmR...
The issue (to my mind) is not method, but acceptance. I am not looking for optimal f. I am looking for the ordinal in the primordial that is only hinted at with EW.
Optimal F would, in natural course, be in resonance with said.
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Registered User Joined: 1/28/2006 Posts: 291
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PS: I did not ramp $120 to $12000 in a single month. The one that did is the one to heed...as are his recommended readings.
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Registered User Joined: 12/19/2004 Posts: 457
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FWIW,
I believe Pretcher did that back in the early 80's, when he had a hot hand.
I think he traded options and gained some outrageous 1200% in one month. What I don't know is if he did that in an actual account, or if that is just paper trades.
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Registered User Joined: 1/28/2006 Posts: 291
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Hot hand...lol. No, this guy was generations ahead of the herd in his time and built his work on others who were generations ahead of their herd. 'Markets' are thousands of years old.
Equating speculation to gambling is why so many loose their shirts.
BTW, are you a cardiologist or md there hoss? Just thought with a handle like rmr and a graduation year(?)...
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Registered User Joined: 11/13/2004 Posts: 3
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I think the idea of elliot wave should have stopped after explaining the pschology of each wave. Not to mention the time it takes do all the counting of all the fractals. The whole fibonacci thing should have been some other book for toilet reading in my opinion.
I haven't done any quantitative research on price movements but a=c seems to work fairly well. Other than that I HATE when any indicator, method or guru leaves no space for common sense. Laziness has always been the path of least resistance for most people.
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Registered User Joined: 5/17/2005 Posts: 221
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jhend .. don't discount fibonacci. I use it for FOREX trading and it works like a dream. Trading FOREX on technicals is much more predictable than trading stocks ..maybe something to do with the fact the $1.9 trillion is traded in the four major pairs every day.. It seems that a lot of FOREX traders use a herd mentality for support and resistance levels , which are based on fib retracement. I also use other indicators like CCI , stochastics , volume etc ...it seems to work as the balance in my FOREX account has trebled in 3 months !
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Registered User Joined: 12/8/2004 Posts: 1,301
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I agree on the fibonacci malcombe. I have never used it in the past, but I am amazed by its accuracy, and it will now become a permanent part of my ttading tools.
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Registered User Joined: 12/25/2004 Posts: 51
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Pretcher fell to the following: 1. Too many followers, leaving too few to trade against. 2. Elliot waves give a sense of where you are in a trend, but never dictates next move. In other words the next move may be an unanticipated cyclic complex nevertheless fulfilling the theory's requirements. As followers began relying on it for trades the could not accept that fact and instead blamed the messenger who admittedly may have himself overlooked that rather obvious circumstance.
I suggest instead yielding to Don Worden, as have I. He proffers no single element adequately founds any trade. Instead it's the look...the whole look...and hopefully glimpse the truth.
Even more simply said, trading is broad glance, gelling one's thoughts, going into the trade, and getting over it (whatever happens.) Don flips through charts like a speed reader who sees not letters or even the words, but whole ideas gel little appreciating the individual points are for purposes of decision nearly meaningless rudimentary pieces.
Attacked another way, the cyclic including fibbiconi calculations are deductive logic infamously failing in reality. Decision taken without capability of defining why is instead natural or Hippocratic rationally necessary to trade successfully.
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Registered User Joined: 1/28/2006 Posts: 291
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I like Gann. Mathematical points of force, natural law and geometric constructs...the epitome of 'accept what you see' in logic constructs.
Of course, not all eyes are the same
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Registered User Joined: 1/28/2005 Posts: 6,049
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I believe as Norman Fosback has stated: "The market always has to do something." "The explanation of everything is the explanation of nothing."
The moment you draw a line on a chart it is correct.
If the market never touches the line you say: "It provided support."
If the market goes through the line you say: " It correctly showed the point where the market changed character and direction."
