Elliott Wave theory - why does it work?

[uasish]

CV,
The above posts displays your effort for chartical presentation on Fib relations of EW/Gann projections on price & time ,to better understand the subject & to find any probability of it's effectiveness as a tool.
This is expected from a pro ,when exchanging notes.
My simple query to a pro ,given a situation when you have 2 buy / sell signal
to choose from (signals derived not by EW / Gann / Fib ),other than the Money Mgmt part,you have to take a call between 2 ,choose 1 & discard 1 , Exit being unknown ,what will you do to project some expectancy,i recourse to EW.
I have being trying to express that signals were not generated by EW.
Your prudent thoughts on this will enrich me.

Asish

 

[oxusmorouz]

OK be happy with your belief (that this is rat poisioning) let me be happy with my belief (it will cure cold) ,what r you going to derive ,with lack of evidence ? i have been repeatedly telling you this suits my comfort level of "Selection" & i am also not disputing you may be right (time will only tell),but EW gives me an edge (this i belive),so repeatedly bashing this only satisfying your ego.
Without evidence ,or established knowledge of non performance, my cognitive or intutive logic structure acts as a firewall against the Emperor's gospel.

Yes sir, I understand. Let me not interfere. I'm sorry I did so.

 

[CreditViolet]

My simple query to a pro ,given a situation when you have 2 buy / sell signal
to choose from (signals derived not by EW / Gann / Fib ),other than the Money Mgmt part,you have to take a call between 2 ,choose 1 & discard 1 , Exit being unknown ,what will you do to project some expectancy,i recourse to EW.
I have being trying to express that signals were not generated by EW.
Your prudent thoughts on this will enrich me.

Asish

First, I dont understand the term 'project expectancy".How is tht possible?
I think a better term is Expected Utility, which comes from Utility theory. Expected Utility would be Probability X Value but since there is no way to calculate probabilities using EW unless emiprically, I dont know how anything systematic can be used.

I understand your part on 'signals not being from EW'.The "Strategy & Tactical" trading is a better application of EW, thats how I used it as well but for day to day trading it was an overkill. There are far more relaxing and systematic ways to trade.

Rgds

 

[kkseal]

I have the folowing query addressed to CV & Uasish :-

If i were to use EW, the 2 questions that'd interest me most are

1) What wave am i currently in w.r.t. my trading timeframe (i.e. for me the daily charts. I would also like to cross-reference the same on the Weekly & Hourly, but for now i'm assuming that's not an essential condition)?

2) What would be an (approx) projected top/bottom for this wave?

Is it possible to get an accurate answer to at least the first question if not both?

By 'projected expectancy' i think Uasish meant a projected target for profit taking. Have you been able to consistently arrive at such an estimate using EW principles and how consistently have those targets been met?

Thanks & regards,
Kalyan.

P.S. : I am also not trying to catch the start of a new wave, but just knowing where i am on my tf after say 10% of the wave has already formed. That is to say a slightly delayed realization would also do, but it has to be accurate & unambiguous (not like 'it might be the 3rd or it might be the 5th' kind of thing).

 

[uasish]

kkseal,
Normally EW analyst's use a top down approach to determine the wave structure that is Grand Cycle / Super Cycle etc etc.
As i trade on EOD & signals generated by MS & my holding is 5 - 10 days.Before initiating the trade ,routinely i check (on daily time frame)the nature of the wave (impulse or corrective) & the main wave position ( 1st /2nd/ etc ).Becoz of it's Hind Sight nature , the main wave is easier to identify
after it is formed.Hence 5 up or 5 dn identification is comparatively easy. Now as there are few set rules for each wave's path ,let me put forward an example.
EW says in 5 wave pattern the 4th wave will never traverse 1st waves territory .
Here we get in MS Short signals for 2 stocks,of which no 1 stock is in 5 Up mode and say presently in 4th wave (which will be downward after 3rd) & no 2 stock is in 5 Dn mode & presently in 4th wave (which will be upward after 3rd).
EW says for stock no 1 it's downside is max near to the top of 1st.Your 1st wave is marked in the chart,hence probability is upto that price level.
For stock no 2 its downside will be beyond 3rd & can run into an extended 5th after 3rd's Low point.
So here in this scenario ,becoz of it's Hindsight you can easily mark the major wave's position & chalk out tgt areas.
The subject is slippery,in the 2nd stock we can put a SL just a few ticks above 1st's top.but the moment the stock crosses beyoun 1st's top our entire count will be proved wrong (becoz it can't go beyoun 1st).Here is the objection raised for EW's authenticity.
Let me put forward an example for subjectivity.On 28th Feb (budget day)' week,most of our forum's EW practitioner identified Nifty fut was in 5th Down & on that date on 3rd wave,hence a down tgt & really Nifty went down until 5th May.
If you refer my thread "Sticking my neck out ...." there i had given a link showing chartically Nifty is on 5th Up (diametrically opposite view),see how subjective this can be,people are opposing becoz of this subjective nature of EW.One view projecting Nifty Fut to go to - 800 to -1000 points & another +800 to +1000 points.
All said & done still EW is an edge to bring the odds in your favour ,if you are coversant about the set of rules.

