Why Elliott Waves Is Not Useful?

[analyst75 12]

I have been corresponding with a mathematically oriented gentleman who is quite brilliant in his approach to the markets but who is very close to going off the deep end. He wrote me the following email:

 

"I have given the 45 degree - phenomenon a lot of thought. I pretty much would like to know how you figure out the inner workings.

 

"What I think is:

 

"(a) The route of the 45 degree cuts the Elliot 3 pivot and the 4 reverse pivot in half. The retracing swing from 3 to 4 (starting off with what looks like a congestion) is the playing field of the insiders. It quickly develops into a squeeze to the downside before the final 5th wave shoots up.

 

"(b) Those who know what is happening, take full advantage of the less informed by jumping on their resting orders. The key is the knowledge that the 5th wave lies ahead. Then the load of contracts could be transferred to the public's 'greed-panic.'"

 

While I would like to agree with what he has stated above, I'm not really sure of what he actually said: Are you? I submitted the following answer:

 

I know virtually nothing about how to count Elliott waves or the meaning of Elliott wave counts. I have no reason to believe in them and many reasons to believe that they are nothing more than what is stated about Elliott Waves. It is a THEORY. Personally, I want to trade based on facts and the reality of what I'm seeing. My belief that Elliott Waves are virtually worthless comes from the results others have obtained from following them. I am very familiar with these results. I know that Elliott practitioners have been dead wrong about the stock market for multiple years running. Elliott wavers missed the bull market of the 1990s. I know that many times they wrongly predicted the rise and fall of the U.S. dollar. I know that people who follow Elliott Wave Theory were wrong about gold and silver for many years, predicting rises as those metals fell to multi-year lows. It is difficult for me to understand why anyone would want to trade based on a theory when they could trade based on what is plainly seen in the markets.

 

Author: Joe Ross

 

 

Profits from games of knowledge: https://www.predictmag.com/    

 

[CrazyCzarina 17]

Thanks for sharing this valuable insight, it would be very much helpful for both the newbies and expert traders.

[4EverMaAT 10]

So what do you propose as an alternate?   You mention

On 6/17/2021 at 6:14 PM, analyst75 said:

I have no reason to believe in them and many reasons to believe that they are nothing more than what is stated about Elliott Waves. It is a THEORY. Personally, I want to trade based on facts and the reality of what I'm seeing. .......[snip]..............It is difficult for me to understand why anyone would want to trade based on a theory when they could trade based on what is plainly seen in the markets.

 

So you care to share a synopsis of your theory (or theorem) and why it may be superior?

[zdo 20]

I'm gonna pull a crazyCzarina and reply to a long dead post ...

Quote

So what do you propose as an alternate?   

One sure thing about trading forums - The great questions never get an answer.  Ask  even the greatest posters a great question... silence, no nothin’, not even crickets. 

 

 

 

 

First a few comments about Elliott Wave

Wave Theory is a ‘science’ of socionomics.  Socionomics is about how societal ideas ‘ideally’ or typically unfold -  wave 1 is the early adapters, wave 3 is broad collective acceptance, wave 5 is continuing valuation narratives but with narrowing collective assessment of actual value... with all kinds of ‘ideal’ sub patterns...

Socionomics starts with a simple observation: For lots of issues, how people FEEL influences how they will BEHAVE.  (Equally true = How people BEHAVE influences how they will FEEL... but that’s for another topic) Anyways...

Elliott Wave theory is an attempt to apply socionomics  to trading   - and  yes analyst75 “theory” is the key word.  Imo, it’s a jump too far.   First, price is not a good metric for socionomics.... especially across decades when currencies are being viciously  'corrupted'.   And practically, socionomics does not transfer over to trading nearly to the degree Ellioticians would like.   It simply does not deliver enough of those ‘ideal’ sub patterns because  crowds of traders’ behaviors and ‘feelings’ about pricing are not sufficient equivalents of broader collective behaviors / socionomic waves... ESPECIALLY as time frames shorten... (ie waves may appear to ‘fractal’ down ... but they really don’t.)  

If you’re going to use EW to trade, probably the most important point you can acknowledge is that 5 wave patterns are EXCEPTIONS to normal trading crowd behavior ie  the best thing a 5 wave pattern indicates is that corrective patterns will soon resume. 

