Thursday, May 11, 2006

>Academic and Practial Elliott

Tonight we are going to cover practical Elliott Wave analysis. I'm here to tell you there are two kinds of Elliott. There is the Elliott the academics preach, then there is the real world. The world of academic Elliott Wave is all about fitting every possible twist and turn of the market into a wave count. This readership has a number of professors, doctors and others from the academic world. I have an advanced degree. This is not intended to demean people in academia. However, we have to face facts here. Most of what we learned about the stock market in college doesn't work very well and most of what the purist Elliotticians preach may be nice in textbooks but anyone who has followed them religiously over the past twenty years has contributed to somebody else's retirement fund.

Everyone follows any number of professional and amateur Elliotticians. Ask yourself this question? How many of these wild counts actually work out? I don't mean AFTER THE FACT. After the fact, we can take a wave and fit a count to it. In real time, how accurate are these counts?

From my observation the vast majority of them do not work out. The implications are profound. It's unfortunate but the leaders of the Elliott community have a very poor record of forecasting markets since 1987. If the leaders can't get it right, what does that say about the rest of us? Somewhere along the way I discovered for myself that being married to any particular wave count unless it was very clear had a detrimental effect on my bank account. It was only when I let go of the orthodox leanings of the methodology did things change. Elliott is a great tool if you understand its place in the bigger scheme of things.

At best, Elliott is a guide to give you a real time estimate of where the market is in relation to the overall trend at any given point in time. If you can understand the difference between an impulse 5 and a corrective 3 you are way ahead of the game.

Elliott starts working much better when you incorporate Fibonacci price and time relationships. You need both. Many times the only way a pattern can be confirmed is when the time element works.

You can take my word for it, or do some due diligence yourself. When the wave count is clear, great! If not, use other methods and don't get caught up in exact counts or attempt to find certainty where there is none.

  • "Try not to be the smartest person in the room. If you are, find another room." - Michael Dell

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