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The Basics of Elliott Wave Theory

  • #101
  • Apr 5, 2007 11:04pm Apr 5, 2007 11:04pm
Quoting oedipean
Hi itme ,
thanks for link and thanks for useful threads , I watched the video , but I think he counted the waves wrongly , i mean where he named Wave 1 , i think he is wrong
what do you think about it ?
I agree with you, oedipean. I would definitely count it differently. That's odd that he would count it that way. It actually seems quite obviously incorrect to me.
  • #102
  • Apr 5, 2007 11:14pm Apr 5, 2007 11:14pm
Quoting SeekingLight
Hi again Itme

As you know, I rather prefer a KISS approach, in EW, too.

Me too. I switch back and forth between a very simplistic, naive approach, and a clever, analytical approach. I go back and forth and try various hypotheses and try to find one that fits a general "three pulse" concept and a more technically correct one, considering the internal structure and other criteria. Sometimes by alternating back and forth and trying on different perspectives, I develop a perspective that allows both a KISS approach and a clever approach to agree, and then I favor that hypothesis.

Here's a very, very simplified wave count for EURUSD on a long term timeframe. According to this we could retest / challenge 1.36 soon.

I agree with your wave count, except that I think it is most likely that we are in a Wave B of Wave 4, not a Wave 5. But according to my semi-deterministic model, whether it turns out to be a Wave B or a Wave 5 depends on world events and the reaction the investment world has to them. Only time will tell.

I really really think it's best to simplify these counts as much as possible. I don't think big houses or players and especially long term players even bother with Subminuettes and whatnot. I assume they don't even think below full handles(100 pip increments -> 1.xx). Even if they do, I'm not smart enough for the complicated counts, so, you know, what can I do.

Either way, it matters not. Most important part - this count is simple, fits roughly and looks good to me AND coincides well with current direction. What more could I want?

Just another good excuse to look for long EURUSD setups until we retest those 2004/5 highs =)

Doesn't look that implausible, does it? Do you think it's an okay "toddler" version of an EW count?

Btw, glad to see you're cutting down pairs AND trades and waiting for the time one trade setup lines up. Focus and discipline is a very important part of trading and I, too still struggle with this biggest of all demons.

Thanks for the support!

I would still recommend simply knowing the most basic price action stuff like a pin bar / doji formation, outside bars, inside bars and double highs/lows with lower/higher closes in order to get that little bit of extra edge and confirmation as well, but that's always been anyone's own choice whether or not one trusts these.
Pin bars alone as pointed out before can signal a nice resumption of the trend as a reversal after a correction - just line it up with a wave count and tadah, you're set to go =)

Good suggestion! Multiple confirmations from various approaches add to probability of success.

Best regards,

You too!

SeekingLight
This above graph is very clear, and I think the wave count is feasible. The blue bar is a nice effect. Where do you acquire these charts?
  • #103
  • Apr 5, 2007 11:52pm Apr 5, 2007 11:52pm
Hi SeekingLight,

My longterm count for EUR/USD is same as Itme's.
Every one of us can have our own count, so we're just putting inputs here.
Attached Image
Tra-X
  • #104
  • Apr 8, 2007 2:54pm Apr 8, 2007 2:54pm
Quoting itme
This above graph is very clear, and I think the wave count is feasible. The blue bar is a nice effect. Where do you acquire these charts?
I draw my charts on Metatrader 4 demos(I drew that chart myself from scratch), by now basically all from the Interbank FX demo which runs on GMT time. The blue bar is actually a channel which you can set to "background" and therefore do that highlighting effect which I think helps to give a rough frame for things.

Hmmmmm Wave 4.B....well, then we theoretically can't go (much) above the origin of 4.A, the last high we put in. Let's see

Thanks for the opinion itme and also thanks for the chart Traex
Trust price. Know yourself.
  • #105
  • Apr 26, 2007 1:37am Apr 26, 2007 1:37am
4/25/2007 11:57:14 AM
By Vadim Pokhlebkin