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Registered User Joined: 1/28/2006 Posts: 291
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I'll respectfully disagree diceman. I accept what I see in nature (human nature included), echoed in music and mathematical constructs. That we have barely scratched the surface (actually, we've only just picked up the instrument used to scratch the surface) of how the construct is organized does not invalidate it nor does it validate the 'random walk'.
Funny that you quote "the explanation of everything is the explanation of nothing".
There is nothing extant that evades causality. The existance of fractals proves a universal rule that effects and organizes all dimensions.
First trick...find the rule.
Second trick...find the proofs.
Shy of all this...accept what you see.
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Registered User Joined: 1/28/2005 Posts: 6,049
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awshucks
I'm glad you included humans as part of nature. (some don't)
If I had to believe in something I would say that nature based is as good as any. At least it has an undeniable logic.
Fosback does make an excellent point. Are we really predicting? Just because we have an explanation is it valid?
Rather then disagreeing with ideas, I consider myself trying to stimulate thought. Sometimes we have to take the other side to show that there are alternatives.
When we invest time and labor in ideas sometimes we just want to defend them even if shown opposing evidence. The ideas not having worth would mean we wasted our time.
In order to find truth we must be our biggest critic.
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Registered User Joined: 1/28/2006 Posts: 291
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I would tend to agree diceman, but there are groups attempting to introduce memes into the info pool that are (at best) counter- productive to humans.
It is perhaps unfortunate for you that I view 'random walk' as one of those views. I attack the idea, rhetorical form, or the action, not the individual.
One does not predict, one accepts. This still, open hand accepts what is presented, the grasping hand misses.
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Registered User Joined: 1/28/2005 Posts: 6,049
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awshucks
Isn't Fosbacks point more toward random walk???
We cant control or predict what is happening we only think we can.
Can things like fractals and laws coexist with random walk?
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Registered User Joined: 1/28/2006 Posts: 291
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Yes, I understood Fosbacks point...which is why I questioned/countered it.
The issue should probably be reframed 'can random walk and vibratory/natural law coexist?' The answer to my mind is no. I view them as opposite polarities and probably what Western religionists narrowly view as the diametrically opposed extremes of God/Satan.
What some view as random walk today is probably more like a dormant period or low oscillation sign wave. I think the difference rests in training of the eyes (awareness) and questioning/establishing the rules of causality.
And to my mind, the issue is not control, but awareness and acceptance. You do not have to control what exists if you learn how to ride the wave. I'd love to talk with some surfers who happen to trade. The need for control is not part of my makeup and I note the negative impacts on society in the US since the Sixty's due to the actions of the control freaks on both sides of the false paradigm.
But we digress. Funny that you frequent a tech. analysis board as a proponent of random walk.
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Registered User Joined: 1/28/2005 Posts: 6,049
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awshucks
I don't consider myself a proponent of random walk. Maybe I should have been clear. Maybe it was this quote:
"Isn't Fosbacks point more toward random walk??? We cant control or predict what is happening we only think we can"
In the "we cant control line" I was speaking as Fosback.
Quote:"Funny that you frequent a tech. analysis board as a proponent of random walk."
I was thinking the same of you.
If I am understanding you correctly. You believe there is random walk and we can make money in the market because we are riding a trend that is already in existence and will be there with or without our participation.
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Registered User Joined: 1/28/2006 Posts: 291
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No...there must be a disconnect in our comm. lol!
Tech analysis and E Waves are manifestations of natural law...of which we perceive a minute amount due to our limited understanding. You are correct that the wave would be there without our participation. I believe in natural law, tech indicators and the cosmos (not necessarily in that order).
I do not believe in random walk being in effect anywhere in this reality. I believe random walk is an opposite polarity, not extant in this dimension. Were it ever to intrude on this dimension I think twould be 'bad'...as in "Bwahhh, we're all going to die" bad. Kinda like postulations on matter/antimatter.
We ride waves and harmonics of waves pretty much sums it up. However, I don't think EWaves capture the true nature of things as they effect the market and reality.
Ok...Dead horse beaten sufficiently from this end.