Asish

NB: People are very virulent ,becoz in system trading,one has to be robot,hence discard EW otherwise it will distract & raise confusion.I am an out & out system trader ,if it is a buy even on catastrophic days i will look to buy only,but knowledge on wave definetly improves Exit.

 

[hari09omkar]

This thread is another useful one of many in traderji.....But to sum it up all for a real trader who is here and wants to invest his time and money for a serious profession,i.e trading by yourself,and not the 'analyst' tag on him, some valid points that I found useful from this thread itself,which matched my thinking....
1.

As I have said before, the question is not whether it works or not but it works against what standard. For eg. what is the need to call market tops or project turning points? Money is made in the NOW riding the current impulse if one needs to use the EW term for it.

2.

RN Elliott spent many years in an ailing condition while he discovered the EW principle. He went back on all available price history and researched his theories, presenting it in its current form.But how many EWers have done that, most of them read some book and become true believers.Same goes with the Gann Artists, none of them is interested in any rigourous testing. If Gann & Elliott would have been alive today they would have been the biggest users of computer horsepower on Wall Street, however the new age students arent interested in anything scientific.One only wonders.

3.

Why should one risk money testing theories? If trading is a business and the goal is to make money why would anyone be interested in theories?

4.

First of all, lets clear up something.Why do you trade? Do you trade to make money or forecast or 'predict' or 'make sense of market randomness'.

5.

The objective for any trader looking to last long in this business is to reduce as much stress from decision making and that means using forms of 'probablistic' techniques instead of 'predictive' techniques

6.This is the warning to the trader in general and specially for any novice who wants to know to make money but thinks TA is a business of very solemn people..........IT IS THE COMPLEXITY THAT KILLS THE VALUABLE TIME.....

I have researched all this 'theories' ,have read Neely, Miner, Pretcher, Balan, Beckman, Pesavento etc and I am very pissed about the time I wasted.Ofcourse I have picked up useful stuff in there but the Cost to Benefit Ratio is too high.Real-life trading is just too simple instead of all this half-baked quackery.

 

[kkseal]

Thanks Asish.

Just one more question/clarification.

Each of these waves on the daily is supposed to have it's own 5-3 pattern. Now where does one get to see these sub-waves - is it on the daily itself or a lower timeframe (like say the hourly)?

More broadly speaking, what is the significance of the Triple Screen (if any) in EW?

Regards,
Kalyan.

P.S. : Never mind people (each is entitled to his/her opinion) Better to stick to the subject. I may bother you with more questions on EW later
The good thing about such a debate is that one gets a holistic pespective - fom the point of views of the believer, the non-believer & the ambivalent.

 

[marcus]

Yes sir, I understand. Let me not interfere. I'm sorry I did so.

Oxy I must say that was a very .... very mature response , no point getting into petty squables, this is a great place and we are all friends here, its unfortunate some people are huffing & puffing, getting personal and then regretting what they said and editing earlier posts.

As uashish has said I suppose we are all entitled to our own beliefs.

 

[CreditViolet]

1) What wave am i currently in w.r.t. my trading timeframe (i.e. for me the daily charts. I would also like to cross-reference the same on the Weekly & Hourly, but for now i'm assuming that's not an essential condition)?

This can be known only after the fact.Projections can be made but since there are no probability values and possiblity of different scenarios especially in a corrective wave, everything just becomes a crapshoot.

2) What would be an (approx) projected top/bottom for this wave?

Those are made using Projection Ratios for every particular wave scenario, both internal and external projections are used.

Is it possible to get an accurate answer to at least the first question if not both?

Heisenberg Uncertainty Principle - in the moment of now, you cannot know both the position and momentum of a particle.If you know the present dynamic, you can predict the future. If you can't know the present dynamic, then the question of predicting doesnt apply in the first place.
In short - No. EW is purely chartistic and hence no accuracy can be claimed except empirically which is a tricky issue given different skill levels and usage.

By 'projected expectancy' i think Uasish meant a projected target for profit taking. Have you been able to consistently arrive at such an estimate using EW principles and how consistently have those targets been met?

I still dont understand 'projected expectancy'. Expectation has to do with averages of past values and unless there is dependency, any outcome is always random which is so with EW.

it has to be accurate & unambiguous (not like 'it might be the 3rd or it might be the 5th' kind of thing).

Not going to happen.EW is about scenarios in the first place so wave labelling is never going to be sure shot thing.


Rgds

 

[CreditViolet]

Each of these waves on the daily is supposed to have it's own 5-3 pattern. Now where does one get to see these sub-waves - is it on the daily itself or a lower timeframe (like say the hourly)?

EW is fractal, lower wave labels can be used to confirm higher order fractals.

More broadly speaking, what is the significance of the Triple Screen (if any) in EW?

hmm..Triple Screen of Elders variety? All said and done, EW is much more useful than all of Dr.Vendor Elders nonsense.

The good thing about such a debate is that one gets a holistic pespective - fom the point of views of the believer, the non-believer & the ambivalent.

There is no concept of believing or not believing in science or business. Its all about the bottomline and hard facts.If it adds to your bottomline use Astrology or Broker Tips for that matter,the truth is only in the numbers which is your brokerage account or performance stats.


Chitrahaar CV Out