Elliott Wave Theory
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Murray Ruggiero
Sponsor
I wrote an article April 1996 in which I showed how to mechanize counting the 3-4-5-wave sequence and then show how it worked in a backtest. I do believe there is something to Elliott wave analysis. The problem is that it is subjective and many of the mechanical counting tools, change the historical count once they discover the count was not correct. These means we cannot even backtest Elliott wave by hand with these tools. It would be nice to do a study, of objective Elliott wave counts on a basket of commodities and stocks and see it's value as a trading tool.
From what little I know and have read about EW, I think its most salient feature is its ambiguity. Therefore, retrospectively, it is a marvelous tool for vendors since most charts will accommodate one interpretation or another. Going forward, however, is a different matter.
Murray, Thunderdog...
I certainly agree that the Elliott Wave has received a lot of negative publicity for many years. However, I assure you, it is not the theory that is subjective, but the pundits interpreting what the wave patterns are actually forecasting.
There's saying in programming; "Garbage in, garbage out". When the correct data is used, the Waves literally jump of the page.
Thank you for your responses
Tony
I certainly agree that the Elliott Wave has received a lot of negative publicity for many years. However, I assure you, it is not the theory that is subjective, but the pundits interpreting what the wave patterns are actually forecasting.
There's saying in programming; "Garbage in, garbage out". When the correct data is used, the Waves literally jump of the page.
Thank you for your responses
Tony
how about a link to the article, or a description of the nuts and bolts.
Murray Ruggiero
Sponsor
The article is own by Futures Magazine. I also discussed it in my book Cybernetic Trading Strategies as well as my article collection book, which contains over 100 articles I have written called Technology in Trading, which I have a royalty arrangement with Future on .
The basic concept, letâs look at the long side is using an oscillator, which is the difference between two moving averages. When that sets an N bar high, N is a relatively big number 50,60,80 ect then you are in a wave three to the upside. We then wait for divergence between the oscillator and price call that wave 4, wave 4 cannot complete until the oscillator crosses 0, and we then look for wave 5 when the market rallies without the oscillator making new highs. If the oscillator makes new high , it can not be a wave 5 . Three must have subdivided and we change the count to a 3. This is simple and primitive concept but is a good starting point for counting waves.
The basic concept, letâs look at the long side is using an oscillator, which is the difference between two moving averages. When that sets an N bar high, N is a relatively big number 50,60,80 ect then you are in a wave three to the upside. We then wait for divergence between the oscillator and price call that wave 4, wave 4 cannot complete until the oscillator crosses 0, and we then look for wave 5 when the market rallies without the oscillator making new highs. If the oscillator makes new high , it can not be a wave 5 . Three must have subdivided and we change the count to a 3. This is simple and primitive concept but is a good starting point for counting waves.
what Prechter and Frost aren't telling you is that R.N. Elliot died a penniless, AIDS-stricken, child molester.