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Registered User Joined: 1/28/2005 Posts: 6,049
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As long as the dead horse was beaten at its natural rhythm.
Ok I think I see where you are coming from now.
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Registered User Joined: 12/25/2004 Posts: 51
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Interesting, that come after my post, as I did not imply Elliot Wave Theory not modeling natural behavior. In my opinion it does!
Instead I simply state that the theory does not predict with certainty a next force or effect thereof. That's simply because that model accommodates anything next...meaning anything come next courses as complexly as must to apparently fit the model.
I say apparently because all mathematical modeling only approximates nature, and everyone who like myself is veteran of quantum physics is evermore aware that limitation. It does not however mean models are useless, for each reveals something about the present state and likelihood of nearby future consequences. Though none exactly predicts the future, in a microcosm exact isn't necessary for profit in excess random expectation.
With Elliot analysis early in the great bull market so few were following that the approximation offered in the Elliot Wave Theorist was good enough, but later too near perfect was necessary as virtually everyone got on board...which is to say on the same side of the market with identical expectations. Each accepted roughtly the same degree of depth in examination hence requirement for certainty. Greater certainty then was necessary to profit and the common expectation did not follow. The waves formed nevertheless do fit the theory.
Obviously I don't subscribe to random walk where a model of proximate existence is available. Nonetheless in largest sense of nature as a whole quantum physics supports randomness. It does so as scientists foresee the end sum of all existant force is zero. That is thought to occur without an exact map of events as random summation reality's near infinite occurrences.
Perhaps it's way of saying a trader may set sight on profiting a piece of nearby reality but if acquires it all has in sum nothing.
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Registered User Joined: 1/28/2006 Posts: 291
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EWave theory is subject to fractal distortion (subjective and derivative), therefore not effectively representative of the wave, which is primary and objective. Then you add humans to the mix. Oy.
If quantum physics supports random walk, in macro or microcosm, then it is bunkem. All theoretical physics is based on educated guesses as to the nature of the Universe rather than on careful study of empirical interactions within the Universe. Theoretical physics assumes a constant to the speed of light which does not exist in reality rather than using the time it takes a photon to pass a given point as a universal unit, and measuring the locality changes in the speed of light and the effect on events. It is my opinion that the further one removes from the core of the issue, which is universal constants, geometric constructs and mathematical points of force, the further one removes oneself from the construct experienced/studied we like to call reality. Quantum physics is a theoretical 'box canyon' and, I believe, purposefully designed as such.
Fractals exist, therefore patterns repeat going forward and back in time/space, varying only by degree/exponent... not form. Therefore, no true random variation exists within this reality.
I return you to the simplicity of the pythagorean theorem and its explanation of space/time.
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Registered User Joined: 3/17/2005 Posts: 8
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I'll add my two cents on EWT: It's too hard to count in real time. What I do like to see is a clear second wave, to catch the third wave, or any 7, 9, or 11 waves down with a truncated 5th type of ending; right now EXM has 9 waves down from October, and also has great TSV, BOP, and MACD positive divergences at the February low (the truncated 5th subwave of C).
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Registered User Joined: 12/8/2004 Posts: 1,301
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My Software cannot find any trade setups for EXM. A forced elliott shows EXM to be at the start of Wave 5 but only predicts this stock has the potential to rise to 11.60-11.75. I have no idea how accurate forced elliott waves are on this software but it will be interesting to see how close it comes.
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Registered User Joined: 3/17/2005 Posts: 8
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Can your software evaluate a weekly chart? I would be curious to know what it says about a weekly chart using exponential scaling of price. I see wave 1 topping in Sept 2004 and wave 2 just ending in Feb 2006. Fundamentals in TC also support this interpretation with only EPS 2nd Qtr Back being bad. Other EPS and Revenue growth are very good, and PE is only 3.10. However, YHOO Finance shows negative EPS growth projected for next year, so who knows?
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Registered User Joined: 12/19/2004 Posts: 457
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I hate to rain on everyone's president's day parade, but there are no Elliott patterns on EXM.