As of this morning (April 25), the euro came within 3 pips (0.03 of one cent) of registering a new all-time high against the U.S. dollar.
The previous high occurred on December 30, 2004, at $1.3667. As of this writing, the euro/dollar exchange rate has reached as high as $1.3664. Will it break through? And what happens if it does?
First, a little background. When the dollar was scraping the bottom in December 2004, you couldn't swing a dead cat without hitting a dollar bear. "Crash and burn” was the widespread expectation for the buck, and the story even made the cover of several business magazines (the famous "magazine cover indicator.")
We all remember what followed. By the end of 2005, the USD gained 14.6% on the EUR and 15.2% on the JPY. That's when forex analysts, to their amazement, realized that in 2005 “the greenback enjoyed its best year against the euro and yen since 1999 and 1979 respectively.” So unexpected was the dollar’s rally that even Warren Buffet, the Sage of Omaha, who famously bet “$20 billion or so” against the buck in 2004, was caught off guard by its sudden and sustained turnaround (The Wall Street Journal).
It's worth noting that the current consensus among analysts is again bearish on the dollar. The latest monthly Reuters poll of "around 60 top foreign exchange strategists" shows that the majority expects 2007 to a bad year for the USD but a good one for the EUR and the JPY.
While the bearish consensus doesn't seem to be as uniform as it was in December 2004, it's a consensus nonetheless. Back then no one liked the dollar because of its “bad fundamentals.” Well, the “fundamentals” haven’t really changed since then, and neither has the analysts’ reasoning for staying bearish. They can keep analyzing “bad fundamentals” till they’re blue in the face, but the bottom line is this: “Fundamentals” obviously didn't prevent the USD from rallying in 2005, so why should they in 2007?
A few technical indicators may be worth watching here. Regular readers of this column already know how bearish the dollar sentiment has been, as measured by the Daily Sentiment Index (DSI). The index is constructed by polling forex traders to see whether the majority is bullish or bearish, and its April 23 reading was at 11.7 – near all time-lows. That means that 88% of forex traders out there are bearish on the USD.
Another noteworthy sentiment indicator is the Commitment of Traders (COT). This report is significant, because it lets us know what the big boys are doing (that is, where their money is.) The chart below shows the record extremes that the hedge funds (Large Speculators) and the Commercials (“smart money”) are presently holding with respect to the euro futures:


http://www.elliottwave.com/images/fo...%204-24-07.gif


Note the position of each of these two groups of traders at the wave (A) low. Now look at their current stance – it is the near-mirror opposite of the dollar’s extreme.
And of course, another technical indicator we at Elliott Wave International find particularly useful is the wave pattern. Without going into too many details, let me just say that our Currency Specialty Service analysts believe that the EURUSD is in the fifth wave of three different wave degrees: i.e., fifth wave of a larger fifth of a larger fifth.
Two years ago, forex market reviewers overwhelmingly called the “unexpected strength of the US dollar” in 2005 one of that year’s “biggest surprises” (FT). We shouldn't have to wait too long to find out if history repeats itself.
  • #106
  • Apr 26, 2007 1:50am Apr 26, 2007 1:50am
Cocoa : Another Useful Wave Pattern to Learn
4/23/2007 11:49:08 AM

At its core, an expanded flat correction is a simple ABC move that every Elliottician knows. The tricky part, though, is that in expanded flats, wave B ends beyond the end of wave 5.
In other words, the market makes a new high or a low – and yet it's still in a correction, not an impulse.
Obviously, your ability to recognize an expanded flat is critical. Once you learn how, this pattern can offer excellent opportunities to spot potential trades in stocks, currencies or commodity markets.
Watch this video from last Friday's (April 20) Daily Futures Junctures Weekly Wrap-Up, where editor Jeffrey Kennedy offers an excellent visual lesson on how to spot expanded flats using Cocoa as an example.

Cocoa: A Video Lesson in Expanded Flats
  • #107
  • Apr 26, 2007 8:08am Apr 26, 2007 8:08am
Hi Itme.

I agree whith you in the way to see the dollar. I think it will be back in 1.30 against the Euro soner than later.

