Customer Reviews

Elliott Wave Principle: Key to Market Behavior (Wiley Trading Advantage)

5 star:		(12)
4 star:		(4)
3 star:		(3)
2 star:		(3)
1 star:		(4)

 

 

When I first opened this book, I had already read numerous books on Technical Analysis, including candlesticks, momentum oscillators, volume indicators and basic chart patterns. It became obvious to me that the Elliott Wave Principle lies at the heart of why certain chart patterns work only a certain percentage of the time; for what one is seeing in chart patterns is the formation of robust fractals, or Elliott Waves. Chart patterns are the blunt tool and Elliott Waves, the knife - at least in a probabalistic sense, as no method provides perfect accuracy.

This book is not for the mentally lazy, which included me when I first started reading it. In fact, it took me several months just to get through it, understand it and then apply it in real time chart reading. I still keep going back to it as a reference. However, if you have an obsessive desire to understand the financial markets, you will make it through the book and be rewarded with a perspective that VERY few have on the financial markets and, therefore, the psychology of crowds.

I would suggest The Wave Principle of Human Social Behaviour (also by Prechter) before reading the highly technical Elliott Wave Principle. Your want to learn the details of the Elliott Wave Principle will then be fully primed.

A fellow reviewer of this book said "Obviously people either love this book or they hate it." I disagree. I love and hate this book at the same time. People with different backgrounds and perspectives will view this book differently. I would like to offer my opinions here to those like me, and to others too.

I consider myself a "serious beginner". I read my very first book on stock market in last March and bought my first stock in last May. I became interested in Elliott Wave Theory (EWT) in last August, one week before I gave up my academic career and started trading as full time pursuit. Currently I make a living by trading S&P index with the guidance of EWT.

Ralph Nelson Elliott is one of the greatest observers in human history. I believe that his achievement should be equal to those of the greatest ones such as Newton and Darwin. But I doubt that he will be ever widely recognized simply because the subjects he and his theory have been observing are actually the judges, i.e., we human beings.

EWT had been forgotten by the majority of trading, investing society for decades. Mr. Frost and Mr. Prechter and their book were the main reason that EWT became widely appreciated. I love the concise, old fashion way of writing of this book. All the rules and guidelines of EWT are presented clearly and demonstrated precisely with very well chosen examples. This book is a must have for any Elliott Wave student. I have studied three different editions of this book for five times. I studied some sections and pages more than ten times. This is the book one needs to read over and over again. However, this is a textbook, not a trading manual. Many of the wave counts in the examples are full of hindsight and not practically useful. And many of the situations in the examples aren't tradable. To have a feel of actual application of EWT, one certainly needs some extra practice.

What I dislike about this book is that the authors blended their own opinions into EWT. There's nothing wrong with that if the contributions were meaningful. The reality is that they were often wrong and misleading.

I have heard claims such as "if it didn't fit in Elliott Wave, you counted it wrong", from EWT loyalists. The authors had the same superstitious belief throughout the book. From my limited experiences, I see incompletes, failures and arguable patterns everywhere from hourly charts to weekly charts. Even if this belief is true, it's based on hindsight, and doesn't do any good to what EWT is supposed to do, i.e. to forecast and to make money. This belief will create a mindset which leads to a fatal psychological state. One consequence is over trading. When over trading, you win you will be damned and you lose you will be damned. If you are a trader trading with your livelihood on the line, you know what I mean. I was puzzled by the superstitious concept for weeks until I read Elliott's description of triangle in his classic Natural's Law. He said "......the triangle falls outside the wave phenomenon, as herein discussed, and should be IGNORED." This is enlightening. The moral is that EWT isn't a school exam, in which every question has an answer.

Elliott defined "Half Moon" and "AB base" patterns in his classic Natural's Law. The authors of this book considered that "Half Moon" was not a separate pattern but merely a descriptive phrase. The authors of this book didn't agree "AB base" either and implied that Elliott was too old and confused to give right judgment. They claimed "The authors have never seen an "AB base", and it cannot exist. Its invention by Elliott merely goes to show that for all his meticulous study and profound discovery, he displayed a typical analyst's weakness in......" This is outrageous. And this is where my hatred for this book is from.

Half Moon deserves to be a separate pattern for four reasons. First of all, Elliott said so! Secondly, Half Moon has well defined structures. It is a five wave pattern in which wave 5 significantly bigger than wave 3 and wave 3 significantly bigger than wave 1. Wave 1 and wave 3 can be zigzags in some cases. Thirdly, Half Moon starts from a zigzag and ends at a zigzag. There may be another five wave pattern following the last zigzag, may not, depending on where the Half Moon is at in the pattern one degree higher. If Half Moon isn't a separate pattern, it will violate EWT's rule "five wave pattern in a correction phase will be followed by another five wave pattern". Fourthly, Half Moon happens in market often and is extremely profitable or destructive. I learned Half Moon pattern the hard way in January. At 11:00 am EST on January 4th I called market bottom and reversed my SPX positions prematurely. I lost more than 50 % in a day.

I wonder why the authors of this book had never seen AB Base. I see AB Base everywhere in market. AB Base has unique structure in which motive waves of one degree lesser are actually zigzag and corrective waves of one degree lesser are five wave. AB Base pattern isn't very frequent. But its variations are so common they occupied really high percentage in history. AB Base definitely deserves to be a separate pattern. AB Base has so well defined structure it offers great certainty and trading opportunities. For example, with no doubt I opened March OEX 615 calls at 12:45 pm EST on March 20th for the price of $0.50. The calls expired three hours later at $5.38. The return was 980%. One of the authors of this book, Mr. Prechter rose to guru status and fell hard back in 80s and 90s. If Mr. Prechter was humble enough and studied AB Base carefully before completely denied it, he might recognize the market pattern in late 80s not later than November 1990 and found its analog in history. This way he would at least have a strong alternative wave count and forecast which pointed to the actual market direction in 90s and therefore avoid the catastrophe in his career and decade long humiliation.