The best that I can tell, the stock is in a downtrend, but is oversold. There is a chance for a rally to at least the 21 Wk moving average (13.29) or the 1 SD Band (around 15.20).
There looks like a double bottom forming on the daily, so a close stop is nearby. The risk/reward is poor 1.6 to 1 (using 13.3 as a target) to fair--about 2.5 to 1 (using 15.2).
Using the lower risk/reward, you would have to be correct about 38.4% of the time for this trade to break even (1/(1+1.6) or 1/2.6).
Considering the chart pattern as a whole, I'd probably pass on this one.
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Registered User Joined: 12/19/2004 Posts: 457
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As for Norman Fosback:
He is a quantitative type, who dislikes subjective concepts like "head and shoulder" patterns, trendlines, etc. He advocates a mechanical (I'd say lifeless) and objective approach to the markets.
He is a believer of relative strength, insider buy signals, and the econometric approach in general.
I used to subscribe to this philosophy. But, as you think about the markets, you realize this approach is doomed. If a trading system is objective: ie. no dispute about the signals, then it is likely to be traded out of existence.
Think about the ultimate technique, that would identify points where fundamental data makes it attractive to fundamentalists to buy, say from a value POV. The chart patterns and indicators make it attractive to technicians (ie. just broke out of an inverse head and shoulder).
Clearly, since the prior trend was down, the bullish fundamentals and the bullish technicals suggest this is a great time to buy, as they have not been factored into the price.
Yet, the more filters you apply to data the smaller the sample size, and the less confidence you can have in your conclusion, from an econometric POV.
The econometric trading method would have you reject what is obviously, and intuitively, a high probability/low risk opportunity, simply because there isn't enough data to draw a "scientific" conclusion.
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Registered User Joined: 12/8/2004 Posts: 1,301
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QUOTE (bfuruta) Can your software evaluate a weekly chart? I would be curious to know what it says about a weekly chart using exponential scaling of price. I see wave 1 topping in Sept 2004 and wave 2 just ending in Feb 2006. Fundamentals in TC also support this interpretation with only EPS 2nd Qtr Back being bad. Other EPS and Revenue growth are very good, and PE is only 3.10. However, YHOO Finance shows negative EPS growth projected for next year, so who knows?
The software allows you to look for waves, but if the software feels it is not in a good setup position it will not recommend doing anything with the stock. I am still trying to figure out what conditions have to be met before it will make a decision. I know it looks for 1 day reversals, but it also looks for other things.
It can search for minor, intermediate, and long term trends. There are no long term trends on this chart that the software can find. The count never changes. If it finds a valid count it will always find the same count now and in the future. What the software is saying to me is this stock is actually in a downward trend 5 that actually could have been completed on 1/27/06. Since the wave 5 completed it does not have enough information to determine if a new first wave has begun. I read the chart incorrectly the last time and gave you the wrong information. Sorry.
The wave count is as follows. Wave 1 downtrend started on 11/4/2005 and ended 11/17/2005. Wave 2 correction ended on 12/6/05. Wave 3 downtrend ended on 12/20/05. Wave 4 correction ended 1/6/2006, and I already mentioned where wave 5 ended.
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Registered User Joined: 12/25/2004 Posts: 51
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The subject of Elliot Wave detection software has been for months of interest to me. I have noticed on several occasions retracements in accord Elliiot Wave theory which are to points on might believe from price patterns alone are valid but when one considers whole character the wave are forced, which is to say not likely the true predicted retracement.
In other words I beleive the use of Elliot Wave software is occasionally driving some market moves! Such behavior has been seen by me only in last about 2 years and more frequent than rare only in recent 6-10 months.
The behavior isn't "tradable" as a retracement since market could retrace as software predicts or retracement predicted fail of its not being requisite under the theory. If however too many count on the retracement falsly predicted, technicals may reveal the error and countertrade opportunity. I've now seen several but taken none as the swings likely in the current market were small compared to other trades I had at hand.
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