p.s. hope you continue pousting your journal.
  • #108
  • Oct 30, 2007 8:16am Oct 30, 2007 8:16am
I believe that Elliot Wave theory is a very useful tool to know how to use as a trader, and so I think this thread should come back to life. I will start posting a few charts as they come along, and a few historical charts to show the outcomes of the usage of the Elliot Wave theory. First, I have to go to school, but when I get back later tonight I will begin posting.
I dream, therefore I become.
  • #109
  • Jan 1, 2008 3:21pm Jan 1, 2008 3:21pm
I have just joined and will post also,.....to expand slightly in what some have said, EW is a product of Fibonnaci Math.....Fibonacci Math is a reading of growth, death, Human Nature enmass, and is used in nature extensively, and is in fact a natural law the same way the law of gravity is. we are all subject to it whether we believe it or not, whether we are aware of it or not........if you step off a cliff, the law of gravity does not care if you're a good person or bad, believe in gravity or not, or even if you're aware of it......the law of gravity is absolute and you are going down...The natural law of Fibonnaci is the same....When making EW counts, don't just count ups and downs...count waves, waves react to Fibonnaci...you'll find that most spikes in price are just that and not a countable wave, at that point your counts will become reliable and VERY tradeable......
  • #110
  • Jan 1, 2008 3:47pm Jan 1, 2008 3:47pm
there is any software, indicator that can make a reliable EWC? or it is necessary discretion to create the waves?
  • #111
  • Jan 1, 2008 7:04pm Jan 1, 2008 7:04pm
Quoting giraia_br
there is any software, indicator that can make a reliable EWC? or it is necessary discretion to create the waves?
yes, but not on metatrader. tradestation i heard has some. but it is pricy.
The software will estimate each wave and "take a picture" and get back best probabities to the users. A computer will generate based on all the moves in the database.
You can get a ball park ew by using a 5 /34 macd ema. "bigger top waves" are wave 3.
I spent a lot of time on EW but never was able to get a good trading system running. Its a lot of work!. Its truly an "art" to be good at it. One tip I can tell you is that waves are not 5-abc. They are 5abc abc abc. With generally 3 corrective market patterns. You want to
make your decision on the third market decision. Thats what makes it "tough".
http://ensign.editme.com/newsletter
has a "ton of stuff:".
  • #112
  • Jan 1, 2008 8:35pm Jan 1, 2008 8:35pm
Quoting itme
In the March 2, 2007 Elliott Wave Financial Forecast...
"The now infamous 'Big Glitch' ... began right at the 12,337 'bear confirmation' level from the February issue of EWFF. Market action validated our levels."

- March 2, The Elliott Wave Financial Forecast


The Elliott Wave Financial Forecast and The Elliott Wave Theorist have recently commented on the extreme investor optimism and its foreshadowing of a drastic reversal. Then came Tuesday, Feb. 27, when the markets experienced not only a 3+ percentage downward thrust, but a fear-inducing reversal not seen on a daily degree since 2001. It was obvious that there would be more to the story.



Here's what Financial Forecast Service subscribers have been reading throughout the run up to Tuesday's aggressive reversal and the volatile price action since.


Feb. 2: The February issue of The Elliott Wave Financial Forecast said a break of 12,337 "returns us to an aggressive bearish stance."


Feb 21: Bob Prechter's urgent Feb. 21 interim issue of The Elliott Wave Theorist presents a narrow date range for a top: "... on Friday, February 23," with "a leeway of only ± 3 trading days." Bob states unequivocally, "Speculators should return to a fully leveraged short position immediately." That same day, Steve Hochberg's Short Term Update tells subscribers, "... coming under the wave 4 low (12,536.20) will be an early warning sign that the rally is complete."


Feb. 26: Steve posts a Short Term Update including a chart of the DJIA titled "Near the End of Wave (5)," which shows the index subdividing toward a top.


Feb. 27: Steve appears on CNBC's Power Lunch segment and then returns to his home office to observe the Dow's 400+ point sell off. Soon after the markets close, Steve publishes a chart in a special interim issue of Short Term Update calling for a relatively small bounce, followed by more declines.


Feb 28: Steve gives his wave count for the drop and states of his forecast, "... with such a wide consensus (of bulls and bulls in waiting), a complete Elliott wave pattern and with a market decline that was truly historic yesterday, we think the odds are on our side."


March 2: Steve and co-editor Pete Kendall release the March issue of The Elliott Wave Financial Forecast, which digs deeper, addressing exactly what happened on Feb. 27 and what is expected to happen in the U.S. and elsewhere in the near and intermediate future....


In this type of environment, there could hardly be a more important time for you to have updates on all time frames.
A subsequent move up of over 2000 points is some kind of "relatively small bounce".

