Are Elliot waves too subjective to be objective?

GordyG said:
Yeah, from a psychology point of view, at a market bottom you have too much fear in the market for wave 1 to last long, so some bearishness remains, which is wrung out in another short wave 2.

I think most logically thinking people without bias would agree with that side of thinking is useful.
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IMO trying to predict wave 2 is the least useful one of the bunch.

Wave 3 has waves 1 & 2 and prior trend/correction to start of wave 1

Wave 4 has, of course, waves 1, 2 and 3 (especially wave 2) for comparison.

Wave 5 has all of the above.

What I've seen over my many years is how few traders use the more important factor in their EW analysis ..... time.
 
This book description has "This work presents the first scientific, objective approach to market forecasting with the Elliott Wave Theory."
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This anecdote provides a fascinating glimpse into the mindset and approach of a seasoned, possibly old-school trader. The rules he laid out offer insight into a very particular trading philosophy that prioritizes selling options, committing only to high-conviction trades, and completely dismissing certain popular market theories. Here's a breakdown of the potential reasoning behind each rule:

  1. "We only sell options here. We don't ever buy them."
    • Reasoning: Selling options can be seen as a more consistent way to generate income, especially for traders who believe in managing risk and collecting premiums. Selling options puts the trader in a position of being the 'house' in a casino—the odds are theoretically in their favor, as most options expire worthless. By avoiding buying options, the trader sidesteps the high risk and potential for total loss that comes with being on the other side of the trade.
  2. "If you have a good idea, it better be a really good idea because we don't paper trade here. We only use real money."
    • Reasoning: This rule underscores a commitment to serious, actionable trading. Paper trading (simulated trading with no real money) is often used by beginners to practice, but this trader insists on the real stakes of the market. It implies a level of confidence and discipline—trades should only be made if they are backed by thorough analysis and conviction, as there's no room for hypothetical scenarios.
  3. "Do not ever mention Elliott Wave theory."
    • Reasoning: Elliott Wave Theory is a popular but controversial method of technical analysis that predicts market trends based on wave patterns. This trader's dismissal of the theory suggests skepticism toward its predictive power or a preference for more straightforward, perhaps less speculative, methods of analysis. It might also reflect a disdain for what could be seen as overly complex or esoteric strategies that don't align with his practical, results-oriented approach.
Each of these rules reflects a distinct trading philosophy: one that favors calculated risk-taking, demands a high level of conviction, and values practical, proven strategies over theoretical or complex ones. This approach would likely appeal to someone who values consistency, discipline, and a no-nonsense approach to trading.
 
GordyG said:
I know of a well known investment strategist guy with a background in Physics, who regularly appears on CNBC, who swears by Elliot waves.
He flat out says it's multiplied his trading returns.

I guess I partly believe in using them from a market psychology point of view, and I definitely believe trendlines work, which are a big part of EW.

The thing that makes them limited for me is that when a trend changes from say 1 to 2 is subjective.

It's almost as if EW traders say, " Oh, that's not gonna fit. Well, I'll just divide wave 1 into separate individual waves, to make it 1 later on".
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Who?
 
Is it subjective? To answer that, just try to code it up in real time, not after the fact.

What you will find is there is about a 10:1 ration of "waves" that behave in "Elliot waves" that are tradable.
 
From a purely discretionary perspective,I see no problem operating within an EW framework,as long as one also employs sound risk management/position sizing..
 
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