There are more improper and arguable comments in the book. I may be wrong though. As I mentioned above that my experience and knowledge are limited.

Five plus stars for the introduction to EWT and zero star for the disrespect and arrogance. Final rating 3 stars.

Read this book with an open mind and investigate the suggested patterns and you will be amazed what you see.
I remember looking at a 4 year chart of the sp500 after reading this book and trying to observe the "3s" and "5s" and was shocked to see them staring back at me.
It is hard going at first - especially the first couple of chapters, but take it slow and it will soon sink in - you won't regret that you spent the time to learn Elliot Wave Theory

This book is the easiest to read, most direct and to the point book that is solely on Elliott Wave. It tells all the possible moves, how they happen, and why. The book also goes into the very necessary explanation of Fibonacci and time relationships with regard to price. Many gold nuggets of information contained within this book; it is the most simple, complete Elliott Wave book you can get.

But the biggest problem is...most people just don't "get it"... Elliott Wave and Elliott's findings are SO MUCH MORE than the financial markets. The fundamental discoveries that govern the Wave Principle and thus the behavior of the financial markets are the very same fundamental forces at work throughout the entire universe. When you have a deep understanding of the Wave Principle, Socionomics, and science in general, you can begin to see how everything around us all ties together to form this awesome grand scheme of life and existance. A deep understanding of Elliott Wave and Fibonacci is the key to opening a whole new world of knowledge, application, and the birth of a new science.

After reading this book I've decided to study Elliot Waves very carefully. While the book is fairly short the job of constructing degrees and understanding the rules/guidelines will take time to master. The reason I feel it's worth the time is that only Elliot Wave provided a structured way to understand short and long term cycles. The stacking and governance by degree provide meaningful insight into predicting future price movement.

This is the classic book on Elliott Wave Theory. As such I would recommend it for everyone to read. One doesn't have to go hardcore Elliott, but just the psychological descriptions of market mood are important. If you want you can then go hardcore and label every minute swing if you want to. I don't know the value of that latter approach, but that is not material. Elliott will always be a judgmental, discretionary trading method and it is hard to make quantitative tests of its success rate - unfortunately.

Prospective buyers should also know that this book wasn't written in 2001 as stated by amazon. However, that should not be the cause of any worry.

I have written several short reviews on trading books. The best way is to compare the score on the books I've read. Many reviews on amazon.com are just glorious 5 star reviews. I use all five categories; sorry but everything isn't "great". Books rated 1 or 2 I would not recommend buying. Books rated 4 are good solid books. Books rated 5 are very good. Naturally all in my humble opinion.

It may seen esoteric, but the patterns described by Elliott are actually the way that mass psychology and the markets tend to move. Thank your Mr. Frost and Mr. Prechter for making the theory so understandable. I have now been using it in the marketplace quite successfully.

I read this book after becoming very interested in Robert Prechter's doctrine from an interview he did in a magazine. He has a different way of discussing wave theory, one that concentrates on the whys of crowd psychology. It's absolutely fascinating stuff and well worth reading.

I would give the book 5 stars, even though I don't believe in the practical application of wave theory, if it spent more time on specific applications in trading. Perhaps the reason it doesn't is because the applications are so difficult that they are of questionable use.

I'm not saying I disagree with anything in the book, as the authors are obviously highly intelligent and the material comes across as quite educational. And I am fully aware that he has an entire full-time staff trading different markets based on his work, some of who are very successful.

I'm just saying that the theory isn't provable, and even if it were, it provides no predictive value. No matter what a market does to fill the rest of the chart it fits into Elliot Wave theory. You can identify exactly where the current price fits into the theory, say in the middle of a 3rd wave, and that market can now do anything - tank hard, scream upward, gradually reverse, flat-line for a year, anything - and it still fits into the theory somehow. The author himself admitted in the magazine interview that he has been very wrong on some of his strongest trading convictions, which of course were based on his wave analysis.

The book is still pretty cool. It isn't likely to make you any money, but it's a good read.

[...]

Over the past years I've red over 300 books on investing, with at least 70 on the subject of technical analysis. One cannot read so much books on TA without ever having heard of the famous Elliot wave principle. I decided to give this book a try, but to be honest I already stopped after the first 3 chapters.

This stuff just isn't based on any principles. The author claims to have find some kind of order in price movements, which he tries to illustrate with his wave movements. He goes in great detail into trying to develop a theory on the logic behind these movements. What I missed the most are backtests supporting his theory.

He also doesn't hesitate to charge people money selling his wave theories. As if all of that ain't enough, a lot of his predictions on the stock market were completely wrong.

Honestly, I don't see a reason why a trader anno 2011 would pick up this stuff trying to improve his/her market skills.

I've been reading this book again and again for about 3 times. Every time I read it, I got new stuff out of it.

None of the sentences in it is redundant. When I first got this book, I also bought myself a highlighter, cuz I want to study it really carefully, I want to make sure I dont miss a thing. But eventually, I highlighted pretty much the whole book!

Treasure. Even if it costs $500, I'll still buy it. Worths it!