It is hard to make predictions. I prefer to make trades.
  • #113
  • Jan 2, 2008 7:13pm Jan 2, 2008 7:13pm
Quoting 4XWeezal
yes, but not on metatrader. tradestation i heard has some. but it is pricy.
The software will estimate each wave and "take a picture" and get back best probabities to the users. A computer will generate based on all the moves in the database.
You can get a ball park ew by using a 5 /34 macd ema. "bigger top waves" are wave 3.
I spent a lot of time on EW but never was able to get a good trading system running. Its a lot of work!. Its truly an "art" to be good at it. One tip I can tell you is that waves are not 5-abc. They are 5abc abc abc. With generally 3 corrective market patterns. You want to
make your decision on the third market decision. Thats what makes it "tough".
http://ensign.editme.com/newsletter
has a "ton of stuff:".
===

yes thank's or info...
  • #114
  • Jan 22, 2008 12:54pm Jan 22, 2008 12:54pm
Thanks for sharing. I am grateful.
  • #115
  • Jan 27, 2008 4:53pm Jan 27, 2008 4:53pm
Quoting 4XWeezal
yes, but not on metatrader. tradestation i heard has some. but it is pricy.
The software will estimate each wave and "take a picture" and get back best probabities to the users. A computer will generate based on all the moves in the database.
You can get a ball park ew by using a 5 /34 macd ema. "bigger top waves" are wave 3.
I spent a lot of time on EW but never was able to get a good trading system running. Its a lot of work!. Its truly an "art" to be good at it. One tip I can tell you is that waves are not 5-abc. They are 5abc abc abc. With generally 3 corrective market patterns. You want to
make your decision on the third market decision. Thats what makes it "tough".
http://ensign.editme.com/newsletter
has a "ton of stuff:".
many thanks.
  • #116
  • Jan 28, 2008 3:31am Jan 28, 2008 3:31am
The question is, why do waves come in 5's and 3's ? Is it because this is fact or because some guy that named imaginary findings after himself believed this to be so? If I were to come up with a 4.5 / 13 Wave theory, wouldnt all of you be able to find correct counts for these waves if the right criteria was invented?


Elliott Waves = Desperate measures to predict the future.
  • #117
  • Jan 28, 2008 4:38am Jan 28, 2008 4:38am
Quoting bobblong
The question is, why do waves come in 5's and 3's ? Is it because this is fact or because some guy that named imaginary findings after himself believed this to be so? If I were to come up with a 4.5 / 13 Wave theory, wouldnt all of you be able to find correct counts for these waves if the right criteria was invented?

Elliott Waves = Desperate measures to predict the future.
Let's take the most basic and effective idea, the 123 and ABC, cited endlessly by many traders and trading intros...

There's a move out/break through something or other, people say okay, that move looks convincing(Wave 1/A); however I'm not stupid and selling chart lows, that's for suckers, wait for a rally(Wave 2/B) and proceed to sell this down to new lows(Wave 3/C).

Now whether or not you like it, but imho the gist of EW is that it simply reflects market behavior, and often pretty well.
As usual the problem isn't whether or not the thing itself works; it's whether you can make it work for you.

Also you won't be able to trade something you don't believe in, obviously.


His findings weren't imaginery, they were based on reoccuring patterns; what other than reoccuring patterns are squazillions of things like wedges, triangles, boxes, breakouts, HNS, trendlines, slopes, fib retracements, bar setups, etc pp?

If there is no recognizeable, repeatable element in FX, run to your broker and cash out, because then you admit to complete, unexploitable randomness and joined the "nothing works!" team
Trust price. Know yourself.
  • #118
  • Mar 7, 2008 6:00pm Mar 7, 2008 6:00pm
  •  FxChi
  • | Joined Dec 2007 | Status: Cash Rules Everything Around Me | 749 Posts
Quoting bobblong
The question is, why do waves come in 5's and 3's ? Is it because this is fact or because some guy that named imaginary findings after himself believed this to be so? If I were to come up with a 4.5 / 13 Wave theory, wouldnt all of you be able to find correct counts for these waves if the right criteria was invented?


Elliott Waves = Desperate measures to predict the future.
I think EW analysis is closely tied to Fib numbers and 3 and 5 are Fib numbers. The most common wave 2 retracement is 38% which is also a fib retracement number.

Then 2 waves of a degree have a lesser degree subdivision of 8 (another fib number) which in turn has a lesser degree subdivision of 34 (another fib number).

I just started learning about EW (about 8 hours ago), and so far I think it can be pretty useful when combined with other trading strategies. Albeit it's by far the hardest trading strategy/patterns I've tried learning, but that's all the more reason why I want to learn it! Knowledge is money in this game.
"Wishful thinking dies hard." Igor T.
  • #119
  • Apr 15, 2008 2:46pm Apr 15, 2008 2:46pm
does any one have a simple wave calculator like in exel?
Thanks
  • #120
  • Jun 24, 2008 5:31am Jun 24, 2008 5:31am
Dear Thread,

Anyone demo Richard Swannell's Elliott Wave software, named RET?

Thanks,

Lenoxer
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