Elliott Wave Theory – The Myth And Reality

Elliot wave theory enjoys massive popularity - becoming described as advanced technical evaluation, by numerous brokers and publishers.

Elliot wave concept has a huge and devoted following - shame the principle has no basis of sound logic that will assist you make money!

Let’s examine Elliott wave concept in more detail and then look at sensible market evaluation.

The principle was named right after Ralph Nelson Elliott, who concluded in his book “natures law” that the movement of economic markets could possibly be predicted by observing, and identifying a repetitive pattern of waves.

Elliott’s Profound Observation

Elliott came for the stunning conclusion that all natural phenomena are cyclical - and this includes the economic markets. That is accurate, but we realize that anyway - we realize that at some time in our lives, we will feel rain when we venture outside, the question is when specifically?

So, markets are cyclical - large deal! What we want from an purchase theory, could be the probability of the event - i.e. when is it most likely to occur.

Elliott wave principle is an objective purchase concept - but there isn’t any objectivity in it whatsoever!

It’s all a subjective interpretation of peaks and troughs, in any time frame you like!

Does this sound a logical predictive concept for you?

The Theory

Based on rhythms discovered in nature, the theory suggests the fact that market moves up inside a series of five waves and down in a series of three waves.

The distinction between the Elliott wave principle and other cyclical theories is the fact that the principle suggests no absolute time requirements to get a cycle to complete - well that’s plenty of help!

The subjectivity is so fantastic in Elliott wave, that like most theories, every thing is explainable in hindsight - but the difficulty is in fact predicting the future.

You will find so numerous interpretations with the actual peaks and troughs in numerous time frames, that every person will see them differently, this really is hardly the basis of your predictive principle.

Elliott wave principle claims to be able to predict the market - but provides no objective way of accomplishing it in practice.

Who uses Elliott Wave Principle?

1. Investors who want an easy way to produce money, and are attracted towards the mysticism of such resources as the Fibonacci number sequence, to predict market retracements.

2. Investors who believe in the false assumption that you can predict industry behavior ahead of time - and want an effortless way to create funds.

How Markets Really Move

Industry rates are a reflection with the following:

Supply and demand fundamentals + human psychology = cost action

This looks easy, but is in reality, complicated equation - which is impossible to predict in advance.

Trading markets via technical evaluation is all about putting the odds and probability within your favor, and no greater than that. It is not a way of predicting the long term.

Are there better theories than Elliott wave around, for creating funds from the markets? - An excellent exercise will be to poll the whole top performing fund managers within the world and see how several of them take the concept seriously.

Predictive and subjectivity don’t mix!

The Elliott wave theory can be a predictive theory that leaves anything to subjective analysis.

If Elliott had worked out a predictive principle, why didn’t he give an objective way to produce funds from it? - Like most predictive theories it doesn’t operate.

If all investors could predict the industry ahead of time, we would all know what was going to happen - and there would actually be no market at all, as we would all know the market price ahead of time!

Elliott wave theory is supposed to become a predictive theory, but the only factor you are able to predict with it, is you will shed your cash.

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