I’ve described it differently in other posts*  ... but basically, at any given point in time it is possible to reasonably project that ANY freakin wave ‘count’ / pattern will enfold.   It is just as reasonable to project that a nice 5 wave completion will go on to a nice 7 or 11 or 17 or whatever wave count as it is to project that the market will now have a ‘trend’ change.  At the end of any nice 3 wave corrective pattern, either projecting a huge 5 wave pattern unfolding in the other direction or projecting a long flat congestive pattern or another 3 wave correction pattern... or... all are equally reasonable.  Or, a pretty wave 1, 2, and 3 doesn’t not mean a pretty wave 5 will unfold.  Ie it’s just as reasonable to count it over and project that the next sequence will be corrective or a 5 wave impulsive move in the opposite direction. etc etc

 

 

 

... to get back to the unanswered question - So what do you propose as an alternate?

Long ago I read Hurst.  In a short section of his book he mentioned it.  It didn’t sink in.  Then one day it really hit me.  There is no Elliott wave sequence or any other ‘technical’ price pattern that cannot be better explained via ‘summation of cycles’ ...

 

* fun example can be seen by searching for 'trading chaos by bill williams' thread on t2w ... TL is so special we don't even allow links to other trading forums?

...

other snarky EW comments at http://www.traderslaboratory.com/forums/topic/7555-do-you-use-the-elliott-wave-to-trade/page/2/?tab=comments#comment-146022

 

 

 

Edited September 22, 2021 by zdo

[fxeconomist 11]

On 6/17/2021 at 4:14 PM, analyst75 said:

I have been corresponding with a mathematically oriented gentleman who is quite brilliant in his approach to the markets but who is very close to going off the deep end. He wrote me the following email:

 

"I have given the 45 degree - phenomenon a lot of thought. I pretty much would like to know how you figure out the inner workings.

 

"What I think is:

 

"(a) The route of the 45 degree cuts the Elliot 3 pivot and the 4 reverse pivot in half. The retracing swing from 3 to 4 (starting off with what looks like a congestion) is the playing field of the insiders. It quickly develops into a squeeze to the downside before the final 5th wave shoots up.

 

"(b) Those who know what is happening, take full advantage of the less informed by jumping on their resting orders. The key is the knowledge that the 5th wave lies ahead. Then the load of contracts could be transferred to the public's 'greed-panic.'"

 

While I would like to agree with what he has stated above, I'm not really sure of what he actually said: Are you? I submitted the following answer:

 

I know virtually nothing about how to count Elliott waves or the meaning of Elliott wave counts. I have no reason to believe in them and many reasons to believe that they are nothing more than what is stated about Elliott Waves. It is a THEORY. Personally, I want to trade based on facts and the reality of what I'm seeing. My belief that Elliott Waves are virtually worthless comes from the results others have obtained from following them. I am very familiar with these results. I know that Elliott practitioners have been dead wrong about the stock market for multiple years running. Elliott wavers missed the bull market of the 1990s. I know that many times they wrongly predicted the rise and fall of the U.S. dollar. I know that people who follow Elliott Wave Theory were wrong about gold and silver for many years, predicting rises as those metals fell to multi-year lows. It is difficult for me to understand why anyone would want to trade based on a theory when they could trade based on what is plainly seen in the markets.

 

Author: Joe Ross

 

 

Profits from games of knowledge: https://www.predictmag.com/    

 

Agree after testing Elliot Waves for three months I returned to S/R trading with Hotforex using RSI as confirmation signal and trading returns went into green again. This was pricey experiment so stick to your approach if it works, lol

[CrazyCzarina 17]

The theory helps measure uptrends and corrections that may occur in the near future. As trends show upside and corrections, identifying trends through Elliott Wave Theory can help protect profits and exit trades.

[fxeconomist 11]

While Elliott Wave Theory can provide a framework for analyzing market trends, it has its limitations that traders should be aware of. One reason some traders find Elliott Waves less useful is the subjectivity involved in identifying wave patterns, leading to varying interpretations. Additionally, market behavior doesn't always conform to the theory's expectations, making it challenging to consistently apply in real-time trading.